How to Develop a Strategy in an Organization?

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By: Site Engineer, Staff

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In any organization, there are laid down rules, procedures, and processes that are usually involved when it comes to developing a strategy in an organization.

First, you design a vision statement of the organization which will lead us to a mission statement, goals and objectives. It also involves the use of a strategic model which includes environmental scanning, strategy formulation, strategy implementation evaluation, and control.

Developing Strategies Vision and Mission

  • A vision statement is a permanent statement of a company that communicates the mission of a company, identities its major Strategic Business Units (SBUs) and their interaction, and its corporate philosophy.
  • It defines the very purpose of the existence of a company in terms of its corporate objectives, business scope, competitive leadership, and provides a framework for the operation of relationships amongst stakeholders, customers, suppliers, competitors and other driving forces of business and the company itself.
  • It also includes and enlists the board objectives of a firm. It essentially emerges from the CEO of the company and is an expression of a unifying thread for different organizational units.
  • It offers vital challenges, communicates sense of accomplishment of objectives, and serves as a fountain of inspiration to members of an organization it has an altogether magnetic effect and is motivating, driving and guiding force for people of an organization who work to achieve the targets envisioned, keeping in focus the ethics and values cherished by the organization.

It is quite difficult to articulate a vision statement. Many companies find it extremely difficult to define a vision statement due to their nature of work or near-total absence of a vision. They are bogged down with routine activities and do not have focused growth direction. In such organizations, employees do not share corporate objectives and do not work in a unified direction for accomplishing the company’s vision.

It is good to view the vision statement of a company. A vision statement of a company is a direction for action for an individual employee. It gives him a defined path on which he must act in a manner that would reinforce his personal view towards meeting the objectives of the vision of the company.

He must become an active collaborator in pursuit of strategic purposes and be comfortable with the vision of the company. He must understand the implications of the company’s vision and must develop an understanding of it at the operating level, keeping in mind the prevalent traditions and values of the organization.

To develop the vision of a company, one must first understand the segmentation or business of that company which is done in terms of strategic business units.

Strategic Business Units (SBUs) can be defined as an operational entity of unit or a planning focus that offers a set of a distinct set of products or services to a definite group of customers, which can be termed as a segment due to their identifiable traits in comparison with a well-defined set or competitors. SBU is a level at which an analysis of a business is done. The strategic planning effort is centered on it.

Characteristics of SBUs

For a product or service to be classified as a SBU it must have the following characteristics.

  • It can be a single business or collection of the related businesses (backward or forward integrated) which can be planned for profits and, independent of the rest of the company.
  • It has its group of competitors competing with the business.
  • The unit has a CEO who is responsible for strategically managing the business and for creating profits.

A business mission helps to evolve an executive action. As the company mission includes the fundamental and unique purpose for which the business in question is set apart from similar business units or firms of its type it tends to create a separate identity for the business or the company in question. However, the business is defined as covering the scope of operations that follow the path of execution as envisaged in the mission statement. It is a build-up of the business philosophy of strategic decision-making about products, markets, and technological areas that need to be emphasized.

Need For a Mission Statement

Defining the mission of a business is entirely an internal agenda of a company. No external agency can probably help in this regard because it is the way a specific company would like to conduct its business to attain a certain desired objective. It is a very painful, tedious and time-consuming exercise but is vital for any company or business. It contains a few specific areas of trust broadly carved-out goals and strategies. It is a statement reflecting the attitude outlook, thinking-pattern orientation, and direction of the company.

The following are reasons for evolving a mission statement.

  • The mission statement gives a unified direction to the company’s growth.
  • The utilization of the company’s resources is also unified and people get motivated to exploit these resources in a specific direction for the company’s growth.
  • The allocation of resources is based on the mission statement. Company executives get an idea for the allocation of resources as a directed mission statement.
  • The mission statement while giving a direction for growth also tends to build up a professional climate for maintenance and improvement of the company’s status in any organization.
  • The mission statement vividly brings forth the purpose and growth direction in the prevailing cultural climate of an organization, thus bringing into focus the style of management and functioning of the organization. This approach draws support from people who wish to grow with the organization.
  • The mission statement outlines a framework for organizational planning and assigning definite tasks and responsibilities to each business unit.
  • The mission statement helps to set up and develops a control mechanism for the achievement of objectives.
  • Defining the mission of an organization brings forth the hidden talents amongst the workforce who take up challenges to meet the company’s strategic objectives.

Characteristics of a Mission Statement

For a mission statement to be effective it should have certain characteristics as discussed below.

  1. Motivation: The mission statement should be a source of inspiration for members of an organization. Members of the organization should take pride in associating themselves with their through the mission statement and they should get motivated to accept and accomplish the mission. Customers and society associated with the company should also feel good about its mission.
  2. Distinctiveness: The mission statement of an organization should be distinct. There may be many organizations manufacturing washing machines, refrigerators, scooters, cars, etc but each one of them defines its mission differently because each of them is pursuing a specific mission that exclusively belongs to.

The mission statement should be unique for an organization as it makes it different from the crowd, and makes an impact on the minds of people associated with the organization. The mission statements of any two companies are rarely similar. Each company, depending on its resources environment, purpose and various other conditions evolve its mission statement.

  1. Feasibility: The mission statement should be feasible. So the company can afford to have a mission statement that would not be achievable. It should, no doubt, reflect stressed goals but must be credible and realistic.

The feasibility of the mission statement depends on various resources that are available or which can be made available. The CEO of a company should make a correct assessment of resources and come out with a mission statement that may be possible to accomplish.

  1. Precision: Using too many or too few words in a mission statement may lead to ambiguity. If too many words embody a mission statement it may not be clearly understood by people at the functional and operating levels. On the contrary, if less than the necessary numbers of words are used in a mission statement, the employees at the operating level may derive different meanings out of it.

Similarly, the mission statement should not have a narrow focus or a very broad view for preparing mission statement strategy managers have to create an abstraction ladder and choose appropriate words to define the mission. Defining mission as manufacturing refrigerators may be too narrow a focus. Likewise, defining the mission as just taking health care may appear very non-specific.

  1. Clarity: The mission statement should culminate in an action program and hence brevity is the essential requirement of a mission statement. It should not contain high-sounding words which eventually do not convey any action.

The mission statement should be clear to employees of the company because all of them would be guided by this statement. It should be made clear to those who do not understand it through training workshops leaflets or other forms of communication.

Reflection of Major Strategy

An organization may have different strategies but its mission statement should speak of the major strategy being followed by the company. The company should highlight potential strengths and requirements, that is, stability, growth, leadership, business volume and so on, such that the requirements are elastic in the minds of the employees and for giving them a unified direction of growth.

The major strategy along with the purpose of an organization gives an insight to a reader about the organization. The major strategy should also be reflected in the mission statement to bind the organization in a unidirectional effort to meet objectives. Stating the major strategy in the mission statement gives an insight to the employees regarding the course of action that they have to jointly take.

Company’s Objective and Goals

Objectives and goals that are being pursued presently are for the future of the company and hence must be carefully defined. Companies set their objectives and translate them into short and long-term goals.

An effort is usually made to set measurable goals such that the performance of the company can be objectively worked out. Any company doing business has a will to secure its survival through continuous growth and profitability.

The survival of a firm is the priority as it exists to satisfy the needs of the stakeholders, customers and other driving forces of business. Very often, strategic managers neglect this aspect of goal-setting in a hurry to emphasize growth and creation of surplus.

The company then faces the danger of being myopic as its focus is on short-term gains. The short-term gains are usually at the expense of long-term benefits. There appears urgency in a company for quick hits or bargains at the cost or long-term benefits. This further leads to unplanned investments changes detours etc. The synergic exploitation of resources is also ignored and thus survival itself becomes quite difficult.

The profitability of a company is the most important and sought after goal. Various companies have different ways of measuring profits. However, the measurement of profits over a long period gives a clear idea of the performance of the company. The method, therefore, evolved to find better acceptance with employees and stakeholders.

The short-term profits may endanger the existence of a company and we may call it its strategy myopia. Some companies may decide to reap short term profits as part of their strategy

In an environment, which is charged with the competition, the growth of a company is tied to its survival and profits.

Growth does not merely mean growth in several markets served, but growth in a variety of products and services and so on which lead to improvements in a competitive edge and consequently in the performance of the company. Growth may be reactive or proactive.

A correct balance is to be struck between growth and opportune diversifications, maintaining the parameters that guide various growth decisions. Hence, optimum flexibility has to be built in the structure of the organization to make a quick shift-over wherever required.

The objectives of an organization play a very significant role in creating an environment tor growth in the desired direction.

The role of objectives is as follow:

  • Strategic decision-making processes become more sharply focused due to objectives «and a code of behavior is also set for meeting the targets. The strategic decisions are taken around agreed objectives.
  • Objectives lead to the evolution of standards for performance evaluation and measures to control and guide performance. Standards for individual performance are also generated since it is the individual performance that eventually gets translated to organizational performance.
  • Objectives tend to develop a conducive environment understanding of the business environment, organization, personal development, required knowledge skills, and attitude, etc.
  • The objectives establish a relationship between an organization and the environment in which it exists. The environment consists of various entities, that is, society. Politics, employees, customers, stakeholders, etc. who affect objectives and also the method of achieving defined objectives.
  • Objectives are the driving force for an organization. The employees make a unified effort to accomplish them thereby developing clarity of mission and purpose.

Characteristics of Objectives

  • Objectives must be quantified and specific. Mention of increasing sales turn over, quality, etc does not convey anything. However, mention of increasing sales by 10% increasing turnover by 20% makes them more specific and clear for those who have to act to accomplish them. It implies that these should be achieved in specific terms.
  • Objectives must essentially be related to a time-dimension. The business situations today undergo extremely fast changes, and not relating objectives to a time-dimension may prove to be very costly for companies. Objectives, when related to time, communicate more specific information. Objectives without a time-frame do not yield many results. Objectives should essentially be linked to timeframes in these times of fast change where quick obsolescence of products and concepts has engulfed almost all business activities.
  • Objectives should be defined in a manner in which they can be understood by the concerned people. Vague and hazy ideas cannot be called objectives as they may lead to more confusion. Objectives should be simple and easy to understand by all people in an organization in the same sense as they are meant to be understood. This aspect is to be carefully ensured.

Vision Statement

A vision statement is defined as an inspirational description of an organization. It states what an organization would like to accomplish or achieve midterm or long term future. It is intended to serve as a clear guide to the management of a firm for choosing current or course of action.

A vision statement sometimes is called a picture of your company in the future but it is so much more than that.

A vision statement is your inspiration, the framework for all your strategic planning effort. A vision statement may apply to an entire company or a single division of a company. Whether for all or part of an organization the mission statement answers the question, “where do you want to go?”

Unlike the mission statement, a vision statement is for you and the other members of your company not for your customers or clients.

A vision statement also defines the organization’s purpose, in terms of the organization’s values rather than bottom-line measures (values are guiding beliefs about how things should be done).

The vision statement communicates both the purpose and values of the organization. For employees, it gives directions about how they are expected to behave and inspires them to give their vest best. Shared with customers, it shapes customers’ understanding of the work with the organization.

The creation vision statement can be a great asset to just about any type of organization. Essentially a vision statement takes into account the current status of the organization and serves to point the direction of where the organization wishes to go.

As a means of setting a central goal that the organization will aspire to reach, the vision statement helps to provide a focus for the mission of the corporation business or non-profit entity.

Mission Statement

A mission statement defines the organization’s purpose and primary objectives. Its prime functions are internal to define the key measure or measures of the organization’s success and its prime audience is the leadership team and stakeholders.

The mission statement should be a clear and concise representation of the enterprise’s purpose for existence. It should incorporate socially meaningful and measurable criteria addressing concepts such as moral/ethical. It is the position of the enterprise’s public image, the target market, products/services, the geographic domain and expectations of growth, and profitability.

 

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