BASIC CONCEPTS OF BUSINESS POLICY/STRATEGIC
MANAGEMENT
ARIZONA STATE UNIVERSITY
WPC 480 - STRATEGIC MANAGEMENT
WEEK 1
Strategic management is a series of managerial actions that determine the long-term
performance of the company.Strategic management includes environmental observation, strategy
formulation, (strategic planning or long-term planning), strategy implementation, and evaluation
and control.Strategic management emphasizes the observation and evaluation of environmental
opportunities and threats by looking at the strengths and weaknesses of the company.Originally
called business policy, strategic management includes long-term planning and strategy.
Business policy, on the other hand, is general management oriented and tends to look
inward and emphasize the appropriate integration of many functional activities within the
company. Business policy focuses more on the efficient utilization of the company's assets. Thus,
business policy emphasizes the formulation of general directions that can be used to better
achieve the company's mission and goals. Strategic management as a field of science combines
business policy with the environment and strategic pressures. Therefore, the term strategic
management usually replaces the term business policy as the name of the field.
The first part of the book explains the meaning and purpose of business policy and
strategic management, then explains the basic model of strategic management and strategic
managers.
1.1 Definition of Strategy and Strategic Management:
Strategies are developed basically to form a 'response' to relevant external changes from
an organization. These external changes will certainly be answered by paying attention to the
internal capabilities of an organization. To what extent can an organization take advantage of
opportunities and minimize threats from outside to obtain maximum benefits by utilizing the
current organizational advantages.
The inability or indifference to see changes in the external environment will 'shock' an
organization, so strategy is useful for maintaining, maintaining, improving the performance and
competitive advantage of an organization (Pearce and Robinson, 1996). Some research results
reveal that organizations that have a clear / formal strategy are outperformed by their
performance compared to organizations without / not clearly formulated strategies.
Thune and House (1970) studied the performance of 36 sample pharmaceutical companies
in the USA, food, chemical, steel, oil and machinery manufacturers. By using 5 (five)
performance measures namely 'sales, return on equity, return on capital, stock prices', and
'earnings per share' it is proven that the performance of companies that use well-formulated
strategies in strategist planning is superior to companies without informal planning.
Keniehl Ohmae (Wahyudi, 1996) compared three kinds of thinking processes, namely
mechanical, intuitive and strategic thinking. Of the three, it can be concluded that strategic
thinking will result in more creative and differentiated solutions than just thinking.
mechanically and intuitively, the more creative the problem solving, the smaller the error rate
that may arise in the future and this will benefit the decision maker.
Strategic thinking requires several stages, namely:
(a) Problem identification,
At this early stage, it is expected to identify problems by looking at existing symptoms.
(b) Problem grouping,
At this stage, we are expected to be able to categorize problems according to their nature
for ease of solution.
(c) The abstraction process,
At this stage, we are expected to be able to analyze problems by looking for the factors
that cause them. Therefore, then we are required to be more thorough to be able to
develop a method of solving it.
(d) Determination of solution method/ways and
At this stage, we are expected to be able to determine the most appropriate method for
problem solving.
(e) Planning for implementation.
In this final stage, we are required to be able to apply the methods that have been
determined.
There are many definitions of strategy, as stated by Steiner and Miner (1977), 'strategy is
the forging of company mission, setting objectives for the organization in light of external and
internal forces, formulating specific policies and strategies to achieve objectives, and assuring
their-'proper implementation so that the basic purposes and objectives of the organization will
be achieved'.
Pearce and Robinson (1994) define strategy as a 'comprehensive, general plan of major
actions through which a firm intends to .achieve its long term objectives in a dynamic
environment'. 14 basic approaches (generic strategies) can be identified: concentration, market
development, product development, innovation, horizontal integration, vertical integration, joint
ventures, strategic alliances, consort/a, concentric diversification, conglomerate diversification,
turnaround, divesture and liquidation.
According to Stephanie K Marrus, as quoted by Sukristono (1995), strategy is defined as
a process of determining the plans of top leaders who focus on the long-term goals of the
organization, accompanied by the preparation of a way or effort how these goals can be
achieved. In addition to general definitions of strategy, there is also a more specific one, Hamei"
and Prahalad (1995), which raises core competencies as important. They both define strategy
which translates as follows:
"Strategy is an action that is incremental (always increasing) and continuous, and is
carried out based on the perspective of what customers expect in the future. Thus, strategy
almost always starts from what can happen rather than starting from what happened. the
occurrence of the speed of new market innovations and changes in consumer patterns
requires core competencies (core competencies). Companies need to find core
competencies in the business they do".
Furthermore, the definition of strategic management according to Fred R. David is the art
and science of formulating, implementing, and evaluating cross-functional decisions that enable
organizations to achieve their goals. Meanwhile, according to Michael A. Hitt & R. Duane
Ireland & Robert E. Hoslisson (1997) is a process to assist organizations in identifying what they
want to achieve, and how they should achieve valuable results. The magnitude of the role of
strategic management is more widely recognized in these times than in previous times. In a
global economy that allows the free movement of goods and services between countries,
companies are constantly challenged to be more competitive. Many of these companies that have
increased their level of competition offer products to consumers at a higher value, and this often
results in above-average profits.
The definition of strategic management according to Michael Polter is something that
makes the company as a whole amount more than the parts so that there is an element of synergy
in it, and according to H. Igor Ansoff is a logical analysis of how the company can adapt to the
environment in the form of both threats and opportunities in its various activities.
Another definition of strategic management is a series of decisions and actions that result
in the formulation (formulation) and implementation (implementation) of plans designed to
fulfill the objectives of the organization achieve company goals.
Strategic management is the art and science of developing, implementing, and evaluating
cross-functional decisions that decisions that can enable a company to achieve its goals.
Management strategic management is the process of setting organizational goals, developing
policies and plans to achieve those goals, and allocating resources to implement policies and
plans to achieve organizational goals. Strategic management combines the activities of various
functional parts of a business to achieve organizational goals (Wikipedia).
Strategic Management is a management process to realize the organization's vision and
mission, maintain the organization's relationship with the environment, especially the interests of
stakeholders, strategy selection, strategy implementation and strategy control to ensure that the
organization's mission and goals can be achieved.
Based on the above definitions, Strategic Management is defined as the art and science of
formulating, implementing and evaluating cross-functional decisions that enable an organization
to achieve its goals. Strategic management focuses on integrating management, marketing,
finance/accounting, production/operations, research and development, computer information
systems to achieve organizational success.
The objectives of Strategic Management are:
a. Implement and evaluate the chosen strategy effectively and efficiently.
b. Evaluate performance, review and review the situation and make various adjustments and
corrections if there are deviations in the implementation of the strategy.
c. Constantly update the strategies formulated to suit developments in the external
environment.
d. Constantly review the strengths, weaknesses, opportunities and threats of the business.
e. Constantly innovate products to keep up with consumer tastes.
The benefit of Strategic Management is that by using Strategic Management as a
framework (frame work) to solve every strategic problem in the company, especially those
related to competition, managers are invited to think more creatively or think strategically.
There are several benefits that organizations gain if they implement Strategic
Management, namely:
a. Provides a long-term direction in which to go
b. Helps the organization adapt to changes that occur
c. Make an organization more effective
d. Identifying an organization's comparative advantage in an increasingly risky environment
e. Activity. strategy making will increase the company's ability to prevent future problems
from arising.
f. Involving employees in strategy creation will motivate them more during the
implementation stage.
g. Overlapping activities will be reduced
h. Reluctance to change from existing employees can be reduced
1.2 The Development of Strategic Management Theory:
Strategic Management as it is known today did not emerge out of nowhere, but it went
through a number of very important stages. The main themes in the early 1950s revolved around
budgeting and financial control.) Corporate management at that time used budgets as a planning
and control tool through defined financial goals.
Towards the end of the 1950s strategic management theory then developed by
emphasizing functional integration or the combination of production, marketing, finance and
human resources functions to achieve predetermined goals. Gordon Howell recommended
business education or business policy courses, a compulsory course for business education.
In the 1960s, the dominant theme in strategy shifted towards Corporate Planning which
was an elaborate plan with detailed forecasts of the economy and specific markets. This view
was supported by Alfred Sloan in his book My Years with General Motors and Albert Chandler
in a book entitled Strategy and Structure.
In the 1970s, corporate strategic planning developed, which emphasized the combination
of management functions which were then formulated in the company's strategic planning and
policies. In the 1980s, the concept of Strategic Management emerged, which focused on
developing the company's internal expertise with the company's strategic policies using core
competence and reactive to changes in the external environment.
1.3 Strategy Management Model:
The basic elementsof strategic managementaccording to Wheelen and Hunger are
(Wheelen and Hunger, 2003: 8):
1) "Environmental scanning"
2) "Strategy formulation"
3) "Strategy implementation"
4) "Evaluation and control"
1. Environmental Scanning:
Environmental scanning is monitoring, evaluating, and seeking information from the
external and internal environment for key people in the company. The goal is to identify the
strategic factors of external and internal elements that will determine the future of the company.
Strategy development, especially strategic planning or long-term planning is usually related to
the vision, mission and policies of an agency. Usually, strategy development begins by analyzing
the situation to get a match between external opportunities and internal strengths with external
threats and internal weaknesses.
One of the most frequently used tools in situation analysis is SWOT analysis. SWOT
stands for Strengths and Weaknesses internal to an agency, as well as Opportunities and Threats
in the environment that an agency faces. (Hunger and Wheelen, 2006, p. 138)
SWOT analysis is a systematic way to identify these factors. It is based on the
assumption that an effective strategy will maximize strengths and opportunities, and minimize
weaknesses and threats. SWOT analysis not only identifies the competencies (capabilities and
resources) that the company has, but also identifies opportunities that the company has not taken
due to its limited resources. When applied accurately, this simple assumption has a huge impact
on the design of a reliable strategy.
A more detailed explanation of each of these factors is as follows:
1) Strengths: Strengths are resources, skills or other advantages, relative to competitors
and the basic needs the firm serves or wants to serve. Strengths are the company's
comparative advantage in the market.
2) Weaknesses: Weaknesses are limitations or deficiencies in resources, skills and
capabilities that seriously hinder the effective performance of the company.
3) Opportunities: An opportunity is an important favorable situation in the company's
environment. Important trends are one source of opportunities.
4) Threats: Threats are major disruptors to a company's current or desired position.
From the SWOT analysis that has been carried out, we can then produce several
alternative strategies that might be applied. This SWOT component can be further used in the
creation of a SWOT matrix or better known as a TOWS matrix. (Hunger and Wheelen, 2006, p.
144)
The TOWS matrix can illustrate the external opportunities and threats faced by a
company can be combined with the internal strengths and weaknesses of the company. The
results are four alternative strategies, which are as follows:
•
Strengths - Opportunities (S-O Strategies), namely strategies that are carried out by using
strengths
internal company to take advantage of opportunities outside the company.
•
Strengths - Threats (S-T Strategies), namely strategies that
This is done by using the company's internal strengths to avoid or reduce the impact of
threats from outside the company.
•
Weaknesses - Opportunities (W-O Strategies), namely
A strategy that is carried out by overcoming the company's internal weaknesses to take
advantage of opportunities outside the company.
•
Weaknesses - Threats (W-T Strategies), namely strategies that are
This is done by reducing the company's internal weaknesses and avoiding external threats.
2. Strategy Formulation
Strategy formulation is the development of long-term plans for the effective management
of environmental opportunities and threats, in terms of strengths and weaknesses company. After
knowing the threats faced by the company, the opportunities or opportunities it has, as well as
the strengths and weaknesses that exist in the company, then we can determine or formulate the
company's strategy.
Strategy formulation includes defining the company's mission, determining achievable
goals, developing strategies, and setting policy guidelines.
a. Mission:
An organization's mission is the purpose or reason why the organization exists. A well-crafted
mission statement identifies the fundamental purpose and what distinguishes a company from
other companies, and identifies the company's range of operations in products offered and
markets served. The mission develops expectations in employees and communicates a
common view to key stakeholder groups within the company's work environment. Missions
can be narrowly or broadly defined. The narrow type of mission statement clearly defines the
main business of the organization, it also clearly limits the range of company activities related
to the products or services offered.
b. Destination:
Objectives are the end result of planning activities. Objectives define what will be
accomplished and when it will be accomplished, and should be measured if possible. The
achievement of corporate goals is the result of accomplishing the mission.
c. Strategy:
Corporate strategy is a comprehensive planning formulation on how the company will achieve
its mission and goals. Strategy will maximize competitive advantage and minimize
competitive limitations. There is such a thing as an explicit or stated strategy, which is a
strategy with which some things can be argued, such as the development of a new product line
acquisition. However, further investigation may reveal a very different implicit strategy.
Managers at all levels may claim that the strategies described in their strategic plans are
different, but few will dare admit it. Often the only way to see the company's implicit strategy
is to pay attention not to what managers say, but to what they do.
Implicit strategies can come from company policies, approved (and unapproved) programs
and approved budgets. Divisional programs that are supported with large budgets and
handled by managers who are considered for fast-track promotions, show where the
company places its efforts energy and costs.
d. Policy:
Policies provide broad guidelines for overall organizational decision-making. Policies are also
broad guidelines that link strategy formulation and implementation. These policies are
interpreted and implemented through the strategies and objectives of the respective divisions.
Divisions will then develop their own policies, which will serve as guidelines for their
functional areas to follow.
3. Strategy Implementation:
Strategy implementation is the process by which management puts its strategies and
policies into action through the development of programs, budgets, and procedures. The process
may involve changes in the overall culture, structure and/or management systems of the
organization as a whole.
a. Program
A program is a statement of activities or steps required to complete a one-time plan. Programs
involve corporate restructuring, a change in internal corporate culture or the start of a new
research venture.
b. Budget
budget is a program expressed in terms of units of money, each program will be
expressed in detail in costs that can be used by management to plan and control.not only
provides detailed planning of the new strategy inaction, but also specifies with pro-forma
financial statements that show the expected effect of the company's financial condition.
c. Procedure
Procedures or often referred to as standard operating procedures (SOPs) are a system of
sequential steps or techniques that describe in an organized manner. It details how a task or
worker is accomplished. Procedures specifically detail the various activities that must be
performed to complete company programs.
4. Evaluation and Control:
Evaluation and control measures what the company can produce or achieve. This means
comparing the company's performance with the company's expected results. Performance is the
end result of an activity. What measures are chosen to measure performance depends on the
organizational unit to be assessed and the objectives to be achieved. Objectives that have been
created in advance in the strategy formulation part of the strategic management process (such as
profitability, market share, cost reduction and so on) should be used properly to measure the
company's performance once the strategy has been implemented.
As the end result of an activity, performance is the actual outcome of the strategic
management process. Strategic management practices are justified in terms of their stability in
terms of improving company performance, particularly as measured by profit and return on
investment. In effective evaluation and control, managers should seek clear and unbiased
information from their subordinates. From this information, it can be known what actually
happened and what was planned beforehand.
In measuring performance, appropriate measures must be considered. Some measures,
such as return on investment (ROI) are considered appropriate for evaluating a company's or
division's ability to achieving profitability goals. But it is not sufficient to measure other
corporate objectives such as social responsibility or employee development. Nevertheless,
profitability is indeed the main goal of the company. ROI can be calculated only if profits have
been totaled over a period of time. It will show what happened after the fact, not what is
happening or will happen. Therefore, companies should still develop profitability measures. This
is a steering control, as it measures variables that affect future profitability.
In addition, the type of control must also be considered. Controls are built with a focus on
actual performance, on the activities that produce performance, or on the resources used in
producing performance. Behavior control specializes in how things should be done through
policies, rules, standard procedures and operations, and orders from superiors. Output control
specializes in what should be achieved by focusing on the end result of behavior through the use
of goals and performance targets. Input control focuses on resources, such as employees'
knowledge, skills, abilities, values, and motives.
Environment:
The environment is the elements that surround the organization both outside the
organization (external environment) and within the organization (internal environment). The
external environment consists of variables of opportunities and challenges that are outside the
organization and cannot be controlled in the short term by management. The external
environment can be general forces and trends within the overall social environment or factors
specific to the organization's operations (task environment).The internal environment of a
company consists of variables (strengths and weaknesses) that are within the organization itself
and are usually controllable in the short term.These variables include the structure, culture and
resources of the company.
In conducting an environmental scan, strategic managers must be aware of several
variables from the environment, namely the existence of the social environment and corporate
tasks.The societal environment includes forces that do not directly touch short-term activities,
but often affect long-term decisions. The societal environment consists of:
a. Economic power
b. Technology power
c. Political-legal power
d. Socio-cultural forces.
The task environment includes elements or groups that directly affect the company, and in
turn will be affected by the company. The task environment includes governments, local
communities, suppliers, competitors, customers, creditors, labor unions, special interest groups
and trade associations. The task environment is often called the industry in which the company
operates. Industry analysis (popularized by Michael Porter) refers to an in-depth search for key
factors in a company's task environment.
Strategic managers must also scan the internal environment to identify their resources,
capabilities, and competencies. In an effort to offer products, it must be in accordance with the
changes in the market that occur.
Scanning and analyzing the external environment for opportunities and challenges is not enough
to gain a competitive advantage. Analysts must also look within the company itself to identify
internal strategic factors - the critical strengths and weaknesses that can determine whether the
company will be able to take advantage of opportunities, while avoiding challenges. This internal
scan, also called organizational analysis, is concerned with identifying and developing the
organization's resources and competencies.
Strategy:
According to Stephanie K. Marrus, as quoted by Sukristono (1995), strategy is defined as
a process of determining the plans of top leaders who focus on the long-term goals of the
organization, accompanied by the preparation of a way or effort how these goals can be
achieved.According to strategic management theory, corporate strategy can be classified based
on the type of company, among others. In addition, there are also known corporate strategies that
are classified on the basis of task levels. The strategies in question are generic strategies that will
be elaborated into a main / master strategy (grand strategy). This master strategy is further
elaborated into a strategy at the functional level of the company, which is often referred to as a
functional strategy.
Basically, every company has a strategy in doing business. However, it may happen that a
company leader does not realize it. In examining corporate strategy, it is important to recognize
that the form of strategy will vary between industries, between companies, and even between
situations. However, there are a number of well-known strategies that can be applied across
industries and company sizes. These strategies are grouped into Generic Strategies. The term
Generic Strategy was coined by Porter. The definition is an approach to corporate strategy in
order to outperform competitors in similar industries. In practice, after the company knows its
generic strategy, its implementation will be followed up with a more operational strategy
determination step.
To explain strategy, Wheelen and Hunger use the concept of General Electric. General
Electric states that in principle, generic strategies are divided into three types, namely Stability,
Expansion, and Retrenchment strategies.
a. Stability Strategy. In principle, this strategy emphasizes not increasing products, markets, and
other company functions, because the company is trying to increase efficiency in all fields in
order to improve performance and profits. This strategy is relatively low risk and is usually
carried out for products that are in a mature position.
b. Expansion Strategy. In principle, this strategy emphasizes the addition/expansion of
products, markets, and other company functions, so that the company's activities increase.
While the gains to be made are greater, this strategy also carries a high risk of failure.
c. Retrenchment Strategy. In principle, this strategy is intended to reduce the products
produced or reduce the markets and functions within the company, especially those with
negative cash flow. This strategy is usually applied to businesses that are in the decline
stage. This shrinkage can occur because the resources that need to be shrunk are better
mobilized, for example, for other growing businesses.
Performance:
Performance is the end result of an activity (Wheelen & Hunger, 2004:16). The steps to
choose to assess performance depend on the organizational unit to be assessed and the objectives
to be achieved. This means that the performance of an organization can be seen from the degree
to which the organization can achieve goals based on previously set objectives. Performance can
also be said to be a result (output) of a certain process carried out by all components of the
organization against certain sources used (input). Furthermore, performance is also the result of a
series of activity processes carried out to achieve certain organizational goals.
However, there are several indicators that are usually used to measure the performance of
the public bureaucracy, which are as follows:
a) Productivity
The concept of productivity not only measures the level of efficiency, but also the
effectiveness of services. Productivity is generally understood as the ratio of inputs to
outputs.
b) Service Quality
Public satisfaction can be a parameter to assess the performance of public organizations.
c) Responsiveness
Responsiveness is the organization's ability to recognize the needs of the community to
develop service agendas and priorities and develop public service programs in accordance
with the needs and aspirations of the community.
d) Responsiveness
Responsibilities explain whether the implementation of public organization activities is
carried out in accordance with the principles of proper administration or in accordance with
organizational policies, both explicit and implicit (Lenvine, 1990).
e) Accountability
Public accountability shows how much the policies and activities of public organizations are
subject to political officials elected by the people,assumption is that political officialsbecause
they are elected by the people, will automatically always represent the interests of the
people.
Bureaucratic performance can actually be seen through various dimensions such as the
dimensions of accountability, efficiency, effectiveness, responsiveness and responsibility.
Various literatures that discuss bureaucratic performance basically have substantial similarities,
namely to see how far the level of achievement of results has been carried out by the service
bureaucracy. Performance is a concept that is composed of various indicators that vary greatly
according to the focus and context of their use.
Some measures, such as return on investment (ROI), are appropriate elements to
evaluate a company or division's ability to achieve profitability goals. While profitability is the
main goal of a corporation, ROI can be calculated only after achieving profits for a period of
time. It tells what happened after the fact-not what is happening or what will happen. A
company, therefore, needs to develop measures that are likely to forecast profitability. These are
referred to as steering controls because they measure variables that affect future profitability.
One example of this type of control is the use of detailed quality and productivity control charts
and graphs on a daily basis. They are thus able to make adjustments to the system before it
becomes uncontrollable.
SETTING THE DIRECTION OF THE COMPANY:
Vision and mission are the foundation of an agency's program implementation. Vision
and mission are certainly not to be used as symbols or "framed sentences" without meaning.
Many visions and missions are barren because they cannot be translated into operational work
programs. Many apparatus are found when asked about the vision and mission in their work
units say "don't know, don't understand, don't understand, don't come to mind, and certainly don't
make a source of inspiration in carrying out their work." This condition is worrying because it
shows that the vision and mission are only symbols.
George Barna (1992) states that vision is a clear mental picture of a better future that is
granted to certain people because of their accurate understanding of the meaning and meaning of
life, self-image and message and sensitivity to existing situations. Therefore, the vision and
mission should be able to become "a source of inspiration, innovation, creativity, dedication,
productivity for employees.
This paper will present the principles of building and implementing a company's vision,
mission, goals and strategies.
2.1 Establishment of Company Vision:
This section will begin with an explanation of what is meant by vision and mission. Some
definitions of mission include the following:
1. Vision is the ability to see to the heart of the matter; view; insight into what appears in the
imagination; sight or observation. Or the ability to see a desired future picture/insight based
on vision/observation/comparison of existing conditions/present state. (Kamus Besar Bahasa
Indonesia, 1988).
2. Vision is the ability to see; the ability to understand what is to be realized in the future; a
wishful idea of something (Dictionary of Language and Culture, Longman).
3. Vision is an image of the future of an organization, be it a company or an institution (H.
Dawan Rahardjo, Insight and Vision (21st Century Development))
4. A vision is a view of the future of the organization that is realistic, believable, attractive, a
better condition than what currently exists. (Burt Nanus, Visionary Leadership)
5. Vision is a challenging picture of the future state that contains the ideals and images that
government agencies want to realize.
6. Vision is related to the view of the future, concerning where government agencies must be
taken and directed in order to work consistently and still exist, anticipatory, innovative, and
productive. (LAN, Guidelines for Preparing Government Agency Performance
Accountability Reporting).
From the above definitions, it can be concluded that in general, a vision is an
organization's perspective on the expectations it wants to achieve in the future. There are two
important aspects of a vision, namely the form aspect in the form of vision language, the
substance aspect, namely the scope of vision content.The language of the vision is the language
of objects, conditions or results.The content of the vision describes the types or various desired
results.The mission language contains tasks, or work language that contains the tasks needed to
achieve the vision achieve the vision, as well as the source of work unit goals and objectives
within the organization.
The right vision for the agency will be an accelerator (tool to accelerate) activities that
include strategic planning, resource management, performance indicator development,
performance measurement and performance measurement evaluation that are integrated
synergistically for organizational development towards a better future. Vision is not only
important at the beginning of the work, but also important in the further journey of the
organization.
The formulation and establishment of a vision is an important step for the organizational
unit, and is useful in directing, convincing, and giving hope to achieve goals/goals, strengthening
support/commitment, motivating, and moving the spirit of the entire organizational/work unit.
According to Wibisono (2006;43), vision is a series of sentences that state the ideals or
dreams of an organization or company to be achieved in the future. Or it can be said that the
vision is a statement of want to be from the organization or company. Vision is also very crucial
for a company to ensure long-term sustainability and success.
In the vision of an organization there are also values, aspirations and needs of the
organization in the future as expressed by Kotler quoted by Nawawi (2000: 122), Vision is a
statement of organizational goals expressed in the products and services offered, needs that can
be addressed, community groups served, values obtained and future aspirations and ideals. An
effective vision should have characteristics such as:
1. Imagible.
2. Desirable.
3. Feasible (realities and achievable).
4. Focused.
5. Flexible (aspirational and responsive to environmental changes).
6. Communicable (easy to understand).
At Basically vision must can describe several things:
a. Sets the direction of what the organization must do to be successful.
b. States where the organization is headed, what it will become. or for how long or until when
c. The ideal condition that the company wants to achieve in the future, although it may never be
achieved, but the people in the organization will never stop trying to achieve it.
If an organization is able to craft the right vision, it will help in three important ways:
a. Describe the desired direction clearly, distinctly and unequivocally.
b. Encourage and motivate people to 'move' in the right direction, even if the first steps may be
painful.
c. Helps coordinate the actions of people from different fields.
An example of this visioning is the vision of PT Astra International Corporation:
"To be an international player and national leader in the business we are in"
"To be one of the best managed corporation with the emphases on: human resources, - solid
financial structure, customer satisfaction, efficiency"
"To have a balance of growth and profitability"
The key to the successful implementation of a company's vision is :
a. Total involvement from every level of the organization
b. Effective communication
c. Removing existing barriers
d. By Continuously Continuously conduct evaluation and improvement
2.2 Company Mission
The vision is then translated into a mission. The mission is as follows:
1. A mission is a duty that people feel obligated to perform for the sake of religion, ideology,
patriotism, etc. (Kamus Besar Bahasa Indonesia).
2. A mission is a specific task that a person or group is charged with (Webster Third New
International Dictionary).
3. Mission is a step / activity that must be carried out in order to realize the achievement of the
vision. (DR. Sapta Nirwandar, Seminar Paper).
4. Mission is the strategic action to achieve the organization's vision (Edwin A. Locke &
Associates, Leadership Essence).
5. Mission is something that must be carried out or carried out by government agencies, as a
description of the vision that has been set. (State Administration Agency, Guidelines for
Preparing Government Agency Performance Accountability Reporting).
These definitions illustrate that mission is synonymous with strategic efforts, activities,
and actions; and is a unit task that supports the work of the organization.
The mission statement must be able to determine what needs the company satisfies, who
has these needs, where they are and how they are satisfied.
According to Drucker (2000:87), the mission is basically the fundamental reason for the
existence of an organization. The organization's mission statement, especially at the business
unit level, determines the boundaries and intentions of the company's business activities. So the
formulation of the mission is a realization that will make an organization capable of producing
quality products and services that meet the needs, desires and expectations of its customers
(Prasetyo and Benedicta, 2004: 8).
According to Wheelen as cited by Wibisono (2006: 46-47) Mission is a series of
sentences that state the purpose or reason for the existence of the organization that contains what
the company provides to the community, either in the form of products or services the current
business jungle. The purpose of a mission statement is to communicate to stakeholders, inside
and outside the organization, the reason for the company's establishment and the direction in
which it is headed. Therefore, the mission statement should be expressed in a language and
commitment that is understandable and relevant to all parties involved. The steps for preparing a
mission that are commonly taken by organizations or companies are to follow the following
stages:
1. Conduct a brainstorming process by aligning several words that describe the organization.
2. Prioritizing and focusing on the most important words
3. Combine the selected words into a sentence or paragraph that describes the company's
mission.
4. Editing words until they sound right or until everyone is exhausted from arguing over their
favorite word or phase.
To ensure that the mission that has been launched is a good mission, it must be:
1. Broad enough to be applicable for several years from the time it is established
2. Specific enough to communicate direction
3. Focus on the competencies or capabilities that the company has
4. Free of jargon and meaningless words.
The Company's mission is a fundamental and unique purpose that distinguishes a
company from its peers and that implies the scope of the company's business. its operations by
stating the goods or services it produces and the markets it serves (Handoko Sasmito). With the
company's mission, it must be able to answer the question "what business are we in" so that the
company's mission is aimed at the social function that the company wants to carry out, in order
to support the company's existence. Rue and Holland (1989) state that the mission is also
referred to as 'business definition' or 'the purpose' or 'reason for existence' of an organization.
In the company's mission statement must include 3 main components, namely (a) the
name of an organization such as IBM (a definition of the organizations business), (b) public
statement or statement of major corporate goals and (c) corporate philosophy (statement of
corporate philosophy). Pearce and David (1987) state that public statements basically contain 8
things, namely:
1. Target customers and markets - served,
2. Product and service - what's on offer,
3. Geographic domain,
4. Technology - that is used,
5. Concern of survival, growth and profitability,
6. Philosophy - i.e. commitment to something
7. Self concept - explains who the organization is and what it does, and
8. Public image or image and social responsibility of the organization.
Whittaker (1995) states that missions exhibit the following characteristics:
1. States what the organization must achieve and what specific activities must be carried out.
in the effort to achieve it, as well as its importance to the organization in relation to its main
activities (what business are we in).
2. It is the business definition or the purpose or the reason for existence of an organization.
Example of a mission:
"Progress' is our most important product" (GE)
"Better things for better living through chemistry" (Du Pont)
"Trusted, solid and friendly" (Bank BNI); "Healthy water every time" (AQUA)
Vision and mission will be useful for :
a) Knowing what business/ business of the organization,
b) making the vision and mission as an inspiration (something dream to be realized) and
useful for
c) change strategy.
3. Formulate Organizational Goals (Objectives):
A goal is a statement or what is to be achieved (Jauch and Glueck, 1988; Rue and Holland,
1989). In formulating the goals of each level of the organization (at the corporate or functional
level) should be done in 4 steps, namely:
a. Determine key result areas or key success factors, which are areas or fields that are vital
as indicators of success. Snotty (1974) Rue and Holland (1989) and Pearce and Robinson
(1994) provide several suggestions for key success factors that may be used by an
organization, including: profitability, competitive position - market share, productivity,
employee productivity, and profitability development, employee relations, technological
leaderships and public or social responsibility.
b. Determine the time frame of the goal e.g. 1, 5 or 10 years
c. Determine the meaning and quality of the target so that the target is challenging and
realistic. The quality of a goal is good if the goal includes:
(1) Acceptable - can be accepted by organizational actors, especially managers,
(2) Flexible - goals must be able to adjust to extraordinary changes in competition and
other changes in the external environment,
(3) Measurable. - Measurable,
(4) Motivating - for the implementers,
(5) Suitable - with the mission of the organization,
(6) Understandabledan
(7) Achievable
c. Objectives must be written with :
(1) Clear, concise and not confusing,
(2) Expressed in an easily measurable form, at a predetermined time,
(3) Accurate, and
(4) In accordance with the prevailing code of ethics and social norms.
4. Setting Company Goals:
Corporate objectives provide the basis for planning, organizing, motivating, and
controlling.Without objectives and effective communication behavior within the company can go
astray in many different directions. The desired results are achieved, and the objectives also
indicate the plan to achieve the desired results.
Management should use objectives to guide their company by using them to guide
decision-making, improve efficiency and to guide performance appraisal.
In general, goals are categorized into two types, namely short-term goals and long-term
goals. Short-term goals are business goals that companies strive to achieve usually within one or
two years. Meanwhile, long-term goals are business goals that companies strive to achieve
within three or five years.
Some things related to the characteristics of the goal are:
a. Focuses on critical organizational issues and breakthroughs of the company.
b. Describes the activities completed to achieve the goal.
c. Identify specific timelines, when the results will be achieved
d. Measurable, in the form of whether or not the results are being achieved or can be changed, if
necessary; to progress towards the set goals.
Peter Drucker stated that one of the mistakes in organizing a company is that management
focuses on only one main goal. According to him, companies should strive to achieve several
goals.
There are 8 main scopes that are usually used as company goals, namely:
(a) Market standing,
(b) Innovation,
(c) Productivity,
(d) Resource level,
(e) Profitably,
(f) Manager performance and attitude,
(g) Worker performance, and
(h) Social responsibility.
Whether an objective is generally good or bad is usually determined by how useful it
actually is to the company.
Some of the factors that influence corporate goal setting are:
a. Internal resources and power
b. External environmental forces such as
stakeholders
c. Values of top management
d. Past goals and company development
5. Values Creation:
Value statements can include a commitment to quality, innovation, high customer
satisfaction norms, customer focus, environmental protection, etc. The strategy chosen must fit
the organization, its culture and leadership.
6. Company Philosophy:
Every company in preparing a mission statement needs to develop a philosophy that will
guide the company in solving any problems that arise and become a guide in daily activities. The
company's philosophy is usually referred to as a credo and the values of the credo must be
instilled in every employee's heart and behavior.
One of the famous creeds is that of the company Johnson & Johnson (J&J).This credo was
created in 1920 by General Johnson.The J&J credo states that J&J is responsible for customers,
employees, communities and shareholders.The order of this credo should not be reversed and it
has proven to be effective when J & J faced a contamination problem in one of its products,
Tylenol.Because the interests of customers are number one, J & J withdrew all its products
around the world.This resulted in short-term losses, but huge profits in the long run because of
consumer confidence that the quality of J & J products is guaranteed.
The philosophies used by companies differ from one another. Gobel, known as the
pioneer of Indonesia's electronics industry (National and Panasonic brands) in running his
business, always adheres to the "banana tree" philosophy. Meanwhile, the Japanese company
Matsushita chose "water" as its philosophy. McDonald's became popular with its business
philosophy: quality, service, cleanliness and value. Indonesia also has a philosophy of life,
Pancasila.
2.3 Strategy:
According to Pearce and Robinson (1997; 20) Strategy is the "game plan" of a company.
According to Lynch as cited by Wibisono (2006; 50-51), corporate strategy is a pattern or plan
that integrates the main objectives or policies of the company with a series of actions in a
mutually binding statement. Corporate strategy is usually related to the general principles of
achieving the company's mission, as well as how the company chooses a specific path to achieve
the mission.
Anthony and Govindarajan (1995) also added that strategic planning is a systematic
management process defined as the process of making decisions on programs to be implemented
by the organization and the estimated resources to be allocated in each program over the next
few years (in Prasetyo and Gomies, 2004; 8). The output of the process is a strategic plan or
decision.
According to Morrisey (1995: 45), strategy is the process of determining the direction
that the company must go in order to achieve its mission and as a driving force that will help the
company determine its products, services, and markets in the future. In carrying out daily
operational activities in the company, leaders and top managers always feel confused in choosing
and determining the right strategy because of the constantly changing circumstances.
As a result, leaders and top managers often make mistakes that certainly have a negative
impact on the company.Corporate strategy is an area of study that is always interesting to look
at. There are two major streams that can be used as a basis for determining corporate strategy,
namely:
1. Grand strategies are a set of alternative corporate strategies that are generally used as a
benchmark in determining the strategy to be taken by a company.
2. Generic strategies such as
Porter's generic strategies.
2.4 Relationship between Vision Formulation and Corporate Strategy:
After the vision is formulated, all company strategies must refer to the vision and must
not be reversed, the strategy is first formulated first, then the vision later. This is because it is
feared that the strategy will not be effective because the commitment and direction of the goals
of all people in the company are different and compartmentalized in the functional structure. In
communicating the vision, the role of leadership is very decisive. According to Davidson
(1995:75), the role of leadership in communicating vision can be through:
1. Education (fostering an understanding of the vision).
2. Authentication (fostering confidence in all parties that "words match deeds").
3. Motivation (fostering the willingness from within employees - self motivated workforce -
to behave in accordance with company goals).
Davidson (1995:76) adds that there are 7 key elements that can be used to improve
communication effectiveness vision (effective communication of vision) among others:
1. Simplicity (the vision should be written simply so that it is easily communicated to
everyone both internally and externally to the company).
2. Metaphor, analogy and example (the vision can be simply written through metaphorical
words, analogies and examples so that the vision can be more easily communicated).
3. Multiple forums (communicating the vision can be done in various ways, including
through large meetings, memos, newspapers, posters and other informal talks).
4. Repetition (the vision will sink in and be deeply understood usually after employees have
heard the vision many times).
5. Leadership by example (communicating the vision will be more effective if there is a
similarity between the words and behavior of superiors).
6. Explanation of seeming inconsistencies (if it turns out that there are inconsistencies as in
item 5, then management must immediately provide explanations to all employees in a
simple and honest manner to avoid reducing employee confidence in management).
7. Give and take (communicating the vision will be more effective if the delivery is two-
way).
