On the road again;
Formulating a mission for Folkema Sales Ltd.
J. ten Dolle August, 2005
On the road again;
Formulating a mission for Folkema Sales Ltd.
Author: J. ten Dolle
Supervisor Folkema Sales Ltd.: Gary Folkema Wilko Grievink First supervisor RUG: Dr. D.J. Kiewiet Second supervisor RUG: Ir. G. Henstra
Institute: University of Groningen Faculty of Management &
Organization Landleven 5
9700 AV Groningen
© The author is responsible for the contents of this thesis. The copyright of this thesis rests with the author. No part of this paper may be reproduced without the prior permission of the author or Folkema Sales Ltd.
Management summary
The occasion
The occasion of this thesis is the identified lack of a strategic mission that’s on the one hand adapted to current and future developments and on the other hand specified for the organizational objectives, competences and values. The consequence is that organizational members experience a lack of a strategic decision framework, which results in employees aiming for different objectives. The company runs the risk of undermining its market- and profit position.
Lay out
On basis of the above mentioned need the following research objective is formulated:
A literature review was done in order to identify relevant aspects during the mission formulation process. Overall, the thesis consists of the following steps:
1. Situational analysis
The internal and external environment are analyzed in order to identify relevant opportunities, threats, strengths, and weaknesses.
2. SWOT matrix
The results of the situational analysis are recapitulated in order to identify strategic options and use these for the completion of the mission components.
3. Vision formulation
A clear and articulated vision about the future role will be formulated and serves as input for the eventual mission.
4. Mission formulation
After an analysis of the current mission the strategic mission is formulated using the conclusion of the steps mentioned above. Recommendations are done in order to ease the implementation process.
Findings
During the external analysis appeared that there’s demand for a quality product that Folkema is able to deliver and that corresponds with the strengths of Folkema. The deliverance of a quality product in order to increase customers’ added value. The distinctive competences are the already mentioned quality product in combination with reliable service, supported by the reputation that it has build during the past years.
Overall, Folkema’s smaller size compared with its competitors results in the fact that they’re able to be more flexible and adaptive. The competition is, on the other hand, able to deliver a product that’s of lesser quality but cheaper. This is a main threat for Folkema, especially because a main share of the customers see rubber as rubber and aren’t aware of the different qualities. A trend is that customers are getting educated and starting to see these differences;
this is favorable for Folkema.
During the vision formulation Folkema’s future role in the developing business is expounded. Two important aspects come forward:
…to come to a strategic mission for Folkema Sales Ltd. and to do Folkema recommendations concerning the strategy Folkema has to follow to realize the mission…
1. Folkema’s expectation is that the farms tend to grow in size and farmers will value the arrangement of a total barn. Cow comfort in combination with an efficient business process for the farmer are the main aspects they’ll appreciate and are willing to pay for.
2. Folkema will be responsible for the total barn arrangement, but can’t do this on their own. That’s why relationship with future partners are going to be important.
On basis of the SWOT matrix, the formulated vision and the analysis of the current mission the strategic mission is formulated:
“Folkema wants to grow in being a customer oriented partner in delivering a trouble free, low maintenance total barn arrangement. Folkema wants to provide innovative flooring solutions and products that aid in the successful management of today’s livestock facilities, working to improve the conditions in which livestock are kept.”
Especially the considerations of which the mission is the result are important. Roughly the formulation of the strategic mission consists of the following four steps:
1. Integrating the objectives, 2. Integrating the competences, 3. Integrating the values, 4. Completion of the mission.
Finally, recommendations are given in order to help Folkema with the implementation of the strategic mission. Given the fact that Folkema’s resources are limited it’s important to prioritize the organizational objectives in order to prevent that none of the objectives is realized.
Chapter 1. Introduction ...6
Chapter 2. Problem analysis ...8
2.1 Problem definition ...8
Chapter 3. Literature review ...10
3.1 A mission ...10
3.2 Formulation...11
3.3 Situational analysis ...13
3.4 Summary ...19
Chapter 4. Research lay out ...20
4.1 Research questions...20
4.2 Research process ...22
4.3 Data collection ...23
4.4 Summary ...25
Chapter 5. External analysis ...26
5.1 General environment...27
5.2 Industry environment ...31
5.3 Competitor environment ...35
5.4 Conclusion external analysis...38
Chapter 6. Internal analysis...39
6.1 Management values ...40
6.2 Strengths and weaknesses ...42
6.3 Competences according to Barney...47
6.4 Conclusion ...49
Chapter 7. Strategic options...50
7.1 SWOT matrix...51
7.2 Mission components ...51
Chapter 8. Vision formulation ...54
8.1 Development of a vision ...55
8.2 Vision recapitulation ...56
Chapter 9. Formulating the mission...57
9.1 The current mission...58
9.2 Development of conditions and criteria ...61
9.3 Formulating a mission...62
Chapter 10. Strategic recommendations ...64 10.1 Generic strategy ...65 10.2 Implementing recommendations...66
Chapter 1. Introduction
Company’s history & profile
Folkema’s history starts at the beginning of the fifties. Folkema Sales Ltd. (further Folkema) started to sell ‘Harvestore Storage Silos’. During the nineties Animat, a rubber mats manufacturer, approached Folkema to become in charge of the sales department destined for the cattle market. Folkema’s owner didn’t want this, and in the end Folkema Sales Ltd.
became an independent dealer. Folkema set up the marketing and sales of the mats in the cattle market. When this set up was finished Folkema continued to make the concept ready for the market. Divers patents were applied in order to protect the concept and make it profitable.
Folkema’s organizational structure1 is a simple structure; it’s a young and small entrepreneurial company. The most important design parameters are centralization in an organic structure. The owner/entrepreneur developed the need to start for his own because of frustrations during the relationship with Animat.
The entrepreneur has great knowledge about the product his company is selling, but he lacks the education and skills required to manage a business. The owner recognized this, and hired an office manager. Together they form the strategic apex and take the strategic decisions.
According to Mintzberg a simple structure is characterized by what’s missing. Little of its behavior is standardized, and minimal use is made of planning, training, and liaison devices.
This resembles the situation at Folkema. There’s little job specialization what means that the employees in the operating core carry out a broad range of tasks. Folkema’s technical system is simple, and non-regulating.
The main coordination mechanism is direct supervision. In potential this is the power of this configuration. The structure is able to be lean and flexible.
Concerning financial resources Folkema has to rely on their own equity. All the investments will be done using own resources. In order to increase the possibilities in this area Folkema set up a relationship with a European partner, which resulted in extra financial scope.
However, Folkema’s resources are very limited.
Current objectives
Though that Folkema knows what they want there has never been formulated a concrete mission and vision. It appears it has something to do with ‘animal welfare’, ‘cow-comfort’,
‘the cows’ economic lifespan’ and ‘the farmers’ added value. The strategic goals Folkema is trying to reach are implicitly determined and defined as willing to grow. Optimally these strategic themes are translated to concrete tactical and operational goals, but this hasn’t been done.
Culture
It’s already mentioned that Folkema is a simple structure; another relevant aspect is that Folkema is a family business in which most of the employees are related to the owner.
Handy2 assumes that culture can’t be seen apart from the organizational structure. This is also the situation at Folkema. The culture can be described as a ‘power culture’, often found in small companies like Folkema. The owner/entrepreneur takes all the strategic decisions and in the end determines what the direction of the company will be. Mutual trust plays an important role.
1 Appendix 1.
2 Handy, 1999.
Sanders and Neuijen3 developed an instrument, which can be used to describe and characterize organizational cultures. In the second appendix an overview of the different cultural dimensions is given. Folkema’s culture will be discussed per dimension.
For the first dimension Folkema can be characterized as a result orientated organization.
Folkema is an entrepreneurial organization in which employees do their best to increase sales. Concerning dimension two it can be said that the organization is aimed at the people inside the organization. One is informed about problems of others and takes them into account.
For dimension three it can be said that the culture is more an organizational instead of a professional one. Most employees are related, and identify oneself with the organization. In case of the fourth dimension can be said that the culture is open; against new people, new ideas etc. Loose control rules in the fifth dimension, meetings last longer than planned, jokes are made, and there is not a very strict control. The last dimension is more pragmatic instead of normative. For instance, inside the office is a special chair reserved for “the customer”.
Overall it’s the outcome that counts.
Product & market
During their dealer period Folkema started to sell rubber-flooring products for livestock, as well as for dairy as for equine. Rubber has the advantage that it’s softer and more shock absorbing than the traditional flooring manners. The function of the produced mats is to simulate the lifelike underground of a cow. This means less smooth and more comfort than the current surface in stables. The result is that the cow walks easier, feels more confident with less stress. In short: the cow produces more milk with lesser costs.
In the equine market rubber flooring is more accepted and well known than in the dairy market. Especially in a dairy barn the first generation rubber flooring faces problems to stay in place given the circumstances faced in a dairy barn. So, Folkema started with the development of a new flooring system that should be better able to meet the needed standards.
3 Sanders en Neuijen, 1999.
Chapter 2. Problem analysis
The chapter provides insight about the background and lay out of the research. In paragraph 2.1 the problem will be defined, which means the management question will be introduced (§ 2.1.1), and the research objective and practical relevance will be given (§ 2.1.2).
2.1 Problem definition
In order to get to an objective, it’s important to analyze the motives that underlie the research and to identify the stakeholders. This will be done in the introduction to the research question (§2.1.1). In § 2.1.2 the research objective will be verbalized, and besides something will be said about the practical relevance of the research objective.
2.1.1 Introduction to the management question
The research, which will be described in this paragraph, is initiated by one of the owner- managers as a result of some developments in the past.
At the one hand the research concerns the organization. Not long ago Folkema Sales Ltd.
(further Folkema) used to be a dealer organization and they’ve become independent not long ago. Folkema experiences the challenges of managing business through the early phases of development. It can be characterized as an organization in the beginning phase of the organizational lifecycle, between formation and early growth4. The management team indicated that there’s a need for strategic orientation, because the lack of a decision framework. One do take important – strategic – decisions, but don’t link them together sufficient and don’t place them in a strategic framework. The organization risks that the organizational members aim for several objectives, with the result that the organizations’
unity disappears, which can lead to ambiguous management to the prejudice of for example the market- and profit position. Next, Folkema’s productivity5 is too low; daily management routines costs too much and leaves room for improvement.
At the other hand a motive for this research is the fairly turbulent environment. The Especially because Folkema is inexperienced as an independent organization in which all the strategic decision have to be made on its own. At this moment a lot of developments are going on in the market and Folkema wants to know which role or position in the future can be lucrative. In case Folkema doesn’t know this, the chance exists that other parties surpass Folkema in a strategic way. This could be negative for Folkema’s market position.
The text above shows that Folkema’s management team can be seen as main stakeholder of this research.
2.1.2 Research objective and practical relevance
The former paragraph explains that the organization as well as the environment needs to be analyzed, in order to find a way to cater to developments in the market. For this end the research will aim at the formulation of a founded mission that focuses Folkema for the future; at the one end based on its competences, and on the other end in harmony with the developments in its external environment. The mission specifies the main objective of the company, which can be used as a framework for derivative objectives. This forms a whole strategic (decisions-) framework and repairs the indicated lack of a decision framework.
4 Dodge, 1992.
5 Defined as the ratio of output and input.
Next to the formulation of the mission the strategy, which Folkema could follow to fill in the formulated mission will be treated. This will be done in order to hand Folkema handgrips to execute the mission.
In line with the identified need for a strategic framework the research objective will be formulated as follows:
Now that the research objective is formulated factors that play a role during the formulation of a strategic mission need to be identified. This will be done in chapter two where the literature research will take place. In this chapter relevant background of the research will be reviewed. In this way theory shall be linked to business practice. In chapter three identified relevant factors will be used in order to formulate the research questions.
…to come to a strategic mission for Folkema Sales Ltd. and to do Folkema recommendations concerning the strategy Folkema has to follow to realize the mission…
Chapter 3. Literature review
This chapter’s main interest is the literature research that took place to identify relevant aspects that play a role in the formulation process of a strategic mission. In line with chapter two, theories about a strategic mission as a solution to clear the identified lack of strategic awareness at small businesses will be analyzed (§ 3.1). After that different formulation processes and mission components are going to be analyzed (§ 3.2). After this, the concrete completion (§ 3.3) of the formulation process will be treated and it starts with literature about the external and internal environment and the identification of strategic options. The way to analyze the current mission will also be treated. After that Finally (§ 3.3.5), several generic strategies will be analyzed and used to finish the strategic planning process.
Eventually, the research introduction, research objective and research questions that will be formulated in chapter four are going to be linked with the theoretical aspects.
3.1 A mission
In chapter one became clear that Folkema’s management and employees indicated a lack of strategic decision framework, which led to ambiguity about organizational objectives and communication problems. Hamel and Prahalad6 formulate this as follows: “No company can get along without a well-articulated point of view about tomorrow’s opportunities and challenges”. In the paragraph below the functions of a mission will be identified to check if it’s a solution for the problems analyzed in chapter two.
3.1.1 Functions of a mission
By formulating a clear mission the organization creates a framework for unambiguous decision-making. According to Hitt7 it helps the firm to survive in the long run as it creates and uses competitive advantages as the foundation for achieving strategic competitiveness and earning above-average returns. Sandu8 has identified the most important strategic requests for small businesses:
1. To be scientifically substantiated, offering a precise analysis of the enterprise’
objectives and the necessary realism;
2. To completely exploit the market opportunities;
3. To fit the enterprise competences and resources;
4. To involve an acceptable level of risk both from the perspective of the firm’s resources and also the managerial style of the entrepreneur;
5. To be appropriate to the organizational culture and to the entrepreneur’s system of values.
Thomas9 states that the objectives of an organizational mission sounds as follows:
1. The mission forms the objective on which all the activities and efforts should aim for.
2. The mission forms a standard against which the organizational results can be reflected on.
According to several writers10 a mission statement has at least the following advantages:
1. A mission gives the company a direction and determines the organization’s objective. Harmony and communication about the objective and policy line is secured and a basis for the allocation of organizational resources is provided.
6 Hamel and Prahalad, 1994.
7 Hitt, 2001.
8 Sandu, 1997.
9 Thomas, 1988.
10 Campbell and Tawadey, 1990; King and Cleveland in David, 1989; Thomas, 1988.
2. A mission supports daily activities and realizes a consistent company policy.
Thereby it becomes possible to convert objectives to concrete tasks for organizational departments and in such a way costs, time and performance indicators can be recorded and controlled.
3. A mission gives employees the opportunity to identify themselves with, and contribute to objectives that go beyond their own tasks or that of the firm.
The above-mentioned characteristics and advantages of a mission statement show resemblances with the identified management problem in chapter two. So, from this point of view the formulation of an organizational mission is reasonable.
3.2 Formulation
Above (§3.1) the need for a strategic mission is founded. This paragraph deals with literature about the formulation process to make sure no important aspects will be forgotten and that the mission fits the firm’s situation.
3.2.1 Approach
Falsey11 states the following:
“The process of putting a mission statement together can be very difficult. There’s no ‘right way’ of doing it. The actual process will vary from company to company.”
So, one has to keep a firm’s characteristics in mind, for example Hannon12 states that small businesses are not likely to benefit from a formal long range planning system. Therefore, it’s important to adapt the formulation process to the aspects that characterize the concerning organization. Campbell, Devine and Young13 distinguish three different methods, which can be used in practice:
1. The founder approach.
2. The intellectual approach.
3. The operational approach.
In the first method the owner/manager is responsible for the design and the propagation of the mission. The strength of this approach lies in the fact that the mission statement isn’t developed artificial, but rather is grown in an organic way out of the ideas of the founder of the organization. The disadvantage of this method is that it can’t be applied on an already existing organization. This is the case, so one of the two remaining approaches should be used.
The intellectual approach aims to design a crystallized mission at once. The risk that comes with this approach is that too much attention is spent on the formulation process. The implementation of the new mission, whereby support and commitment of the employees is important, gets too little attention.
The operational approach takes above-mentioned risk into account. Within this approach one starts the execution of a number new, operational tasks. When these tasks are accepted one tries to formulate a new mission based on these new tasks.
Concluding can be said that the intellectual approach especially is useful when the changes that need to be carried out aren’t too big. For more radical changes the operational approach seems more convenient.
11 Falsey, 1989.
12 Hannon, 1997.
13 Campbell, Devine and Young, 1990.
In this thesis the intellectual approach will be chosen, but the comment has to be placed that the implementation and commitment from the organizational employees and management team gets substantial attention during the whole process. Chapter four pays attention to the way information is collected and what’s done to improve organizational commitment.
3.2.2 Content and process
In this research a mission will be defined based on Waalewijn14; he defines three ‘mission components’:
Objectives: The objective is in fact the key part of a mission, because the mission can be considered as a main objective for the entire organization.
Competences: The competence specifies that which the organization (potential) is good in compared to the other market actors; in management literature often referred to as (potential) competitive advantage.
Values: The values, finally, concern the ideas of the management team about a healthy and responsible management. These values partly determine the objectives and could in that case be more important than the situational analyses. Through the assimilation of the management values it’s assumed that the eventual mission will fit the organizational culture, and the managerial style.
So, three steps are important; the assimilation of the organizational objectives, competences and management values. Below will be described how these three mission components are going to be filled in.
In order to come to the formulation of organizational objectives and eventual a strategic mission a strategic planning process should be completed. Several writers15 have described a number of steps in this planning process. There’s little disagreement about the abstract structure: a combination of an internal analysis and an external analysis that form the basis of the formulation of the organizational objectives and strategies.
Based upon this so-called situational analysis the SWOT matrix will be drawn in order to identify several strategic options. According to § 3.1.2 a vision has to be formulated which fits the organization and serves as input for the strategic mission. The vision is aimed outside and considers the firms’ future place in its environment.
Another benefit of a vision formulation is that all relevant factors are combined one more time, so an organization can, using Prahalad’s words, outline a “well-articulated view about
14 Waalewijn, 1999.
15 Rowe, Mason, Dickell, 1982; Wind, Robertson, 1983; Leeflang, 1987; Aaker 2001; Hitt, 2001.
Mission Objectives
Competences Values
Figure 2.1: Mission components
the future”. This view shows the organizational ideas about the role the firm wants to play in the future; given their own experience and the results of the strategic analysis. So, it’s the preparation of the completion of the mission.
3.3 Situational analysis
The situational analysis is a combination of an analysis of the external environment and an analysis of the internal environment16. Theory about the external and internal analysis will be analyzed and confronted below.
3.3.1 External analysis
Understanding the environment in which a company operates, and how to respond to it, is critical to both the business planning process and the management of a small firm17. So in order to complete the mission components ‘objectives’ and ‘competences’ the external environment needs to be analyzed. Hitt states that the focus is on trying to predict the future in terms of trends and issues and to predict the expected effects on a firm’s operations. The analysis of the external environment will be divided into three major areas18: the general, the industry, and the competitor environment19. The industry and competitor environment characterize themselves because of the mutual influence between present parties20. Hitt states that the direct control over the general environment is relatively small, while the direct control over the industry-, and competitor’s environment is more present. The consequence of this observation is that the firm’s strategic path should mainly be based upon the industry- , and competitor environment, while taking the general developments into account.
Ad 1 General environment
According to several writers21 the general environment is composed of six segments.
The first one is the demographic segment; this is concerned with a population’s size, age structure, geographic distribution, ethnic mix, and income distribution. According to Hitt 22 it’s relevant for a firm to analyze on a global basis rather than a domestic-only base.
The economic segment is the second segment. The health of a nation’s economy affects the performance of individual firms and industries. Uncertainty in interdependent economies affects firms of all types and sizes.
The political/legal segment represents how organizations try to influence governments and how governments influence them. These developments influence the nature of competition so careful analysis is a must.
Socio-cultural is the third segment. This segment deals with society’s attitude and cultural values that affect a market. Attitudes and values form the cornerstone of a society, they often drive demographic, economic, political/legal, and technological conditions and changes.
Companies must understand the implications of a society’s attitudes and its cultural values before they can expect to offer goods that’ll meet consumers’ needs and interests.
Technological developments sometimes transform or revitalize an industry. The technological segment includes the institutions and activities involved with creating new knowledge and translating that knowledge in new outputs.
16 Rampersad, 1997.
17 Hannon, 1997.
18 Hitt, 2001.
19 Appendix three shows the mutual interdependence of the three environments.
20 Douma, 1993.
21 Hitt, 2001; Eppink, 2004; Douma, 1993.
22 Hitt, 2001.
The global segment deals with new global markets, existing ones that are changing, important international political events, and critical cultural and institutional characteristics of global markets.
The objective of the analysis is to identify opportunities and threats, which influence the firm’s objectives and competences.
Ad 2 Industry environment
In order to determine the organizational objective it’s important to analyze what developments play a role in the industry. Relevant developments form one of the starting points to determine the organizational objectives.
Organizational competences are relative and depend on competition and other factors in the industry. So, when determining organizational competences the industry environment has to be considered.
An industry is a group of firms producing products that are close substitutes. In the course of competition, these firms influence one and another23.
Compared to the general environment, the industry environment has a more direct effect on strategic competitiveness and firms’ returns. The intensity of the industry competition and an industry’s profit potential (as measured by the long run return on invested capital) are a function of five competitive forces: the threats posed by new entrants, suppliers, buyers, product substitutes, and the intensity of rivalry among competitors24. Using Porter25 as a guideline these forces are going to be analyzed.
The threat of new entrants is closely connected with the presence of barriers to entry, which are determined by several factors. These factors will be subject of analysis.
In order to determine the rivalry among competing firms two groups of factors have to be analyzed: the structural factors, and the behavioral characteristics of the firms in the industry26.
To determine the threat of substitutes products that offer comparable capabilities are analyzed. Finally, the bargaining power of buyers and suppliers are going to be analyzed and described. The analysis of the five forces makes it possible to judge whether a market is attractive or not.
Ad 3 Competitor environment
In order to determine the organizational objective it’s important to analyze what developments play a role in the competitors’ environment. A strategic mission involves positioning a business to maximize the value of the capabilities that distinguishes it from its competitors. Relevant developments in this area form one of the starting points to determine the organizational objectives.
Organizational competences are relative and depend also on the competition. So, when determining organizational competences the competitors need to be analyzed.
The competitor analysis focuses on each company against whom a firm competes directly.
One seeks to understand what the competition drives, what it’s doing and can do, what the competition believes about itself and the industry, and what the competitor’s capabilities are27. In order to capture competitive patterns that are visible across a set of firms competing against each other in a certain industry the competitors will be divided into strategic groups.
These strategic groups will be used as an analytical tool. A strategic group is a group of
23 Hitt, 2001.
24 Hitt, 2001.
25 Porter, 1980.
26 Douma, 1993.
27 Hitt, 2001.
firms in an industry following the same or a similar strategy along the same strategic dimensions28.
3.3.2 Internal analysis
The analysis of the internal environment is purposed to retrieve the mission components
‘management values’, ‘objectives’ and ‘competences’. The internal environment is composed of strengths and weaknesses which both influence the firm’s strategic compositeness.
Strengths: organizational aspects that form the core of that in, which the company is relatively good.
Weaknesses: organizational aspects that form the core of that in, which the company is relatively bad.
So, it indicates what a firm can do. It’s required that the organization recognize its strengths before the firm can make important strategic decisions29.
To find out what the strengths and weaknesses of a firm are, Porter’s value chain30 can be used. The organization is considered as a sequence of activities, which each delivers a certain value (and when possible a profit margin). Analyzing how these functions function can provide useful insights31. It provides opportunities to understand how environmental trends affect specific activities of a firm.
The sequence of activities can be divided in the so-called primary and support activities. The primary activities are connected directly with the delivery of a product or service. They can be grouped into five main areas: inbound logistics, operations, outbound logistics, marketing and sales, and service. Support activities are not directly connected with the production process. There are four main areas within the support activities: procurement, technology development (including R&D), human resource management, and infrastructure (systems for planning, finance, quality information management etc)32.
For every activity will be checked whether the organization is in possession of strong or weak points. The value chain will be used, as a framework to make sure important aspects
28 Hitt, 2001.
29 Hitt, 2001.
30 Porter, 1985.
31 Eppink, 2004.
32 Eppink, 2004.
Infrastructure
Human resource management Technology development
Procurement Inbound logistics
Operations Outbound logistics
Marketing
& sales
Service
Margin
Figure 3.1: The value chain
won’t be forgotten. First the support activities will be analyzed; afterwards the primary activities will be treated. During the analyses it’s important to support qualitative judgments with quantitative (financial) information as much as possible33. To exclude subjectivity as much as possible it’s important to involve a variety of stakeholders34. The knowledge provides a base for the formulation of the strategic mission. The analysis needs to be done as exhaustive as possible; given the available information. Several theories will be used as a framework during the analysis of the organizational sub-functions.
R & D
The development funnel35 and the QFD method36 will be used in order to analyze the development process an organization. Wheelwright and Clark recognize the fact that organizations differ, and developed several innovations models. For this thesis model three will be used. The so-called ‘innovative and focused funnel’ illustrates the process a firm ideally goes through to identify many ideas, select the few most promising for development, and focus resources to get them into the market. The management of the funnel concerns three very different tasks or challenges. The first is to widen its mouth; to be effective a firm must expand its knowledge base and access to information in order to increase the number of new product and process ideas. The second challenge is to narrow the funnel’s neck, especially when a firm has limited resources, which is the situation at Folkema. After generating a variety of alternative concepts and ideas, management must screen them and focus resources on the most attractive opportunities. The third challenge is to ensure that the selected projects deliver on the objectives anticipated when the project was approved.
The QFD method is designed to match customer requirements with engineering characteristics. The aim is to set targets to be achieved for the engineering characteristics of a product in such a way that they satisfy customer requirements.
Marketing
To determine a firm’s marketing effectiveness a marketing audit will be done based on Kotler37. Kotler developed a set of questions, which can be used to retrieve a company’s marketing effectiveness.
In order to determine whether the identified strengths are also a competence Barney’s38 VRIO-framework will be used. It’ll be analyzed to what extent the identified strengths are:
1. Valuable (Valuable);
2. Unique when compared to the competition (Rare);
3. Hard to copy by it’s competitors (costly to Imitate);
4. Leading to a goal that could be realized in another way (Organized to exploit).
The more the strengths are valuable (1), rare (2), costly to imitate (3), and if there’re less ways to achieve the same goal (4), the relative strength of the company will grow.
According to Harari39 effective strategy formulation and implementation relies on concepts of uniqueness and differentiation leading to a sustainable competitive advantage. So the identified competences will be used as a basis for the strategic mission.
33 Eppink, 2004.
34 Hitt, 2001.
35 Wheelwright, 1992.
36 Cross, 2000.
37 In Peelen, 1999.
38 Barney, 1991.
39 Harari, 1994.
3.3.3 SWOT-analysis
A good strategy means ensuring a fit between the external situation a firm faces (threats and opportunities) and its own internal qualities and characteristics (strengths and weaknesses).
According to Alsem40 in a SWOT analysis the identified strengths and weaknesses will be linked with the opportunities and threats in order to identify strategic options. Figure 3.2 shows the connectedness with the situational analysis.
An important objective of the SWOT is the development or identification of strategies with which a firm can be successful in the market41. Research shows that the SWOT method is one of the most used tools to formulate strategies42.
According to Eppink the strength of the SWOT method lies in its recognizability, usability, and in ‘the story’ that arises when putting the strengths, weaknesses, opportunities and threats in a matrix. It offers the possibility to discuss several strategic options and thereby increasing managements’ commitment. This is important, because in § 3.2.1 is indicated that commitment is critical. Figure 3.3 shows the strategies per quadrant in the matrix.
This matrix shows which options a company should invest in and focus on. The SWOT matrix will be used to fulfill the three mission components.
3.3.4 The current mission
Before one starts with the formulation of the eventual mission, it’s important to look at the current organizational objectives in order to form an image about the strategic direction the company is pursuing at this moment43. Doing this it becomes possible to
determine whether the current mission runs parallel with the results that came forward
40 Alsem, 2001.
41 Eppink, 2004.
42 Glaister, 1999.
43 Douma, 1993; Eppink, 2004; Rampersad, 1997.
Situational analysis
Internal External
SWOT analysis - Recapitulation situational analysis, - SWOT matrix,
-Identify options, choice.
Figure 3.2 Relation between situational analysis and SWOT
Pull back or bend Defend
Grow Improve
Opportunities Threats
Strengths Weaknesses
Figure 3.3 SWOT combinations and strategies
during the analysis this far.
This will de done by analyzing the current mission. Van de Griendt44 describes several phases the development of a mission goes through. The figure below shows the phases, the content of the several phases is described below.
Phase 1: No clear mission
A concrete mission lacks. Everything is entirely focused on daily business, and there isn’t enough attention for strategic planning.
Phase 2: General mission statement
Most of the time growth forces the director to divide tasks and responsibility. At several organizational levels decisions need to be made. To guarantee a consistent policy, guidelines are put on paper; the general mission statement.
Phase 3: Specific mission statement
Further specification of the in phase two formulated guidelines; the mission is formulated in measurable terms. The specific mission statement indicates in what the organization distinguishes itself compared with the competition.
Phase 4: Priorities among mission
This is the final phase. It deals with worked out guidelines, ordered based on importance.
The management ascribes priorities to each task.
The second step is to analyze the awareness among organizational members, and in line with Waalewijn’s definition to analyze the resemblance with the organizational values, competences and objectives.
The final step before the mission formulation is the development of criteria and conditions, which the mission has to deal with or correspond to. Two different sources are used. First, relevant literature45 is used to identify criteria:
• The mission has to be formulated conform the vision,
• The mission has to be internal congruent,
• The mission has to reflect management values,
44 Griendt, 1994.
45 Hitt, 2001; Griendt, 1994.
No clear mission
General mission statement
Specific mission statement
Priorities among mission
Figure 3.4 Phases in the development of a mission
• The objective has to become clear and the possibility has to be created to distract tactical and operational objectives,
• Provide insight about the organizational competences.
The second source have to be a series of interviews with the main stakeholder. More attention to this subject will given in chapter four.
3.3.5 Strategic options
To clarify the firm’s options and the way to implement the mission recommendations need to be done. Besides dialogues with the organizational management, generic organizational strategies can be used as framework. According to Aaker46 there’re four generic strategies:
- Differentiation, - Low costs, - Focus,
- Preemptive move.
A differentiation strategy is one in which a product offering is different from that of one or more competitors in a way that is valued by the customer. The value added should affect customer choice and ultimate satisfaction.
A low costs strategy seeks to achieve a lower price than competitors whilst trying to maintain similar value of product or service to that offered by the competitors47. A firm pursuing this strategy should make use of scale economies, experience curves and f.i. an efficient product design.
A focus strategy, whether it involves differentiation, low costs, or both, concentrates on one part of the market or product line. Focus strategies avoid diluting or distracting strategy implementation, provide a way to compete when resources are limited, bypass assets and competencies of larger competitors, provide positioning strategy, and reduce competitive pressures.
A preemptive strategic move is an implementation of a strategy new to a business area that, because it is first, generates an asset or competency that competitors are unable to duplicate or counter. A sustainable first-mover advantage can result from technological leadership, preemption of assets, and/or customer’s switching costs.
3.4 Summary
The literature review identified relevant aspects during a strategic mission formulation process. In the following chapter these aspects are going to be linked with a set of research questions needed to fulfill the research objective.
46 Aaker, 2001.
47 Johnson, 2002.
Chapter 4. Research lay out
Based upon the aspects that came up during the literature research in chapter three this chapter will deal with the research questions, which are going to be answered in order to get the knowledge needed to fulfill the following research objective.
This is the research objective as formulated in chapter two. Chapter three described the aspects that are important during the mission formulating process. In line with these aspects the research questions will be formulated below. So, per research question will be described which methods are going to be used to collect the needed information, through which data sources.
4.1 Research questions
The objective shows that the final objective is a strategic mission, and in chapter three appeared that a careful diagnosis of the organization’s current conditions as manifested by its external and internal environments is important. The first two sub-questions deal with this.
From out an external point of view it gets reasoned that an organization is situated in an environment which demands things of an organization and which influences the internal organization in various ways. The environment creates opportunities and threats. In order to formulate a mission external forces can’t be ignored. From this point of view the first research-question is formulated and sounds as follows:
Research-question 1: What relevant opportunities and threats can be distinguished from the external environment?
- Identify the developments that affect the dairy market and indirectly the rubber flooring business,
- Analyze the intensity of the industry competition and profit potential,
- Identification of the direct and indirect competitors that are active and their capabilities.
In line with the literature review Folkema’s external environment will be divided into three major areas: the general, the industry, and the competitor environment. These three categories are going to be analyzed using the concepts as identified in chapter three.
Because the mission components ‘competences’ and ‘objectives’ are influenced by opportunities and threats in the external environment, eventually the results of the analysis will be translated so they can be used for the completion of the two components.
The second research question deals with the internal organization. In order to identify the strengths and weaknesses of Folkema the following question will be answered:
Research -question 2: What relevant strengths and weaknesses characterize Folkema?
- Identification of the management values,
- Analyses of the organizational aspects in which the firm is relatively good and relatively bad,
- Identify the competences that form the basis for the further strategy.
…to come to a strategic mission for Folkema Sales Ltd. and to do Folkema recommendations concerning the strategy Folkema has to follow to realize the mission…
This research questions deals with all the three mission components, namely the ´values´, the ´objectives´ and the ´competences’, are going to be analyzed. These three components show mutual relations.
The strengths and weaknesses are going to be analyzed using Porter’s value chain. Next, using Barney’s VRIO framework the strengths will be judged whether they’re a distinctive competence.
According to the review in chapter three the following step is a combination of the identified strengths, weaknesses, threats and opportunities. This will be done with a SWOT matrix;
strategic options will be discussed and managements’ commitment increases. Therefore research question three sounds:
Research-question 3: What strategic options result from the situational analysis?
After insight is obtained about the relevant strategic options it’s essential for the organization to create an image about the future and to reason which role Folkema should play. Therefore, it’s important for the management team to form a clear vision on the organizations’ possibilities, analogue to the quotation of Hamel and Prahalad. (“a well articulated point of view”). In this vision different factors, which come forward in the mission as well play a role: desirable and possible objectives, the organizations’ strength, and the values in the company. With that the vision is, like the final mission specifically formed for Folkema. The vision concentrates mainly on the external environment and the role Folkema wants to play, while the mission focuses mainly on the internal organization.
The third research-question sounds:
Research-question 4: Which vision fits Folkema?
Based on the formulated vision, together with the situational analyses and the SWOT matrix Folkema’s mission has to be formulated. The question to that end is:
Research-question 5: What mission is reasonable for Folkema?
Again Waalewijn’s mission definition will be used in order to formulate the new strategic mission. The three mission components will be used and integrated into a suitable strategic mission. First, the current mission will be analyzed to form an image about its content and awareness among the organizational members. Van de Griendt describes several phases the development of a mission goes through. These phases will be used to classify Folkema’s situation.
After the analysis of the current mission conditions and criteria will be formulated. The last step is the actual formulation. Again, Waalewijn’s components will be used and integrated in a new mission. The final step is a check with the formulated criteria and conditions to ensure the mission is useable.
To support this research’s practical relevance the possibilities Folkema has to execute the mission in practice will be treated. The research-question that has to be answered sounds:
Research-question 6: What recommendations can be done in order to help with the implementation of the formulated mission?
Several generic strategies will be explained and used in order to get clarity about the aspects Folkema should focus on. Answering the five sub-questions will lead to the answer of the research questions and completion of the research objective.
The research process will be summarized in the model as shown in paragraph 4.2.
4.2 Research process
The overall structure of the research is based upon the completion of the three mission components ‘objectives’, ‘competences’ and ‘values’. The first two mission components will be filled in on bases of the results of the SWOT matrix. The values are going to be identified during the internal analysis.
Before a SWOT matrix can be drawn strengths, weaknesses, opportunities and threats need to be analyzed. This will be done by an analysis of the internal and external environment;
the so-called situational analysis. The results form the input for the SWOT matrix in which the strengths, weaknesses, opportunities and threats are linked with each other in order to identify the strategic options. The results of the SWOT matrix will be used to fill in the three mission components.
Based on these three components a vision will be formulated. This represents an articulated view about the future situation and the role Folkema wants to fulfill.
The final step is the so-called mission formulation. The three mission components, the formulated vision and the status of the current mission will serve as input.
External analysis
Internal analysis
SWOT matrix
Objectives Competences Values
Vision
Mission
Figure 4.1 Research process Current mission
4.3 Data collection
On basis of the formulated research questions in this paragraph insight will be given about the ways data is collected during the research process. First the methods will be named, and after that these methods will be explained.
Introduction / problem analysis / research questions / research framework
- Literature review; study of literature in order to analyze relevant aspects that play a role during the research process and solution directions in order to fulfill the research objective.
- Interviews; with all organizational members and the management team in order to analyze the situation and retrieve the causes motives of this thesis. Next, all the employees were interviewed in order to describe Folkema’s culture and way of working.
- Internal documentation; several unofficial internal documents were used in order to get information about Folkema’s history and causes of the identified problems.
Research question 1: What relevant opportunities and threats can be distinguished from the external environment?
- Interviews;
Sales & marketing employee: they pay visits to farm shows and customers, and have important information about the needs that have to be fulfilled, competitors’
products and developments in the market.
Office manager & Folkema’s owner: they also pay visits to farm shows, did have meetings with an university in order to increase knowledge about rubber.
Test farm owner: contacted and interviewed about the dis- and advantages of rubber flooring and the probable market acceptance of rubber flooring. Interested farmers often contact test farms to collect information about new products (in this case rubber flooring).
Public relations officer of the Ontarian government: interviewed about regulations concerning the fees of recycled rubber, the future supply of rubber, and regulations about the future milk pricing system.
Veterinary surgeon: about the influence of rubber flooring on cow’s health.
- Internal documents;
US and Canadian market audit (concept) and the Market preview plus report:
were used to collect information about the dairy market.
- External documents;
Farm magazines and articles on the internet are used to identify relevant trends in the external environment and additional information to complete the market audits.
Research question 2: What relevant strengths and weaknesses characterize Folkema?
- Interviews;
Sales & marketing employees: in order to identify the competitors’
characteristics and compare them with Folkema’s characteristics and use this information for the analysis of the value chain. Also the information needed for Kotler’s marketing audit is collected during these interviews.
Owner: has worked for a remarkable period at one of the main competitors and has a lot of relevant information as his disposal about the way this company acts.
Judgments for the VRIO framework mostly were done in dialogue with the owner. Finally, he’s also responsible for most past product developments, so
