STRATEGIC MANAGEMENT (MGT 60703)

Student Name: LIM TING LE

Student ID No: 0320028

Lecturer: MR. LEONG BOON TIK

Date of Submission: 10/11/2016

Assignment title: PART A – Vision and mission

PART B – The 5 forces models

Word count: 5045 words

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Part A

In these recent decades, business area is getting bigger and bigger with the comparison of core

competency or other sustainable competitive advantages. Hence, the first step that we need to

take action to enter the business world is to set a future goals and current mission in order to set

the right direction for decision making process. In every business there will be a strategic analysis

and strategic planning before we want to enter to our business.

As the first paragraph stated, these future goals and current mission are so called as vision and

mission statement. Vision statement is very important because it is a step that setting an

organisation’s future direction so that when coming to decision making process, the top

management will select the right decision in order to match with the vision statement that they

stated before entering to this business. Without the vision statement, the top management might

make the wrong decision for the organisation because they don’t have the exact direction. In this

case, how does an organisation explain the vision and mission statement to their workers? Vision

and mission statement can be easily conveyed to his workers and managers if the organisation is

smaller. If the organisation is smaller in term of size and organisational structure, the amount of

workers are simplistic in managerial style which means the vision and mission statement could be

easily discharge without any problem. The employees and managers should be understand and

memorise the vision and mission that the organisation is heading to. However if the organisation

grow bigger, the way to convey the vision and mission statement to the workers would be harder

than smaller organisation. The vision and mission statements is designed and written clearly to

make sure the employees and managers to understand what and how the direction should be

achieve.

Sometimes, vision and mission statement might be fail in the organisation too. To avoid this

situation happens, landing a vision is very important that helps employees see the big picture,

showing them the way to getting there and allowing them to live it. Explain the ‘ways of

working’ and the ‘what’s it in for us and you’ perspectives. Give examples of work that the

organization currently does which relates to the vision. Break down the vision into easy and

digestible parts. Give employees ways to explain the vision in short hand. Ask them to specify

how they will live the vision using statements like ‘In my daily work I need to do the following to

live the vision’ or ‘Things I expect others to do to make it come together’.

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VISION STATEMENT

An inspirational statement which an organisation would like to achieve or accomplish in future

and long-term goal. It invented to improve the decision making process and provide a clear guide

to the workers.

About A Vision statement outlines WHERE you want to be. Communicates both the

purpose and values of your business

Answer It answers the question, “Where do we aim to be?”

Time A vision statement talks about your future.

Function It lists where you see yourself some years from now. It inspires you to give

your best. It shapes your understanding of why you are working here.

Change As your organisation evolves, you might feel tempted to change your vision.

However, mission or vision statements explain your organisation's foundation,

so change should be kept to a minimum.

Developing a

statement

Where do we want to be going forward? When do we want to reach that stage?

How do we want to do it?

Features of an

effective

statement

Clarity and lack of ambiguity: Describing a bright future (hope); Memorable

and engaging expression; realistic aspirations, achievable; alignment with

organisational values and culture.

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EXAMPLES OF VISION STATEMENTS

Mac Donald: Our overall vision is for McDonald’s to become a modern, progressive burger

company delivering a contemporary customer experience. 

Google: to provide access to the world’s information in one click.

Amazon: to build a place where people can come to find and discover anything that they might

want to buy online

IKEA: to create a better everyday life for the many people.

Nike: To bring inspiration and innovation to every athlete in the world

San Diego Zoo: To become a world leader at connecting people to wildlife and conservation

Disney: we create happiness by providing the finest environment for people of all ages,

everywhere.

Wikipedia: Imagine a world in which every single person is given free access to the sum of all

human knowledge.

Starbucks: to establish Starbucks as the most recognised and respected brand in the world

World Vision: For every child, life in all its fullness; Our prayer for every heart, the will to make

it so

Teach for America: One day, all children in this nation will have the opportunity to attain an

excellent education.

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MISSION STATEMENT

A good mission statement should be clear, concise and memorable in order to inspire workers and

managers. A written declaration of an organisation’s core purpose and focus that normally

remains unchanged over time.

Serve as filters to separate what is important from WHAT is not

Clearly state which markets will be served and HOW.

COMMUNICATE a sense of intended direction to the entire organisation

About A Mission statement talks about HOW you will get to where you want to

be. Defines the purpose and primary objectives related to your customer

needs and team values.

Answer It answers the question, “What do we do? What makes us different?”

Time A mission statement talks about the present leading to its future.

Function It lists the broad goals for which the organisation is formed. Its prime

function is internal; to define the key measure or measures of the

organisation's success and its prime audience is the leadership, team and

stockholders.

Change Your mission statement may change, but it should still tie back to your

core values, customer needs and vision.

Developing a

statement

What do we do today? For whom do we do it? What is the benefit? In

other words, Why we do what we do? What, For Whom and Why?

Features of an

effective statement

Purpose and values of the organisation: Who are the organisation's main

"clients"? What are the responsibilities of the organisation towards the

clients?

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EXAMPLES OF MISSION STATEMENTS

Cola-cola: to refresh the world in mind, body and spirit. To create value and make difference

Google: to organize the world’s information and make it universally accessible and useful.

E-bay: to provide a global trading platform where practically anyone can trade practically

anything.

Facebook: To give people the power to share and make the world more open and connected

Invisible Children: To bring a permanent end to LRA atrocities.

Public Broadcasting System (PBS): To create content that educates, informs and inspires.

Mac Donald: to be our customer’s favourite place and the way to eat and drink.

National Wildlife Federation: Inspiring Americans to protect wildlife for our children’s future.

Twitter: To give everyone the power to create and share idea and information instantly, without

barriers.

Oxfam: To create lasting solutions to poverty, hunger, and social injustice.

Environmental Defense Fund: To preserve the natural systems on which all life depends.

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MICROSOFT CORPORATION

In the computer technology’s world, Microsoft Corporation is a successful organisation as a

global computer technology company. Of course, vision and mission statement are needed to

achieve the goal. The vision statement is basically all about development of the business toward a

desired future condition. Therefore, Microsoft’s vision statement is directly point toward the

ability of the company for individual and also organisational customers. On other hand,

Microsoft’s mission statement generate strategic and current task to grow the business.

Microsoft’s mission statement is the current task to empower its customers. In the company,

Microsoft’s mission is strongly aligned with the vision statement.

Why visions fail

Leaders who deride visions can’t improve their organisation in any remarkable way.

For example, when Louis Gerstner Jr. became CEO of IBM in 1993, the company was in deep

red with annual net losses of $8bn. Yet Gerstner was quoted as saying: “The last thing IBM needs

is a vision.” But within two years, he changed that view and embarked on a vision trip that led

IBM into a network computing service. Soon, the company was recording 20% annual growth in

the new venture. Note, however, that without vision Gerstner didn’t turn the tide for IBM. But

when he developed, clarified, shared and launched a vision, the company revived. Yes, visioning

is an indispensable function of leadership; but visions sometimes fail to materialise. As a forecast

of the future, a vision requires that certain factors be shut out to give the vision chance to mature

and materialise. The realisation of a vision isn’t automatic. You may have a mental picture of

remarkable development for your organisation and its people. But if you ignore the effect that

certain intervening variables may have on your vision, the vision may turn out to be wishful

thinking. Giving the factors the chance to act is the reason why some visions fail to “click”.

I call the factors inhibitors. They may strike at three stages in the visioning process: between the

vision’s formation and action; between action and mission; and between mission activities and

full realisation of the vision’s goals (destination). I will treat each inhibitor separately.

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Vision statement

“to help individuals and businesses realize their full potential.”

 Microsoft’s vision statement has the following significant components:

Individuals and businesses

Help realize

Full potential

The first component of the vision statement clearly defines Microsoft’s target market. For

example, instead of selling software products to individual customers only, the company also sells

its products to organizations. The second component of Microsoft’s corporate vision statement

shows what the business intends to do. For instance, the company aims to provide products that

assist customers toward the achievement of their full potential, which is specified in the third

component of the corporate vision. Thus, Microsoft’s vision statement presents the target market,

what the company’s technology products do, and what customers can achieve through such

products.

Mission statement

“to empower every person and every organization on the planet to achieve more.”

The following components are significant in Microsoft’s mission statement:

Empower

Every person and every organization on the planet

To achieve more

The first component of the corporate mission shows what Microsoft’s products can do for

customers. For example, such empowerment can take the form of speedy processing in offices and

enhanced information access in homes. The second component of Microsoft’s mission statement

specifies the target market, which in this case involves all individuals and organizations

worldwide. The company’s mission statement also specifies that its computer technology and

software products benefit customers in terms of achieving more. Thus, Microsoft’s mission

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statement is highly similar to the company’s vision statement, although the corporate mission puts

more emphasis on the practical benefit of achieving more.

IMPROVEMENT OF VISION AND MISSION STATEMENT

“to help people and organizations understand their maximum capacity.”

Microsoft’s vision statement shows the company’s target market and product value. However,

the vision statement is lacking in details to effectively guide the organisation’s development. In

my opinion, vision statement must include a detail direction toward the future condition or a

future goal of the company. In this case, the corporate vision does not contain such details. Thus,

as an advice or recommendation, the company have to study its own vision statement to include

information about where the business is heading to. For an example, Microsoft’s vision statement

must present information that about its target market. Leadership for a specific set of computer

technology and software products. Microsoft’s mission statement presents the global market

scope of the business and a general idea about the benefit of the business to its customers.

However, such information is still not clearly defined to represent the business. Mission

statements must provide a general idea about the strategic direction of the business, or about what

the organization wants to achieve. In this case, Microsoft’s corporate mission needs

improvement. As a recommendation, the company can improve its mission statement by

including how the organization will achieve its corporate vision. For example, in terms of

growing its computer technology and software business, Microsoft can specify rapid innovation

in computing networks and related products. Also, to improve the mission statement, information

about Microsoft’s generic strategy may be included.

HOW TO WRITE AN EFFECTIVE MISSION AND VISION STATEMENT

Vision statement Mission statement

find the human value in your work develop your winning idea

distill into values clarify your goal

combine your mission and value

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Part B

Executive summary

In my research, in 1979, a young associate professor at Harvard Business School distributed his

first article for HBR, “How Competitive Forces Shape Strategy.” In the years that followed,

Michael Porter’s explication of the five forces that determine the long-run profitability of any

industry has shaped a generation of academic research and business practice. Porter undertakes a

thorough reaffirmation and extension of his classic work of strategy formulation, which includes

substantial new sections showing how to put the five forces analysis into practice.

The five forces govern the profit structure of an industry by determining how the economic value

it creates is apportioned. That value may be drained away through the rivalry among existing

competitors, of course, but it can also be bargained away through the power of suppliers or

the power of customers or be constrained by the threat of new entrants or the threat of substitutes.

Strategy can be viewed as building defenses against the competitive forces or as finding a

position in an industry where the forces are weaker. Changes in the strength of the forces signal

changes in the competitive landscape critical to ongoing strategy formulation.

In exploring the implications of the five forces framework, Porter explains why a fast-growing

industry is not always a profitable one, how eliminating today’s competitors through mergers and

acquisitions can reduce an industry’s profit potential, how government policies play a role by

changing the relative strength of the forces, and how to use the forces to understand

complements. He then shows how a company can influence the key forces in its industry to create

a more favorable structure for itself or to expand the pie altogether. The five forces

reveal why industry profitability is what it is. Only by understanding them can a company

incorporate industry conditions into strategy.

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Assume that I’m in charging the company ABC that’s competing with YTL in the same

industry. The 5 forces models which are barriers to entry, rivalry among existing firms, buyer

bargaining power, supplier bargaining power and availability of substitutes will be used by me if

I’m the person in charge of this construction company in Malaysia. For my research, I realised

that mostly but not all larger developer that doing the properties of industry doesn’t work alone

but normally they will merge will other industries such as water park, hospitality, residence,

commercial, green technology building and so on. For me these are the core competitive

advantages as a construction company. Therefore, 5 forces model is needed in order to have

enough strength to compete with other construction company such as YTL.

Firstly, I would like to explain about the threat of new entry generally. This force shows

the factor of enter a particular industry. Economy of scale might be occurred if time and money

are sacrificed to enter your market and compete effectively, power is also affected by the ability

of people to enter your market. If there are few economies of scale in place, or if you have little

protection for your key technologies, then new competitors can quickly enter your market and

weaken your position. If you have strong and durable barriers to entry, then you can preserve a

favorable position and take fair advantage of it. When the economics of scale is bigger, there will

be greater market to enter property development industry and making more profit. Threat of new

entrants is high when:

Low amount of capital is required to enter a market;

Existing companies can do little to retaliate;

Existing firms do not possess patents, trademarks or do not have established brand

reputation;

There is no government regulation;

Customer switching costs are low (it doesn’t cost a lot of money for a firm to switch to

other industries);

There is low customer loyalty;

Products are nearly identical;

Economies of scale can be easily achieved.

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In construction industry, the treat of new entry is low because it is recognised that the

construction industry is in the main and confirmed competition from the published companies.

For my company ABC, I will analyse my economy of scale and huge amount of capital to enter to

this industry. Companies require manpower resources, plant and equipment, health and safety

procedures and various insurances to be in place together with an established track record to be

able to even bid for work in the important sector to develop roads, bridges, ports, airports which

form the infrastructure of a nation and cannot be handled lightly. In this industries, the

requirements that lead the barriers to entry to the construction market resulting a competition no

from the international companies but being challenge with existing local companies. All of these

because of the client and contractor will focus on lower bids and cheapest, and a better quality

tenders, therefore the new entrants might be very high as the contractors would prefer lower cost

as compare to other tenders from other companies. Besides, a new company would have lesser

certifications awarded by the various ISO organizations such as MS (Malaysian Standards) and

BS (British Standards). This would definitely affect the company's chances of winning the tender

for a project. A new company may hard to gain the buyers' trust. For example, a condominium

constructed by IJM will definitely gather greater buyer confidence as compared to a new

company.

Barrier of new Entrants: Weak

Customers are not very loyal, the lowest bid always wins

Low switching costs as new projects means new consultants, contractors and suppliers 

Capital requirements for property development are high

The construction industry is highly risky and filled with uncertainty

Access to inputs such as skilled labour is difficul

Secondly, I will explain about the buyer bargaining power generally. The buyer

bargaining power is high which the buyer have the power to demand lower price or higher

product quality from the industries. In this model, the lower the price of a product means the

lower the revenue the industry will earn, while higher quality products usually increase

production costs. Again, this is driven by the number of buyers, the importance of each individual

buyer to your business, the cost to them of switching from your products and services to those of

someone else, and so on. If you deal with few, powerful buyers, then they are often able to dictate

terms to you. Buyers exert strong bargaining power when:

Buying in large quantities or control many access points to the final customer

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Only few buyers exist

Switching costs to other supplier are low

They threaten to backward integrate

There are many substitutes

Buyers are price sensitive

In construction industry, the buyer bargaining power is very strong. In my research,

Malaysia property’s sale is getting lower year by year. This created demand for the buyers to

choose the property with comparing the price. This is because Malaysia is having several

developers that comparing the price that makes the buyer bargaining power strong. However, not

only the price will affect the demand of the buyer but the location and facilities will affect the

demand of the buyer too. For example, the buyer will surely choose the property (residential) that

surrounded by the commercial building or hospital and so on. As an investor, they will also

purchase the property that located at the perfect location with which higher demand of the buyer.

This is helps the investor increase the speed of returns too. However, if the customer is the

government, or the one that brings the greatest demand in the infrastructure sector, its ability to

assert pressure on the price is high as they buy undifferentiated products also price will largely be

based on the quality provided and will not be agreed to blind folded by the government. In my

opinion, I will choose a perfect location to start up my first project for ABC because the main

factor of the strong buyer bargaining power is the location of the property. Other that location,

there is one more important factor which is reputation of the company. In Malaysia IJM have

loyalty customer due to the sustainable reputation in this industry. For example, IJM had built

High-rise buildings and landmark, such as World-class Mid Valley Megamall, Berjaya Hotel and

Beach Resorts in Mauritius and Port Klang Power Station.

Buyers Bargaining: Strong

Construction developers have a high quality of information for decision making

There are few developers and construction clients compared to the many service

providers available to deliver project

There has been a decline in the developers and client’s demand for construction projects

Developers and clients have the ability to postpone projects until a later stage when they

can secure lower costs of building

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Next, I will explain about the competitive rivalry generally. The competitive rivalry is

basically the number and capability of your competitors. If you have many competitors, and they

offer equally attractive products and services, then you'll most likely have little power in the

situation, because suppliers and buyers will go elsewhere if they don't get a good deal from you.

On the other hand, if no-one else can do what you do, then you can often have tremendous

strength. Rivalry among competitors is intense when:

There are many competitors;

Exit barriers are high;

Industry of growth is slow or negative;

Products are not differentiated and can be easily substituted;

Competitors are of equal size;

Low customer loyalty.

In construction industry, the rivalry among the existing competitors is very strong. In

Malaysia, there a some developer company that already completed some awesome projects such

as IOI Properties Group Berhad, Eco World Development Group Berhad, Gamuda Land, IJM

Land Berhad, Mah Sing Group Berhad, Naza TTDI Sdn Bhd, SP Setia Berhad, Sunway Berhad,

Tropicana Corporation Berhad, United Malayan Land Berhad (UMLand). As I already explained

above, construction sector is very competitive amongst the existing firms. With the system of

awarding tenders to the lowest bidder, the competition increases manifold. Also, in segments of

non-residence, infrastructure etc., onus is on the established firm to meet the standards as laid

won by the government. The competition is fierce within the construction industry as many

projects available are given on a tender basis or contract basis. Only company with the best offer

will get the project and once the project is awarded, the terms of the contract may include further

cooperation. Therefore, the company need to offer high quality work with lower fee. As I stated

that there are too many developer competing each other in Malaysia in term of price, core

competency and so on. In my opinion, even though the competitive in this industry is very high, i

will determine the core competency and my reputation for my company ABC. The location and

quality of my construction work must be the best among those competitors because the

competitive advantage provided by the leading firm can be easily counteracted by the

competitors. 

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Industry Competitors: Strong

There has been a fall in demand for construction projects and this has resulted inexcess

capacity

Construction companies are mostly involved in submitting competitive tenders to win

contracts

Quantity surveying firms also have to compete amongst one another by offering the

lowest fees for services provided to secure clients.

Construction products are very similar and are delivered by means of projects with

variation amongst retail, residential and leisure.

Overcrowded market dominated by the big five construction companies as well as major

Q.S firms.

Besides that, I will explain about the bargaining power of suppliers generally. The

bargaining power of the suppliers is basically how easy it is for suppliers to drive up prices. This

is driven by the number of suppliers of each key input, the uniqueness of their product or service,

their strength and control over you, the cost of switching from one to another, and so on. The

fewer the supplier choices you have, and the more you need suppliers' help, the more powerful

your suppliers are.  This directly affects the buying firms’ profits because it has to pay more for

materials. Suppliers Bargaining power is weak when:

Industry members such as the principal contractors’ e.g Grinaker are integrating

backwards into the business of suppliers 

Construction materials are readily available from many suppliers 

Switching costs of contractors Q.S firms are low 

 Contractors, sub-contractors and manufacturers have to work together for successful

delivery of the project 

In construction industry, the bargaining power of suppliers is very strong. The

bargaining power of supplier is very strong because there are limited suppliers in Malaysia.

Assume that I’m the person who in charge of company ABC, I will find the suppliers for pilling,

excavation, material, steel, machinery and so on. But in Malaysia, the number of suppliers is very

low which the suppliers can control the price. The constantly rising input prices and the acute

labour shortages in the construction industry lead to a very high power in the hands of the

suppliers to affect the price. The same surveys point to the need to hinge on project management,

mechanization and pre advanced technology to handle the situation. This factor entails

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Completion risk, i.e. the risk of non-completion of projects on time due to reasons like shortage

of skilled labour, Price Risk which basically is the prices of the inputs like cement, steel,

aluminium adversely escalating and ultimately resource risk, i.e. the risk of non-availability of

these materials owing to their shortage due to their non-renewable character or the years taken to

generate.

Bargaining power of suppliers : Strong

There are few suppliers but many buyers;

Suppliers are large and threaten to forward integrate;

Few substitute raw materials exist;

Suppliers hold scarce resources;

Cost of switching raw materials is especially high.

Last but not least, I would like to explain about the threat of substitution generally.

The threat of substitution is basically affected by the ability of your customers to find a

different way of doing what you do. For example, if you supply a unique software

product that automates an important process, people may substitute by doing the process

manually or by outsourcing it. If substitution is easy and substitution is viable, then this

weakens your power. These are the factor that might affect the threat of substitution:

Number of substitutes

Performance of substitutes

Cost of changing

In construction industry, the threat of substitution is high. In Malaysia, the

construction industry have a threat of substitution of site-based infrastructure construction

activities although the future may see an increase in the prefabrication of buildings or any

factor based building techniques. Also, it is clearly stated that the sence that infrastructure

in terms of airport, railways cannot be substituted by means of any substitute products or

services. Neither can a demand for a house be substituted with its substitute good. Also in

term of the inputs being used in the industry, the same cannot be substituted very esily as

compromising on the quality of the materials being used will ultimately affect the

foundation of the very construction which may become very likely to collapse on account

of substandard material that has been used. In my opinion, company ABC should select

the best location for the development and the best quality in term to minimize the threat

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of substitution in this market. For example, this industry is highly competitive if the

products are easily substituted by other alternatives. However, this is not the situation

within the construction industry. Buildings, roads, tunnels and bridges cannot be

substituted easily by other products. Therefore, the development of substitute products is

not a problem for IJM.

Substitutes: Strong

New and emerging innovative methods and processes within construction industry

New innovative methods are at lower cost than traditional methods

Low switching costs once a project is complete, new consultants may be appointed

CONCLUSION

In conclusion, company ABC will develop a new and emerging innovative methods and

processes within construction industry because the substitution is strong. In order to encounter the

strong industry competitor, company ABC must provide a quality tender document in order to

win the contract or project. In my opinion, company ABC must select the perfect location to start

the construction because most of the demand are from the perfect location properties. In

additional, perfect location also means that company ABC have to select the development area

which all the facilities are nearby such as hospital, education area, and commercial area and so

on.

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