Stg Mgt # 2 (Handout & Notes)

8/8/2019 Stg Mgt # 2 (Handout & Notes)

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(Handout)Chapter 2

The Business MissionStrategic Management:Strategic Management:

Concepts and CasesConcepts and Cases. 13. 13thth editioneditionFred R. DavidFred R. David

VisionManagement and executive agreement on the basic visionManagement and executive agreement on the basic vision

for which the firm strives to achieve in the long run isfor which the firm strives to achieve in the long run iscritically important.critically important.

VisionVision statement answers the question:Vision statement answers the question:

What do we want to become?What do we want to become?

VisionClear visionClear vision

Provides foundation for comprehensive mission statementProvides foundation for comprehensive mission statement

Vision & MissionVision statement developed firstVision statement developed firstShort preferably one sentenceShort preferably one sentenceBroad management involvementBroad management involvement

Mission StatementsMission statement answers the question:Mission statement answers the question:

What is our business?What is our business?

Mission StatementsMission Statement:Mission Statement:


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Enduring statement of purposeEnduring statement of purposeDistinguishes one organization from another in similarDistinguishes one organization from another in similar

enterprisesenterprisesDeclaration of an organizations reason for beingDeclaration of an organizations reason for being

Mission StatementsMission Statements also referred to as:Mission Statements also referred to as:

Creed statementCreed statement

Statement of purposeStatement of purpose

Statement of philosophyStatement of philosophy

Statement of business principlesStatement of business principles

Mission StatementsMission StatementsMission Statements

Reveal what an organization wants to be and whom it wants toReveal what an organization wants to be and whom it wants to serveserve

Mission StatementsMission StatementsMission Statements

Essential for effectively establishing objectives and formulatingEssential for effectively establishing objectives and formulatingstrategiesstrategies

Vision and MissionMany organizations develop both vision and missionMany organizations develop both vision and missionstatementsstatementsProfit and vision are necessary to effectively motivate aProfit and vision are necessary to effectively motivate aworkforceworkforceShared vision creates a commonality of interestsShared vision creates a commonality of interests

Developing Vision & MissionClear mission is needed before alternative strategies canClear mission is needed before alternative strategies canbe formulated and implementedbe formulated and implemented

Important to have as broad range of participation asImportant to have as broad range of participation aspossible among managers in developing the missionpossible among managers in developing the mission

Importance of MissionUnanimity of purpose within the organizationUnanimity of purpose within the organization

Basis for allocating resourcesBasis for allocating resources

Establish organizational climateEstablish organizational climate

Focal point for directionFocal point for direction


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Translate objectives into work structureTranslate objectives into work structureCost, time and performance parameters assessed and controlledCost, time and performance parameters assessed and controlled

Mission CharacteristicsEffective mission statements:Effective mission statements:

Broad in scopeBroad in scope

Generate range of feasible strategic alternativesGenerate range of feasible strategic alternativesNot excessively specificNot excessively specific

Reconcile interests among diverse stakeholdersReconcile interests among diverse stakeholdersFinely balanced between specificity & generalityFinely balanced between specificity & generality

Effective mission statements:Effective mission statements:

Arouse positive feelings and emotionsArouse positive feelings and emotions

Motivate readers to actionMotivate readers to actionGenerate the impression that firm is successful, has direction,Generate the impression that firm is successful, has direction,

and is worthy of time, support, and investmentand is worthy of time, support, and investment

Effective mission statements:Effective mission statements:

Reflect judgments re: future growthReflect judgments re: future growthProvide criteria for selecting strategiesProvide criteria for selecting strategies

Basis for generating & screening strategic optionsBasis for generating & screening strategic optionsAre dynamic in orientationAre dynamic in orientation

Customer OrientationAccording to Vern McGinnis, mission should:According to Vern McGinnis, mission should:

Define what the organization isDefine what the organization isDefine what the organization aspires to beDefine what the organization aspires to beLimited to exclude some venturesLimited to exclude some venturesBroad enough to allow for creative growthBroad enough to allow for creative growth

Distinguish the firm from all othersDistinguish the firm from all othersServe as framework to evaluate current activitiesServe as framework to evaluate current activitiesStated clearly so that it is understood by allStated clearly so that it is understood by all

Customer OrientationA good mission statement reflects the anticipations ofA good mission statement reflects the anticipations of

customers.customers.

Identify customer needsIdentify customer needs

Provide product/service to satisfy needsProvide product/service to satisfy needs


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AT&Ts mission focuses on communications, not telephonesAT&Ts mission focuses on communications, not telephonesExxons mission focuses on energy, not on oil and gasExxons mission focuses on energy, not on oil and gas

Social Policy & MissionManagerial philosophy and thinking at the highest levelsManagerial philosophy and thinking at the highest levels

in the organization reflect social policy.in the organization reflect social policy.

Affects development of vision & missionAffects development of vision & missionResponsibilities to consumers, environmentalists,Responsibilities to consumers, environmentalists,

minorities, communities, & other groupsminorities, communities, & other groups

Social Policy & MissionSocial policy should be integrated in all strategic-Social policy should be integrated in all strategic-

management activities.management activities.

Mission statement is an effective instrument for conveyingMission statement is an effective instrument for conveyingthe social responsibility of the firm.the social responsibility of the firm.

Components of MissionMission statements vary inMission statements vary in

LengthLength

ContentContent

FormatFormat

SpecificitySpecificity

Must include the 9 elements, as the mission statement is the mostMust include the 9 elements, as the mission statement is the mostpublic and visible part of the strategic-management process.public and visible part of the strategic-management process.

CustomersCustomers

Products or servicesProducts or services

MarketsMarketsSurvival, growth, and profitabilitySurvival, growth, and profitability

TechnologyTechnology

PhilosophyPhilosophySelf-conceptSelf-concept

Concern for public imageConcern for public image

Concern for employeesConcern for employees

Components of MissionComponents of mission and corresponding questions to beComponents of mission and corresponding questions to be

answered:answered:

Customers:Customers:Who are the firms customers?Who are the firms customers?


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Products or services:Products or services:What are the firm's major products or services?What are the firm's major products or services?

Components of MissionMarkets:Markets:

Geographically, where does the firm compete?Geographically, where does the firm compete?

Concern for survival, growth, and profitability:Concern for survival, growth, and profitability:Is the firm committed to growth and financialIs the firm committed to growth and financial

soundness?soundness?

Components of Mission

Technology:Technology:Is the firm technologically current?Is the firm technologically current?

Philosophy:Philosophy:What are the basic beliefs, values, aspirations, and ethicalWhat are the basic beliefs, values, aspirations, and ethical

priorities of the firm?priorities of the firm?

Components of MissionSelf-concept:Self-concept:

What is the firms distinctive competence or major competitiveWhat is the firms distinctive competence or major competitiveadvantage?advantage?

Concern for public image:Concern for public image:Is the firm responsive to social, community, and environmentalIs the firm responsive to social, community, and environmental

concerns?concerns?

Concern for employees:Concern for employees:Are employees a valuable asset of the firm?Are employees a valuable asset of the firm?

PepsiCo Mission StatementPepsiCos mission is to increase the value of our shareholdersPepsiCos mission is to increase the value of our shareholdersinvestment. We do this through sales growth, cost controls, andinvestment. We do this through sales growth, cost controls, andwise investment resources. We believe our commercial successwise investment resources. We believe our commercial successdepends upon offering quality and value to our consumers anddepends upon offering quality and value to our consumers and

customers; providing products that are safe, wholesome,customers; providing products that are safe, wholesome,economically efficient and environmentally sound; and providingeconomically efficient and environmentally sound; and providing

a fair return to our investors while adhering to the highesta fair return to our investors while adhering to the higheststandards of integrity.standards of integrity.

Ben & Jerrys Mission Statement


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Ben & Jerrys mission is to make, distribute and sell the finest quality all-Ben & Jerrys mission is to make, distribute and sell the finest quality all-natural ice cream and related products in a wide variety of innovativenatural ice cream and related products in a wide variety of innovative

flavors made from Vermont dairy products. To operate the Company on aflavors made from Vermont dairy products. To operate the Company on asound financial basis of profitable growth, increasing value for oursound financial basis of profitable growth, increasing value for our

shareholders, and creating career opportunities and financial rewards forshareholders, and creating career opportunities and financial rewards forour employees. To operate the Company in a way that actively recognizesour employees. To operate the Company in a way that actively recognizesthe central role that business plays in the structure of society by initiatingthe central role that business plays in the structure of society by initiatinginnovative ways to improve the quality of life of a broad communitylocal,innovative ways to improve the quality of life of a broad communitylocal,

national and international.national and international.

Evaluation Matrix of Mission Statements

KASBIT Mission StatementProvide competency based quality educationProvide competency based quality educationand inculcate the ability to utilize maximumand inculcate the ability to utilize maximum

potential to meet challenges of new era.potential to meet challenges of new era.Vision Statement Checklist

What do we want to become?What do we want to become?Single statementSingle statementBroader in perspectiveBroader in perspective

InterestingInteresting

Vision Statement Examples

General Motors vision is to be theGeneral Motors vision is to be theworld leader in transportation productsworld leader in transportation productsand related services.and related services.


PepsiCos responsibility is to continuallyPepsiCos responsibility is to continuallyimprove all aspects of the world in whichimprove all aspects of the world in whichwe operate environment, social,we operate environment, social,economic creating a better tomorroweconomic creating a better tomorrow


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than today.than today.


Dells vision is to create a companyDells vision is to create a companyculture where environmental excellenceculture where environmental excellenceis second nature.is second nature.


Tyson Foods vision is to be the worldsTyson Foods vision is to be the worldsfirst choice for protein solutions whilefirst choice for protein solutions whilemaximizing shareholder value.maximizing shareholder value.

KASBIT Vision StatementBuild an institution whose name wouldBuild an institution whose name would

become a synonym for international qualitybecome a synonym for international qualityeducationeducation

(Notes)

Objective:

COMPREHENSIVE STRATEGIC MODEL

The extentof manager and employee involvement in developing vision and missionstatementscan make a difference inbusiness success. Thislecture providesguidelines for developing these important documents. Mis s ion sta t ement:

An enduring statementof purpose Distinguishes one firm from another in the same business A declarationof a firms reason for existence


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Mission is the purpose of or a reason for organization existence. Mission is a wellconvincible statement included fundamental and unique purpose which makes itdifferent from other organization. It identifies scope of it operation in terms ofproduct offered andmarket served. Mission also means what we are and what wedo. A survey in a North America and in Europeans corporation reveal that 60%to 75% have written or formal and remaininghas no written or formal mission.

Illustration:Nest vision computer college mission statement reveals:-

We aredealing in all activitieswhich includes in IT, definition.

Qarshi Laborites Mission Statement,

Production of herbal product isour mission.

Mission Statements arealso known as:

Creed statement Statement of purpose Statement of philosophy

Statementofbusiness principlesMission Statements revealwhat an organizationwantstobe and whom itwants toserveand how? MissionStatements are essential foreffectivelyestablishing objectives andformulating strategies. Mission is divided into twocategories:

Narrow Mission Broad Mission

Narrow Mission:

Narrow mission also identifies our mission but it restrict in terms of:1. Product and services offered2. Technology used3. Market served4. Opportunity of growth

Broad Mission:Broad mission wider our mission values in terms of product and services,offered, market served, technology used and opportunity of growth. But main flowofthis missionthat if creates confusion among employee due to its wider sense.

Illustration:Forexample two differentfirms A& B.A deals inRail RoadsandB deals inTransportation i.e. wecan sayA co. has narrow mission and B co. has awider mission.

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Most companies are now getting used tothe ideaof using mission statements.Small, medium and large firms in Pakistan arealso realizing the needand adoptingmission statements.Some example of Mission statement:

1. The Bellevue Hospital, with respect, compassion, integrity, and courage,honors the individuality and confidentiality of our patients, employees, andcommunity, and is progressive in anticipating and providing future health care

services.

2. The MissionofUSGSis to serve the Nation by providingreliable scientificinformation to

Describe and understand the Earth; Minimize loss of life and property fromnatural disasters; Manage water, biological,energy, and mineral resources; andenhanceand protect our quality of life

3. It is the California Energy Commissions mission to assess, advocate, andact through improve energy systems that promote a strong economy and a

healthy environment.

Characteris t ics of g ood M is s ion Stat e men t s:Mission statements can and do vary in length, contend, format, and specificity.Most practitioners and academicians of strategic management consider aneffective statement to exhibit nine characteristics or components. Because amission statement is often the most visible and public part of the strategicmanagement process, it is important that it includes all of these essentialcomponents.Effective mission statements should be:

Broad in scope Generate range of feasible strategic alternatives Not excessivelyspecific Reconcile interests among diverse stakeholders Finelybalanced between specificity & generality Arouse positive feelings and emotions Motivate readers to action Generate the impression that firm is successful, has direction, and is worthyof time, support, and investment Reflect judgments re: future growth Provide criteria for selecting strategies Basis for generating & screening strategicoptions Are dynamic in orientation

Componentsand corresponding questions that a mission statement should answeraregiven here.

Customer:Who are the firms customers? Products orservices: What are the firms majorproducts or services? Markets:Geographically, where does the firm compete? Technology: Isthefirm technologically current? Concern for survival, growth, and profitability: Is the firm committedto growth and financial soundness? Philosophy: Whatarethe basic beliefs, values,aspirations, and ethical prioritiesof the firm? Self-concept: What is the firms distinctive competence or major competitive

advantage?


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Concern forpublic image: Is the firm responsive to social, community, andenvironmental concerns? Concern foremployees:Are employees a valuable asset of the firm?

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Vision Stat e ment:Vision is the art of seeing things invisible.. . .. Jonathan SwiftThe very essence of leadership is that you have vision. You cant blow an uncertaintrumpetTheodoreHesburghA visionstatement is sometimes called a picture of your company in the futurebut its so much more than that. Your vision statement is your inspiration, the

framework for all your strategic planning. It is critically essential that managementand executive agree on the basic vision, which the organization endeavors toaccomplish over a period of timeA lucid and clear vision lays down a foundation on which a sound mission statementcanbe built.A vision statement may apply to an entire company or to a single division of thatcompany. Whether for all or part of an organization, the vision statement answersthe question, Where do we want to go? Vision statement also answers thequestion What do we want to become? What you are doing when creating avision statement is articulating your dreams and hopes for your business. Itreminds you of what you are trying tobuild.Whilea vision statement doesnt tell you howyoure goingto getthere, it does setthe direction for your business planning. Thats why its important when crafting avision statement to let your imagination go and dare to dream and why itsimportant that a vision statement captures your passion.Unlike the mission statement,a vision statement is for you and theother membersof your company,not for your customers or clients.When writing a vision statement, your mission statement and your corecompetencies can be a valuable starting point for articulating your values. Be surewhen youre creating one not to fall into the trap of only thinking ahead a year ortwo. Once you have one, your vision statement will have a huge influence ondecision making and the way you allocateresources. A vision usually precedes the mission statement It is usually short, concise and preferably limitedto one sentence Organization-wide management involvement is advisable

Some examples of Vision stateme n ts:1. The Bellevue Hospital is the LEADER in providingresources necessary to

realize the communitys highest levelof healththroughout life.. . . . The Bellevue Hospital

2. To be the first choice in the printed communications business, thefirst choice isthe best choice, and being the best is what Atlanta Web pledges to workhard atbeing- every day!

. . .. AtlantaWeb Printers, Inc.3. It is the visionof theCalifornia Energy Commissionfor Californians to have

energy choicesthat are affordable, reliable, diverse,safe, and environmentallyacceptable.

. .. .California Energy Commission

4. Our vision ishelping individuals and organizations discover and develop theirGod given potentials to achieve the ultimate Success.

. . . . Universityof Management & Technology, LahoreM IS S IO N V/S VIS ION

Manyorganizations develop both visionand mission statements Profitand vision are necessary to effectively motivate aworkforce Shared visioncreates a commonality of interest

Some organization developed both mission statementand vision statement. Missionstatementexplains the current and present position andactivities of a firmwhereasmissionstatementexplains the future objective and goals of the company. Missionstatement answers the questions what is our business? The vision statement


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answer the question what do we want to become?

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AMOCO Corporation

MissionStatement:

VisionStatement:

Amoco is a worldwide integrated petroleum andchemical company. We find and developpetroleum resourcesand provide qualify products and services for our customers.We conduct our business responsibly to achieve a superiorfinancial return balanced with our long-term growth,

benefiting shareholders and fulfilling our commitment to thecommunity and theenvironment.

Amoco will be asglobalbusiness enterprise, recognizedthroughout the world as preeminent by employees, customer,competitors, investors and the public. We will be thestandard by which other businesses measure theirperformance. Our hallmarks will be the innovation, initiativeand teamwork of our people and our ability to anticipateandeffectivelyrespond to change and to create opportunity.

ADAMJEE Insurance Company Limited

MissionStatement:

VisionStatement:

Being the leading insurance company Pakistan andsecond best in Asia, our aim is to be a significantparticipant in developing Pakistans image by providingmaximum insurance protection at the most competitive

price in a highlyefficient manner for industrial and economicgrowth.

To remain in the leading insurance company of Pakistan andexcelling its every aspect of business and in delivering itsobligations as a good corporate citizen to its clients, employeesand shareholders, public and to the country.

Many organizations develop both a mission statement and a vision statement.Whereas the mission statement answers the question, what is our business? thevision statement answers the question, What do we want to become? Manyorganizationshave botha mission and visionstatement.It canbeargued thatprofit, not missionor vision istheprimary corporate motivator.Butprofitalone is not enough tomotivate people.Profit is perceived negatively bysome employees in companies.Employeesmay see profit as something that theyearn and management then uses and even gives awayto shareholders. Althoughthis perception is undesiredanddisturbing to management, itclearly indicates thatboth profitand vision are needed to effectively motivatea workforce.When employees and managers together shape or fashion the vision and missionfor a firm, the resultant documents can reflect the personal visions that managers

and employees have in their hearts and minds about their own futures. Shared


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vision creates a commonality of interests thatcan lift workers out of the monotonyofdaily work and put them into a new world of opportunity and challenge.

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The Processof Developing a MissionStatemento A clear mission is needed beforealternative strategies can be formulated andimplemented.o Mission is important to have as broad a range of participation as possibleamong managers in developing the mission.As indicated in the strategic-management model, a clear mission statement isneeded before alternative strategies can be formulated and implemented. It isimportant to involve as many managers as possible in theprocess of developing amission statement, because through involvement, people become committed to anorganization.A widely used approach to developinga mission statement is first to select severalarticlesabout mission statementsand ask all managers toread theseas backgroundinformation. Then askmanagers themselvesto prepare a mission statement fortheorganization. A facilitator, or committee of top managers, then should merge thesestatements intoa singledocumentand distribute this draftmission statementto allmanagers. A request for modifications, additions, and deletions is needed next,along with a meeting to revise the document. To the extent that all managershave input into and support the final mission statement document,organizations can more easily obtain managers' support for other strategyformulation, implementation, and evaluation activities. Thus the process of

developing a mission statement represents a great opportunity for strategists toobtain needed support from allmanagers inthe firm.During the process of developing a mission statement, some organizations usediscussion groups of managers to develop and modify the mission statement.Some organizations hire an outside consultant or facilitator to manage the processand help draft the language. Sometimes an outside person with expertise indeveloping mission statements and unbiased views can manage the process moreeffectively thanan internal group or committee of managers. Decisions on howbest to communicate the mission to all managers, employees, and externalconstituencies of an organization are needed when the document is in final form.Some organizations even developa videotapeto explain the mission statementandhow it was developed.

Importance of Vision and Mission Statements Unanimity ofpurpose within the organization Basis for allocating resources Establish organizational climate Focalpoint for direction Translate objectives into work structure Cost,timeand performance parametersassessed and controlled Most companies are now getting used tothe ideaof using mission statements. Small, medium and large firms in Pakistan arealso realizing the needandadoptingmission statements. The importance of vision and mission statements toeffective strategic management is well documented in the literature,althoughresearch resultsare mixed.

A Resolu t io n of Dive r gen t ViewsDeveloping a comprehensive mission statement is important because divergentviews among managers can be revealed and resolved through the process.Thequestion, What is our business?, can create controversy. Raising the question oftenreveals differences among strategists in the organization. Individuals who haveworked together for a long time and who think they know each other suddenly mayrealize that they are in fundamental disagreement. For example, in a college oruniversity, divergent views regarding the relative importance of teaching,research, and service often are expressed during the mission statementdevelopment process. Negotiation, compromise, and eventual agreement onimportant issues are needed before focusing on more specific strategy formulationactivities.

"What is our mission?" is a genuine decision; and a genuine decision must be based


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on divergent views to havea chance to bea rightand effective decision. Developinga business mission is always a choice between alternatives, each of which rests ondifferent assumptions regarding the reality of the business and its environment. Itis always a high-risk decision. A change in mission always leads to changes inobjectives, strategies, organization, and behavior. The mission decision is far tooimportant to be madeby acclamation. Developing a business mission is a big steptoward management effectiveness. Hidden or half-understood disagreements onthe definition of a business mission underlie many of the personalityproblems, communication problems, and irritations that tend to divide a top-

management group. Establishing a

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mission should never be made onplausibility alone, should never be made fast,and should never be made painlessly.In multidivisional organizations, strategists should ensure that divisionalunits perform strategic- management tasks, including the development of astatementof vision and mission. Each division should involve its own managers andemployees in developing a vision and mission statement consistent with andsupportive of the corporativemission.An organization that fails to develop a vision statement as well asa comprehensive

and inspiring mission statement loses the opportunity to present itself favorablyto existing and potential stakeholders. All organizations need customers,employees, and managers, and most firms need creditors, suppliers, anddistributors. The vision and mission statements are effective vehicles forcommunicating with important internal and external stakeholders. The principalvalue of these statements as tools of strategic management is derived from theirspecificationof theultimate aimsof a firm:They provide managers with a unity of direction that transcends individual,parochial, and transitoryneeds. They promote a sense of shared expectationsamong all levels and generations of employees. They consolidate values overtime and across individuals and interest groups. They project a sense of worth andintent that can be identified and assimilated by company outsiders. Finally, theyaffirm the company's commitment to responsible action, which is symbiotic withits need to preserve and protect the essential claims of insiders for sustainedsurvival, growth, and profitabilityof the firm.

Examples of Mission Stateme n t s of s ome Organiz a tions:

1. Pfizer, Inc. (www.pfizer.com/main.html)

Pfzer, Inc. is a research based global health care company. Our principalmission is to apply scientific knowledge to help people around the world enjoylonger, healthier and more productive lives. The company has four businesssegments: health care, consumer healthcare, food science andanimal health. Wemanufacture in 39 countries and our products areavailable worldwide.

2. Chase Manhattan Corporation (www.chase.com)

We provide financial services that enhance the well being and success ofindividuals, industries, communities and countries around the world.

Through our shared commitment to those we serve, we will be the bestfinancial servicescompany in the world. Customers will choose us first becausewedeliver the highest quality service and performance. People will be proud andeager to work here. Investors will bury our stock as a superior long-terminvestment. To be the best for our customers, we are team players who showrespect of our colleagues and commit to the highest standards of quality andprofessionalism, Customer focus, Respect for each other, Teamwork, Quality andprofessionalism.

3. FoodLion, Inc. (www.foodlion.com)

The Food Lion team will work hard to use our talents and resourcefulness tosatisfy every customer by providing Extra Low Prices on a wide variety ofquality products in a clean, convenient and friendly environment.

4. Apple Computer (www.apple.com)

It is Apples mission to help transform the way customers work, learn andcommunicate by providing exceptional personal computing productsand innovativecustomer services.

We will pioneer new directions and approaches, finding innovative ways to use


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computing technology to extend the bounds of human potential.Apple will make a difference: ourproducts, services and insightswill help peoplearoundthe world shape the ways business and education will be done in the 21st

century.

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5. AT & T (www.att.com)

We are dedicated to being the worlds best at bringing people together giving themeasy access to each other and tothe infomrait5on and services they want anytime,anywhere.

6. Corning,Inc. (www.corning.com)

Our purpose is to deliver superior, long rangeeconomic benefits toour customers,our employees andour shareholder and to the communities in which we operate.We accomplish this by living our corporate values.

7. NichollsState University (College of Business)

The principal mission of the College of Business is to prepare students toparticipate in society and the work force as educated individuals able to competein a dynamic global economy. Inorder toenrich the learning process, the Collegealso contributes to scholarship through applied research and instructionaldevelopment. In addition to providing support to the employer community throughthe development of marketable skills in potential employees, the College also

enhances the competitive capabilities of regional businesses by providingcontinuing education courses and consulting services through the Small BusinessDevelopment Center (SBDC) and the individual efforts of faculty. The facultyadvances the welfare of the University, the community and academic andprofessional organizations through professional interactions.


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CHARACTERISTICSOF A MISSION STATEMENT

Objectives:Every organization has a unique purpose and reason for being. This uniquenessshould be reflected in vision and mission statements. The nature of a businessvision and mission can represent either a competitiveadvantageor disadvantagefor the firm. An organization achieves a heightened sense of purpose when

strategists, managers, and employees develop and communicate a clear businessvision and mission. After readingthis lecture, you willbeable to knowthat for whatpurposesmission statements have such an importance in a business firm.

Characteris t ics of g ood M is s ion Stat e men t s:

Mission statements can and do vary in length, contend, format, and specificity.Most practitioners and academicians of strategic management consider aneffective statement to exhibit nine characteristics or components. Because amission statement is often the most visible and public part of the strategicmanagement process, it is important that it includes all of these essentialcomponents.

Effective mission statements should be:

Broad in scope Generate range of feasible strategic alternatives Not excessivelyspecific Reconcile interests among diverse stakeholders Finelybalanced between specificity & generality Arouse positive feelings and emotions Motivate readers to action Generate the impression that firm is successful, has direction, and is worthyof time, support, and investment Reflect judgments re: future growth

Provide criteria for selecting strategies Basis for generating & screening strategicoptions Are dynamic in orientation

A Declaration of AttitudeA mission statement is a declaration of attitude and outlook more than astatement of specific details. It usually is broad in scope for at least two majorreasons. First, a good mission statement allows for the generation andconsideration of a range of feasible alternative objectives and strategies withoutunduly stifling management creativity. Excess specificity would limit the potentialof creative growth for the organization. On the other hand, an overly generalstatement that does not exclude any strategy alternatives could be dysfunctional.Apple Computer's mission statement, for example, should not open the possibility

for diversification into pesticides, or Ford MotorCompany's into food processing.Second, a mission statement needs to be broad to effectively reconcile

differences among and appeal to an organization's diverse stakeholders, theindividuals and groupsof persons whohave a special stakeorclaim on the company.Stakeholders include employees; managers; stockholders; boards of directors;customers; suppliers; distributors; creditors; governments (local, state, federal,and foreign); unions; competitors; environmental groups; and the general public.Stakeholders affect and are affected by an organization's strategies, yet theclaimsand concernsof diverse constituencies vary and often conflict. Forexample,the general public is especially interested in social responsibility, whereasstockholders are more interested in profitability. Claims on any business literallymaynumber in the thousands, and often include clean air, jobs, taxes, investmentopportunities, career opportunities, equal employment opportunities, employeebenefits, salaries, wages, clean water, and community services. All stakeholders'


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claims onan organization cannot be pursued withequal emphasis. A goodmissionstatement indicates the relative attention that an organization will devote tomeeting the claims of various stakeholders. More firms are becomingenvironmentally proactive in response to theconcerns of stakeholders.

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Reaching the fine balance between specificity and generality is difficult toachieve, but is well worth the effort.An effective mission statement arouses positive feelings and emotions about anorganization; it is inspiring in the sense that it motivates readers to action. Aneffective mission statement generates the impression that a firm is successful, hasdirection, and isworthyof time, support,and investment.It reflects judgments about future growth directions and strategies based uponforward-looking external and internal analyses. A business mission should provide

useful criteria for selectingamong alternativestrategies. A clear mission statementprovides a basis for generating and screening strategic options. The statement ofmission should be dynamic in orientation, allowing judgments about the mostpromising growthdirections and those considered less promising.

A Cus t ome r Orienta t io nAgood missionstatement describes an organization'spurpose, customers,products or services, markets, philosophy, and basictechnology. According to VernMcGinnis, a mission statement should

Define whatthe organization is and whattheorganization aspires tobe, De limited enough to exclude some ventures and broad enoughto allow forcreative growth,

Distinguishagiven organization from allothers, Serve as a framework for evaluating both current and prospective activities, and Be stated interms sufficiently cleartobewidely understood throughout theorganization.A good mission statement reflects the anticipations of customers. Rather thandeveloping a product and then trying to find a market, the operating philosophyof organizations should be to identify customers' needs and then provide a productor service to fulfill those needs. Good mission statements identify the utility of afirm's products to its customers. This is why AT&T's mission statementfocuses on communication rather than telephones, Exxon's mission statementfocuses on energy rather than oil and gas, Union Pacific's mission statementfocuses on transportation rather than railroads, and Universal Studios'missionstatement focuses on entertainment instead of movies. The following utility

statementsare relevant in developing a mission statement: Donot offer methings.

Do notofferme clothes. Offer meattractive looks. Do notofferme shoes. Offer me comfort for my feet and thepleasure of walking. Do notofferme a house.Offer me security, comfort,and a place that is clean andhappy. Do notofferme books. Offer mehoursof pleasure and the benefitof knowledge. Do notofferme records. Offer me leisure and the sound of music. Do notofferme tools. Offer me thebenefit and the pleasure of making beautifulthings. Do notofferme furniture.Offer me comfortand the quietnessof a cozyplace. Do notofferme things. Offer me ideas, emotions,ambience, feelings, and benefits.

Please, donot offer me things.A major reason for developing a business mission is to attract customers whogive meaning to an organization.A classic descriptionofthepurpose of abusinessreveals therelativeimportance of customers in a statement of mission:It is the customer who determines what a business is.It is thecustomer alone whosewillingness to pay for a good or service converts economic resources into wealthand things into goods. What a business thinks it produces is not of first importance,especially not to the future of the business and to its success. What the customerthinks he/she is buying, what he/she considers value, is decisiveit determineswhat a business is, what it produces, and whether it will prosper. And what thecustomer buys and considersvalueis never a product. It is always utility, meaningwhat aproduct or service does forhimor her. Thecustomer is the foundation of a

business and keeps it in existence.


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A Declaration of Social Policy The wordssocial policyembrace managerial philosophy and thinking at the highestlevels of an organization. For this reason, socialpolicy affects the developmentof abusiness mission statement. Social issues mandate that strategists consider notonly what the organization owes its various stakeholders but also whatresponsibilities the firm has to consumers, environmentalists, minorities,communities, and other groups. After decades of debate on the topic of socialresponsibility, many firms still struggle to determine appropriate social policies.

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The issue of social responsibility arises when a company establishes its businessmission. The impact of society on business and vice versa is becoming morepronounced each year. Social policies directly affect a firm's customers, productsand services, markets, technology, profitability, self-concept, and public image. Anorganization's social policy should be integrated into all strategic-managementactivities, including the development of a mission statement. Corporate socialpolicy should be designed and articulated during strategy formulation, set andadministered during strategy implementation, and reaffirmed or changed during

strategy evaluation. The emerging view of social responsibility holds that socialissues should be attended to both directly and indirectly in determining strategies.

Co m pon e nt s of a Mis sio n Statem e ntMission statements can and do vary in length, content, format, and specificity.Most practitioners and academicians of strategic management consider aneffective statement to exhibit nine characteristics or components. Because amission statement is often the most visible and public part of the strategic-management process, it is important that it includes all of these essentialcomponents. Components and corresponding questions that a mission statementshould answer are given here.

1. Customers: Who arethe firm's customers?

2. Products or services: Whatare the firm's major productsorservices?3. Markets: Geographically, where does the firm compete?4. Technology: Is the firmtechnologically current?5. Concern for survival, growth, and profitability: Is the firm committed to growthand financial soundness?6. Philosophy: What are the basic beliefs, values, aspirations, and ethical prioritiesof the firm?7. Self-concept: What is the firm's distinctive competence or majorcompetitiveadvantage?8. Concern for public image: Is thefirm responsive to social,community,andenvironmental concerns?9. Concern for employees: Are employees a valuableassetof the firm?

Importance of Vision and Mission StatementsThe importance of vision and mission statements to effective strategic managementis well documented in the literature, although research results are mixed. Rarickand Vitton found that firms with a formalized mission statement have twice theaverage return on shareholders' equity than those firms without a formalizedmission statement; Bart and Baetz found a positive relationship between missionstatements and organizational performance; Business Week reports that firmsusing mission statements have a 30 percent higher return on certain financialmeasures than those without such statements; O'Gorman and Doran, however,found that having a mission statement does not directly contribute positivelyto financial performance. The extent of manager and employee involvementin developing vision and mission statements can makea difference in businesssuccess

Examples:

Pep s i cola m is s io n stat e ment:

. . . . is to increase the value of our shareholders investment. We do thisthrough sales growth, cost controls, and wise investment resources. We believeourcommercialsuccess depends upon offering quality and value to our consumers andcustomers; providing products that are safe, wholesome, economically efficientand environmentally sound; and providing a fair return to our investors whileadhering to the highest standards of integrity.

Ben & Jerrys Mission Statement. . . . . is to make, distribute and sell the finest quality all-natural icecream and


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An Evaluation Matrix of Mission StatementsPerhaps the best way to develop a skill for writing and evaluating missionstatements is to study actual company missions.These statements are evaluated inTable based on the nine criteria presented above.

An Evaluation Matrix ofMission Statements

Components

Organization

Customers

Products/Services

Markets

Concern forSurvival,Growth,Profitability Technology

PepsiCo Yes No No Yes No

Ben & Jerry's No Yes Yes Yes No

NationalPawnbrokersAssociation

Instituteof ManagementAccountant

PressureSystems

Yes No No No No

Yes Yes Yes No No

International Yes Yes No Yes No

Genentech, Inc. Yes Yes No Yes No

CaliforniaDepartmentofFish and Game

BarrettMemorial

Yes Yes Yes No No

Hospital Yes Yes Yes No No

Philosophy

Self-Concept

ConcernforPublic Image

Concern forEmployees

PepsiCo Yes No No No

Ben & Jerry's No Yes Yes Yes

NationalPawnbrokersAssociation

Instituteof ManagementAccountants

PressureSystems

Yes Yes Yes No

Yes Yes Yes No

International

No No No No


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CaliforniaDepartmentof Fish andGame

No Yes No No

Barrett Memorial No Yes Yes Yes

There is no one best mission statement for a particular organization, so good judgment is required in evaluating mission statements. In Table 2-4, a Yesindicates that the given mission statement answers satisfactorily the question forthe respective evaluative criteria. Some persons are more demanding than othersin rating mission statements in this manner. For example, if a statement includesthe word employees or customer, is that alone sufficient for the respectivecomponent? Some companies answer this question in the affirmative and some inthe negative. You may ask yourself this question: "If I worked for this company,would I have done better in regards to including a particular component intheir mission statement." Perhaps the important issue here is that missionstatements include each of the nine components in somemanner.

As indicated in Table, theGenentech mission statement was rated to be bestamongthe eight statements evaluated. Note, however, that the Genentechstatement lacks inclusion of the "Market" and the"Technology" components. The PepsiCo and Pressure Systems Internationalmission statements are evaluated worst with inclusion of only three of the ninecomponents. Note that none of these eight statements included the "Technology"component in their document.


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Stg Mgt # 2 (Handout & Notes)

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