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MGT603 - Strategic Management - Lecture Handout 06

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Every organization has a unique purpose and reason for being. This uniqueness should be reflected in vision and mission statements. The nature of a business vision and mission can represent either a competitive advantage or disadvantage for the firm. An organization achieves a heightened sense of purpose when strategists, managers, and employees develop and communicate a clear business vision and mission. After reading this lecture, you will be able to know that for what purposes mission statements have such an importance in a business firm.

Characteristics of good Mission Statements:

Mission statements can and do vary in length, contend, format, and specificity. Most practitioners and academicians of strategic management consider an effective statement to exhibit nine characteristics or components. Because a mission statement is often the most visible and public part of the strategic management process, it is important that it includes all of these essential components.
Effective mission statements should be:

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

A Declaration of Attitude

A mission statement is a declaration of attitude and outlook more than a statement of specific details. It usually is broad in scope for at least two major reasons. First, a good mission statement allows for the generation and consideration of a range of feasible alternative objectives and strategies without unduly stifling management creativity. Excess specificity would limit the potential of creative growth for the organization. On the other hand, an overly general statement 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 Motor Company'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, the individuals and groups of persons who have a special stake or claim 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 the claims and concerns of diverse constituencies vary and often conflict. For example, the general public is especially interested in social responsibility, whereas stockholders are more interested in profitability. Claims on any business literally may number in the thousands, and often include clean air, jobs, taxes, investment opportunities, career opportunities, equal employment opportunities, employee benefits, salaries, wages, clean water, and community services. All stakeholders' claims on an organization cannot be pursued with equal emphasis. A good mission statement indicates the relative attention that an organization will devote to meeting the claims of various stakeholders. More firms are becoming environmentally proactive in response to the concerns of stakeholders.

Reaching the fine balance between specificity and generality is difficult to achieve, but is well worth the effort.
An effective mission statement arouses positive feelings and emotions about an organization; it is inspiring in the sense that it motivates readers to action. An effective mission statement generates the impression that a firm is successful, has direction, and is worthy of time, support, and investment.
It reflects judgments about future growth directions and strategies based upon forward-looking external and internal analyses. A business mission should provide useful criteria for selecting among alternative strategies. A clear mission statement provides a basis for generating and screening strategic options. The statement of mission should be dynamic in orientation, allowing judgments about the most promising growth directions and those considered less promising.

A Customer Orientation

A good mission statement describes an organization's purpose, customers, products or services, markets, philosophy, and basic technology. According to Vern McGinnis, a mission statement should

  • Define what the organization is and what the organization aspires to be,
  • De limited enough to exclude some ventures and broad enough to allow for creative growth,
  • Distinguish a given organization from all others,
  • Serve as a framework for evaluating both current and prospective activities, and
  • Be stated in terms sufficiently clear to be widely understood throughout the organization.

A good mission statement reflects the anticipations of customers. Rather than developing a product and then trying to find a market, the operating philosophy of organizations should be to identify customers' needs and then provide a product or service to fulfill those needs. Good mission statements identify the utility of a firm's products to its customers. This is why AT&T's mission statement focuses on communication rather than telephones, Exxon's mission statement focuses on energy rather than oil and gas, Union Pacific's mission statement focuses on transportation rather than railroads, and Universal Studios' mission statement focuses on entertainment instead of movies. The following utility statements are relevant in developing a mission statement:

  • Do not offer me things.
  • Do not offer me clothes. Offer me attractive looks.
  • Do not offer me shoes. Offer me comfort for my feet and the pleasure of walking.
  • Do not offer me a house. Offer me security, comfort, and a place that is clean and happy.
  • Do not offer me books. Offer me hours of pleasure and the benefit of knowledge.
  • Do not offer me records. Offer me leisure and the sound of music.
  • Do not offer me tools. Offer me the benefit and the pleasure of making beautiful things.
  • Do not offer me furniture. Offer me comfort and the quietness of a cozy place.
  • Do not offer me things. Offer me ideas, emotions, ambience, feelings, and benefits.
  • Please, do not offer me things.

A major reason for developing a business mission is to attract customers who give meaning to an organization. A classic description of the purpose of a business reveals the relative importance of customers in a statement of mission:
It is the customer who determines what a business is. It is the customer alone whose willingness to pay for a good or service converts economic resources into wealth and 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 customer thinks he/she is buying, what he/she considers value, is decisive—it determines what a business is, what it produces, and whether it will prosper. And what the customer buys and considers value is never a product. It is always utility, meaning what a product or service does for him or her. The customer is the foundation of a business and keeps it in existence.

A Declaration of Social Policy

The words social policy embrace managerial philosophy and thinking at the highest levels of an organization. For this reason, social policy affects the development of a business mission statement. Social issues mandate that strategists consider not only what the organization owes its various stakeholders but also what responsibilities the firm has to consumers, environmentalists, minorities, communities, and other groups. After decades of debate on the topic of social responsibility, many firms still struggle to determine appropriate social policies.

The issue of social responsibility arises when a company establishes its business mission. The impact of society on business and vice versa is becoming more pronounced each year. Social policies directly affect a firm's customers, products and services, markets, technology, profitability, self-concept, and public image. An organization's social policy should be integrated into all strategic-management activities, including the development of a mission statement. Corporate social policy should be designed and articulated during strategy formulation, set and administered during strategy implementation, and reaffirmed or changed during strategy evaluation. The emerging view of social responsibility holds that social issues should be attended to both directly and indirectly in determining strategies.

Components of a Mission Statement

Mission statements can and do vary in length, content, format, and specificity. Most practitioners and academicians of strategic management consider an effective statement to exhibit nine characteristics or components. Because a mission statement is often the most visible and public part of the strategicmanagement process, it is important that it includes all of these essential components. Components and corresponding questions that a mission statement should answer are given here.

  1. Customers: Who are the firm's customers?
  2. Products or services: What are the firm's major products or services?
  3. Markets: Geographically, where does the firm compete?
  4. Technology: Is the firm technologically current?
  5. Concern for survival, growth, and profitability: Is the firm committed to growth and financial soundness?
  6. Philosophy: What are the basic beliefs, values, aspirations, and ethical priorities of the firm?
  7. Self-concept: What is the firm's distinctive competence or major competitive advantage?
  8. Concern for public image: Is the firm responsive to social, community, and environmental concerns?
  9. Concern for employees: Are employees a valuable asset of the firm?

Importance of Vision and Mission Statements

The importance of vision and mission statements to effective strategic management is well documented in the literature, although research results are mixed. Rarick and Vitton found that firms with a formalized mission statement have twice the average return on shareholders' equity than those firms without a formalized mission statement; Bart and Baetz found a positive relationship between mission statements and organizational performance; Business Week reports that firms using mission statements have a 30 percent higher return on certain financial measures than those without such statements; O'Gorman and Doran, however, found that having a mission statement does not directly contribute positively to financial performance. The extent of manager and employee involvement in developing vision and mission
statements can make a difference in business success


Pepsi cola mission statement:

“ . . . . is to increase the value of our shareholders’ investment. We do this through sales growth, cost controls, and wise investment resources. We believe our commercial success depends upon offering quality and value to our consumers and customers; providing products that are safe, wholesome, economically efficient and environmentally sound; and providing a fair return to our investors while adhering to the highest standards of integrity.”

Ben & Jerry’s Mission Statement

“. . . . . is to make, distribute and sell the finest quality all-natural ice cream and related products in a wide variety of innovative flavors made from Vermont dairy products. To operate the Company on a sound financial basis of profitable growth, increasing value for our shareholders, and creating career opportunities and financial rewards for our employees. To operate the Company in a way that actively recognizes the central role that business plays in the structure of society by initiating innovative ways to improve the quality of life of a broad community—local, national and international.”

An Evaluation Matrix of Mission Statements

Perhaps the best way to develop a skill for writing and evaluating mission statements is to study actual company missions. These statements are evaluated in Table based on the nine criteria presented above.

An Evaluation Matrix of Mission Statements
Organization Customers
Markets Concern for
PepsiCo Yes No No Yes No
Ben & Jerry's No Yes Yes Yes No
Yes No No No No
Institute of
Yes Yes Yes No No
Pressure Systems
Yes Yes No Yes No
Genentech, Inc. Yes Yes No Yes No
Department of
Fish and Game
Yes Yes Yes No No
Barrett Memorial
Yes Yes Yes No No
    Philosophy Self-
Concern for
Public Image
Concern for
PepsiCo   Yes No No No
Ben & Jerry's   No Yes Yes Yes
  Yes Yes Yes No
Institute of
  Yes Yes Yes No
Pressure Systems
  No No No No
Department of
Fish and Game
  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 Yes indicates that the given mission statement answers satisfactorily the question for the respective evaluative criteria. Some persons are more demanding than others in rating mission statements in this manner. For example, if a statement includes the word employees or customer, is that alone sufficient for the respective component? Some companies answer this question in the affirmative and some in the 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 in their mission statement." Perhaps the important issue here is that mission statements include each of the nine components in some manner.

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

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