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Strategic Management

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Strategic Management ­ MGT603
VU
Lesson 6
CHARACTERISTICS OF A MISSION STATEMENT
Objectives:
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.
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Strategic Management ­ MGT603
VU
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.
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Strategic Management ­ MGT603
VU
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 strategic-
management 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
Examples:
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."
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Strategic Management ­ MGT603
VU
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
Components
Concern
for
Survival,
Growth,
Products/
Profitability
Organization
Customers Services
Markets
Technology
PepsiCo
Yes
No
No
Yes
No
Ben & Jerry's
No
Yes
Yes
Yes
No
National
Pawnbrokers
Yes
No
No
No
No
Association
Institute
of
Management
Yes
Yes
Yes
No
No
Accountant
Pressure Systems
Yes
Yes
No
Yes
No
International
Genentech, Inc.
Yes
Yes
No
Yes
No
California
Department
of Yes
Yes
Yes
No
No
Fish and Game
Barrett Memorial
Yes
Yes
Yes
No
No
Hospital
Concern
for Concern  for
Self-
Public Image
Employees
Philosophy Concept
PepsiCo
Yes
No
No
No
Ben & Jerry's
No
Yes
Yes
Yes
National
Pawnbrokers
Yes
Yes
Yes
No
Association
Institute
of
Management
Yes
Yes
Yes
No
Accountants
Pressure Systems
No
No
No
No
International
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Strategic Management ­ MGT603
VU
California
Department
of
No
Yes
No
No
Fish and Game
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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Table of Contents:
  1. NATURE OF STRATEGIC MANAGEMENT:Interpretation, Strategy evaluation
  2. KEY TERMS IN STRATEGIC MANAGEMENT:Adapting to change, Mission Statements
  3. INTERNAL FACTORS & LONG TERM GOALS:Strategies, Annual Objectives
  4. BENEFITS OF STRATEGIC MANAGEMENT:Non- financial Benefits, Nature of global competition
  5. COMPREHENSIVE STRATEGIC MODEL:Mission statement, Narrow Mission:
  6. CHARACTERISTICS OF A MISSION STATEMENT:A Declaration of Attitude
  7. EXTERNAL ASSESSMENT:The Nature of an External Audit, Economic Forces
  8. KEY EXTERNAL FACTORS:Economic Forces, Trends for the 2000ís USA
  9. EXTERNAL ASSESSMENT (KEY EXTERNAL FACTORS):Political, Governmental, and Legal Forces
  10. TECHNOLOGICAL FORCES:Technology-based issues
  11. INDUSTRY ANALYSIS:Global challenge, The Competitive Profile Matrix (CPM)
  12. IFE MATRIX:The Internal Factor Evaluation (IFE) Matrix, Internal Audit
  13. FUNCTIONS OF MANAGEMENT:Planning, Organizing, Motivating, Staffing
  14. FUNCTIONS OF MANAGEMENT:Customer Analysis, Product and Service Planning, Pricing
  15. INTERNAL ASSESSMENT (FINANCE/ACCOUNTING):Basic Types of Financial Ratios
  16. ANALYTICAL TOOLS:Research and Development, The functional support role
  17. THE INTERNAL FACTOR EVALUATION (IFE) MATRIX:Explanation
  18. TYPES OF STRATEGIES:The Nature of Long-Term Objectives, Integration Strategies
  19. TYPES OF STRATEGIES:Horizontal Integration, Michael Porterís Generic Strategies
  20. TYPES OF STRATEGIES:Intensive Strategies, Market Development, Product Development
  21. TYPES OF STRATEGIES:Diversification Strategies, Conglomerate Diversification
  22. TYPES OF STRATEGIES:Guidelines for Divestiture, Guidelines for Liquidation
  23. STRATEGY-FORMULATION FRAMEWORK:A Comprehensive Strategy-Formulation Framework
  24. THREATS-OPPORTUNITIES-WEAKNESSES-STRENGTHS (TOWS) MATRIX:WT Strategies
  25. THE STRATEGIC POSITION AND ACTION EVALUATION (SPACE) MATRIX
  26. THE STRATEGIC POSITION AND ACTION EVALUATION (SPACE) MATRIX
  27. BOSTON CONSULTING GROUP (BCG) MATRIX:Cash cows, Question marks
  28. BOSTON CONSULTING GROUP (BCG) MATRIX:Steps for the development of IE matrix
  29. GRAND STRATEGY MATRIX:RAPID MARKET GROWTH, SLOW MARKET GROWTH
  30. GRAND STRATEGY MATRIX:Preparation of matrix, Key External Factors
  31. THE NATURE OF STRATEGY IMPLEMENTATION:Management Perspectives, The SMART criteria
  32. RESOURCE ALLOCATION
  33. ORGANIZATIONAL STRUCTURE:Divisional Structure, The Matrix Structure
  34. RESTRUCTURING:Characteristics, Results, Reengineering
  35. PRODUCTION/OPERATIONS CONCERNS WHEN IMPLEMENTING STRATEGIES:Philosophy
  36. MARKET SEGMENTATION:Demographic Segmentation, Behavioralistic Segmentation
  37. MARKET SEGMENTATION:Product Decisions, Distribution (Place) Decisions, Product Positioning
  38. FINANCE/ACCOUNTING ISSUES:DEBIT, USES OF PRO FORMA STATEMENTS
  39. RESEARCH AND DEVELOPMENT ISSUES
  40. STRATEGY REVIEW, EVALUATION AND CONTROL:Evaluation, The threat of new entrants
  41. PORTER SUPPLY CHAIN MODEL:The activities of the Value Chain, Support activities
  42. STRATEGY EVALUATION:Consistency, The process of evaluating Strategies
  43. REVIEWING BASES OF STRATEGY:Measuring Organizational Performance
  44. MEASURING ORGANIZATIONAL PERFORMANCE
  45. CHARACTERISTICS OF AN EFFECTIVE EVALUATION SYSTEM:Contingency Planning