Chapter 2 The Business Vision Mission Strategic Management

Objectives of the chapter 1. 2. 3. 4. 5. 6. Describe the nature and role of vision and mission statements in strategic management. Discuss why the process of developing a mission statement is as important as the resulting document. Identify the components of mission statements. Discuss how clear vision and mission statements can benefit other strategic-management activities. Evaluate mission statement of different organizations. Write good vision and mission statements. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 2 Ch 2 -

Vision “The last thing IBM needs right now is a vision. ” (July 1993) “What IBM needs most right now is a vision. ” (March 1996) – Louis V. Gerstner, Jr. , CEO, IBM Corporation Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 3 Ch 2 -

Vision Agreement on the basic vision for which the firm strives to achieve in the long run is critically important to the firm’s success. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 4 Ch 2 -

Vision “What do we want to become? ” Copyright © 2009 Pearson Education, Inc.

Vision Clear Business Vision Comprehensive Mission Statement Copyright © 2009 Pearson Education, Inc. Publishing

Vision & Mission Shared Vision – n Creates commonality of interests n Reduce daily monotonyrepeatative n Provides opportunity & challenge Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 7 Ch 2 -

Vision Statement Examples Tyson Foods’ vision is to be the world’s first choice for protein solutions while maximizing shareholder value. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 8 Ch 2 -

Vision Statement n n Many organizations have both a vision and a mission statement. but the vision statement should be established first and foremostprime. The vision statement should be short, preferably one sentence, as many managers as possible should have input into developing the statement. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 9 Ch 2 -

Vision Statement Examples General Motors’ vision is to be the world leader in transportation products and related services. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 10 Ch 2 -

Vision Statement Examples Pepsi. Co’s responsibility is to continually improve all aspects of the world in which we operate – environment, social, economic – creating a better tomorrow than today. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 11 Ch 2 -

Vision Statement Examples Dell’s vision is to create a company culture where environmental excellence

Mission Statements – 90% of all companies have used a mission statement in the

Mission Statements “What is our business? ” Copyright © 2009 Pearson Education, Inc. Publishing

Mission Statements • Enduringlasting statement of purpose • Distinguishes one firm from another • Declares the firm’s reason for being Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 15 Ch 2 -

Mission Statements Also referred to as: • Creed/faith statement • Statement of purpose • Statement of philosophy • Statement of business principles Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 16 Ch 2 -

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 17 Ch 2 -

Mission Statements Reveal what an organization wants to be and whom it wants to

Mission Statements Essential for effectively establishing objectives and formulating strategies Copyright © 2009 Pearson

Vision & Mission Many organizations develop both vision & mission statements Copyright © 2009

Vision & Mission Profit & vision are necessary to effectively motivate a workforce Copyright

Vision & Mission Shared vision creates a community of interests Copyright © 2009 Pearson

Developing Vision & Mission Clear mission is needed before alternative strategies can be formulated

Developing Vision & Mission Participation from diverse managers is important in developing the mission

Developing Vision & Mission A widely used approach to developing a mission statement is to: 1. Select several articles about mission statements and ask all managers to read these as background information. 2. Ask managers to prepare a mission statement for the organization. 3. A facilitator, or committee of top managers, should then merge these statements into a single document and distribute this draft to all managers. 4. A request for modifications, additions, and deletions is needed next along with a meeting to revise the document. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 25 Ch 2 -

Mission Statement Examples Fleetwood Enterprises will lead the recreational vehicle and manufactured housing industries in providing quality products with a passion for customer-driven innovation. We will emphasize training, embrace diversity and provide growth opportunities for our associates and our dealers. We will lead our industry in the application of appropriate technologies. We will operate at the highest levels of ethics and compliance with a focus on exemplary corporate governance. We will deliver value to our shareholders, positive operating results and industry-leading earnings. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 26 Ch 2 -

Mission Statement Examples We aspire to make Pepsi. Co the world’s premier consumer products company, focused on convenient foods and beverages. We seek to produce healthy financial rewards for investors as we provide opportunities for growth and enrichment to our employees, our business partners and the communities in which we operate. And in everything we do, we strive to act with honesty, openness, fairness and integrity. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 27 Ch 2 -

Mission Statement Examples Dell’s mission is to be the most successful computer company in the world at delivering the best customer experience in markets we serve. In doing so, Dell will meet consumer expectations of highest quality; leading technology; competitive pricing; individual and company accountability; best-in-class service and support; flexible customization capability; superior corporate citizenship; financial stability. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 28 Ch 2 -

Mission Statement Examples Proctor & Gamble will provide branded products and services of superior quality and value that improve the lives of the world’s consumers. As a result, consumers will reward us with industry leadership in sales, profit, and value creation, allowing our people, our shareholders, and the communities in which we live and work to prosper. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 29 Ch 2 -

Mission Statement Examples At L’Oreal, we believe that lasting business success is built upon ethical standards which guide growth and on a genuine sense of responsibility to our employees, our consumers, our environment and to the communities in which we operate. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 30 Ch 2 -

Importance of Mission n 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 statement have a 30 percent higher return on financial measures than those without such statements. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 31 Ch 2 -

Benefits from a strong mission 1. 2. 3. 4. 5. 6. To ensure unanimity of purpose within the organization To provide a basis, or standard, for allocating organizational resources To establish a general tone or organizational climate To serve as a focal point for individuals to identify with the organization’s purpose and direction, and to deter those who cannot from participating further in the organization’s activities To facilitate the translation of objectives into a work structure involving the assignment of tasks to responsible elements within the organization To specify organizational purposes and the translation of these purposes into objectives in such a way that cost, time, and performance parameters can be assessed and controlled Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 32 Ch 2 -

Effective Missions üBroad in scope üGenerate strategic alternatives üNot overly specific üReconciles interests among diverse stakeholders üFinely balanced between specificity & generality Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 33 Ch 2 -

Effective Missions üArouse positive feelings & emotions üMotivate readers to action üGenerate favorable impression of the firm Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 34 Ch 2 -

Effective Missions üReflect future growth üProvide criteria for strategy selection üBasis for generating & evaluating strategic options üAre dynamic in nature Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 35 Ch 2 -

Mission & Customer Orientation – Vern Mc. Ginnis n n n Define what the organization is Define what it aspires to be Limited to exclude some ventures Broad enough to allow for growth Distinguishes firm from all others Stated clearly – understood by all Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 36 Ch 2 -

Mission & Customer Orientation An Effective Mission Statement – n n n Anticipates customer needs Identifies customer needs Provides product/service to satisfy needs Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 37 Ch 2 -

The following are relevant to develop mission n n Do not offer me clothes. Offer me attractive look. Do not offer me shoes. Offer me comfort for feet and 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 a book. Offer me ours of pleasure and the benefit of knowledge, Do not offer me records. Offer me leisure and Copyright © 2009 Pearson Education, Inc. 38 Ch 2 sound of music. Publishing as Prentice Hall

Social Policy & Mission Managerial philosophy shapes social policy – n Affects development of vision & mission n Responsibilities to – q q Consumers Environmentalists Minorities Communities Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 39 Ch 2 -

Social Policy & Mission Social policy should be integrated in all strategic-management activities Mission should convey the social responsibility of the firm Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 40 Ch 2 -

Mission Statements 2007 Most Admired in Social Responsibility 1. CHS 6. YRC Worldwide 2. United Parcel Service 7. Starbucks 3. Whole Foods Market 8. International Paper 4. Mc. Donald’s 9. Vulcan Materials 5. Alcan 10. Walt Disney Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 41 Ch 2 -

Mission Statements 2007 Least Admired in Social Responsibility 1. Visteon 6. Arvin Meritor 2. Dana 7. Huntsman 3. CA 8. Navistar International 4. Delphi 9. Lyondell Chemical 5. Federal-Mogul 10. Toys “R” Us Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 42 Ch 2 -

Vision & Mission Research results are mixed, however, firms with formal mission statements generally see a: n n n 2 x average return on shareholders’ equity Positive relationship to company performance 30% higher return on certain financial measures Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 43 Ch 2 -

Global Perspective Social Policies on Retirement: Japan Versus the World n n n Labor shortages due to aging population Shortages can be met by immigration Historical barriers to immigration in Japan lead to significant economic problems Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 44 Ch 2 -

Customers Employees Public Image Products or Services Markets Mission Components Technology Survival, Growth, Profits Self-Concept Philosophy Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 45 Ch 2 -

MISSION STATEMENT COMPONENTS n n n n n 1. Customers: Who are the firm’s customers? 2. Products or services: What are the firm’s major products? 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? Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 46 Ch 2 -

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 47 Ch 2 -

Mission Statement Evaluation Matrix COMPONENT Organization COMPONENT Customers Products or Services COMPONENT Markets Concern for Survival, Growth, Profitability COMPONENT Technology Fleetwood Ent. Yes No Yes Ben & Jerry's No Yes Royal Caribbean Yes No No Dell Yes Yes Yes Proctor & Gamble Yes No Yes L’Oreal No No No Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 48 Ch 2 -

Mission Statement Evaluation Matrix COMPONENT Organization COMPONENT Self. Concept Concern for Public Image Concern for Employees Philosophy Fleetwood Ent. Yes No Yes Pepsi. Co Yes No Yes Royal Caribbean Yes No Yes Dell Yes Yes No Proctor & Gamble No Yes Yes L’Oreal No Yes Yes Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 49 Ch 2 -

Teamwork n Write a mission statement, either for a business, personal or family. Copyright

Review n n Compare and contrast vision statements with mission statements in terms of composition and importance. Many organizations develop both a mission statement and a vision statement. Whereas the mission statement answers the question, “What is our business? ” the vision statement answers the question, “What do we want to become? ” Both statements are essential for firm success. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 51 Ch 2 -

Review n n Do local petrol stations need to have written vision and mission statements? Why or why not? Why do you think organizations that have a comprehensive mission statement tend to be high performers? Does having a comprehensive mission cause high performance? Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 52 Ch 2 -

Review n n Explain why a mission statement should not include strategies and objectives. The statement needs to be broad in scope to effectively provide a basis for performing an external and internal audit and for generating and selecting among alternative strategies. specific strategies and objectives in a mission statement could reduce the level of innovative and creative thinking in an organization. jeopardizes the potential for the statement to be widely accepted by all managers and employees of the organization. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 53 Ch 2 -

Review n n What is your college or university’s selfconcept? How would you state that in a mission statement? Why is it important for a mission statement to be reconciliatory? (different stakeholders) Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 54 Ch 2 -

Review n n In your opinion, what are three most important components to include in writing a mission statement? Why? All of the evaluative criteria described in Chapter 2 are important, but three are particularly important: customers, products or services, and markets. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 55 Ch 2 -