Strategic Management and Policy Chapter 2: The Business Vision and Mission acm 1

Learning Outcomes Describe the nature and role of vision and mission 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 statements of different organizations Write good vision and mission statements acm 2

What does it mean to you? "A business is not defined by its name, statutes, or articles of incorporation. It is defined by the business mission. Only a clear definition of the mission and purpose of the organization makes possible clear and realistic business objectives." —Peter Drucker "A corporate vision can focus, direct, motivate, unify, and even excite a business into superior performance. The job of a strategist is to identify and project a clear vision." —John Keane acm 3

Vision and Mission Vision What do we want to become? Mission What is our business? acm 4

Vision acm 5 Vision statements are future-based and are meant to inspire and give direction to the employees of the company, not anyone outside the company. Vision statements are dynamic and can change over time. As a company grows, its objectives and goals may change. Vision statements need to be revised as needed to reflect the change as goals are met, but they should be written to last for at least a few years. A clear vision provides the foundation for developing a comprehensive mission statement.

Examples of vision Macy's: "Our vision is to operate Macy's and Bloomingdale's as dynamic national brands while focusing on the customer offering in each store location." Microsoft: "A personal computer in every home running Microsoft software." Coca-Cola: "Profit: Maximizing return to share owners while being mindful of our overall responsibilities. People: Being a great place to work where people are inspired to be the best they can be. Portfolio: Bringing to the world a portfolio of beverage brands that anticipate and satisfy people, desires and needs. Partners: Nurturing a winning network of partners and building mutual loyalty. Planet: Being a responsible global citizen that makes a difference." Avon: "To be the company that best understands and satisfies the product, service and self-fulfillment needs of women — globally." acm 6

Mission An enduring statement of purpose that distinguishes one organization from other similar enterprises, the mission statement is a declaration of an organization’s “reason for being.” A clear mission statement is essential for effectively establishing objectives and formulating strategies. Sometimes called a creed statement, a statement of purpose, a statement of philosophy, a statement of beliefs, a statement of business principles, or a statement “defining our business,” a mission statement reveals what an organization wants to be and whom it wants to serve. A mission statement is not a marketing tool designed to grab attention quickly. While it should be catchy and memorable, a mission statement is a thoughtful declaration designed to articulate the goals and philosophies of a company. acm 7

Examples of Mission Starbucks: To inspire and nurture the human spirit – one person, one cup and one neighborhood at a time. JP Morgan: To be the world’s most trusted and respected financial services institution. TED: Spreading Ideas. Best Friends Animal Society: A better world through kindness to animals. New York Public Library: To inspire lifelong learning, advance knowledge, and strengthen our communities. Habitat for Humanity International: Seeking to put God’s love into action, Habitat for Humanity brings people together to build homes, communities and hope. acm 8

Importance of Vision and Mission 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 have. Bart and Baetz found a positive relationship between mission statements and organizational performance. BusinessWeek reports that firms using mission statements have a 30 percent higher return on certain financial measures than those without such statements. acm 9

Benefits of Vision and Mission (King and Cleland) 1. To ensure unanimity of purpose within the organization 2. To provide a basis, or standard, for allocating organizational resources 3. To establish a general tone or organizational climate 4. 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 5. To facilitate the translation of objectives into a work structure involving the assignment of tasks to responsible elements within the organization 6. To specify organizational purposes and then to translate these purposes into objectives in such a way that cost, time, and performance parameters can be assessed and controlled. acm 10

Characteristics of Mission Statement It is a declaration of attitude and outlook. A good mission statement allows for the generation and consideration of a range of feasible alternative objectives and strategies without unduly stifling management creativity. A mission statement needs to be broad to reconcile differences effectively among, and appeal to, an organization’s diverse stakeholders, the individuals and groups of individuals who have a special stake or claim on the company. It should be broad enough to spell possibilities and options and specific enough to focus on significant details. acm 11

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, be 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. acm 12

9 Essential Components Customer Products or Services Markets Technology Concern for Survival, Growth, and Profitability Philosophy Self-Concept Concern for Public Image Concern for Employees acm 13

Conclusion Well-designed vision and mission statements are essential for formulating, implementing, and evaluating strategy. Developing and communicating a clear business vision and mission are the most commonly overlooked tasks in strategic management. Without clear statements of vision and mission, a firm’s short-term actions can be counterproductive to long-term interests. Vision and mission statements always should be subject to revision, but, if carefully prepared, they will require infrequent major changes. Organizations usually reexamine their vision and mission statements annually. Effective mission statements stand the test of time. acm 14