Chapter 2 The Business Vision & Mission Strategic Management: Concepts & Cases 12th Edition Fred David Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Vision is the desired future position of a company ( Raynor, 1998) Definitions of the strategic management concepts Values are a set of timeless guiding principles pointing out what is important for an organization ( Collins and Porras, 1996) Competence is the ability of an organization to sustain coordinated deployments of resources capabilities in ways that help the organization achieve its goals (Sanchez, 2001) A mission is the organization’s most fundamental reason for existence (Collins and Porras, 1996) Vision is the desired future position of a company ( Raynor, 1998) Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Objectives of the chapter 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

Chapter Outline What Do We Want to Become? What Is Our Business? Importance of Vision and Mission Statements Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Chapter Outline (cont’d) Characteristics of a Mission Statement Components of a Mission Statement Writing & Evaluating Mission Statements Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

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

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

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

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

Shared Vision – Vision & Mission Creates commonality of interests Reduce daily monotony Provides opportunity & challenge Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

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

Vision Statement Many organizations have both a vision and a mission statement. but the vision statement should be established first and foremost. 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

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

Vision Statement Examples PepsiCo’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

Vision Statement Examples Dell’s vision is to create a company culture where environmental excellence is second nature. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Mission Statements – 90% of all companies have used a mission statement in the previous five years Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

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

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

Creed/faith statement Statement of purpose Statement of philosophy 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

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Mission Statements Reveal what an organization wants to be and whom it wants to serve Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Mission Statements Essential for effectively establishing objectives and formulating strategies Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Many organizations develop both vision & mission statements Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Profit & vision are necessary to effectively motivate a workforce Vision & Mission Profit & vision are necessary to effectively motivate a workforce Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Shared vision creates a community of interests Vision & Mission Shared vision creates a community of interests Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Developing Vision & Mission Clear mission is needed before alternative strategies can be formulated and implemented Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Developing Vision & Mission Participation from diverse managers is important in developing the mission Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Developing Vision & Mission A widely used approach to developing a mission statement is to: Select several articles about mission statements and ask all managers to read these as background information. Ask managers to prepare a mission statement for the organization. A facilitator, or committee of top managers, should then merge these statements into a single document and distribute this draft to all managers. 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

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

Mission Statement Examples We aspire to make PepsiCo 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

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

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

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

Importance of 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. 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

Importance of Mission Benefits from a strong mission Mission Unanimity/unity of Purpose Mission Resource Allocation Organizational Climate Focal Point for Work Structure Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Benefits from a strong mission 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

Effective Missions Broad in scope Generate strategic alternatives Not overly specific Reconciles interests among diverse stakeholders Finely balanced between specificity & generality Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Effective Missions Arouse positive feelings & emotions Motivate readers to action Generate favorable impression of the firm Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Effective Missions Reflect future growth Provide criteria for strategy selection Basis for generating & evaluating strategic options Are dynamic in nature Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Natural Environmental Perspective Is Your Firm Environmentally Proactive? Preserving the natural resources is good business! Reactive environmental policies can be expensive Proactive policies force companies to innovate and upgrade processes Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Mission & Customer Orientation – Vern McGinnis 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

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

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

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

Mission Statements 2007 Most Admired in Social Responsibility CHS United Parcel Service Whole Foods Market McDonald’s Alcan YRC Worldwide Starbucks International Paper Vulcan Materials Walt Disney Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Mission Statements 2007 Least Admired in Social Responsibility Visteon Dana CA Delphi Federal-Mogul Arvin Meritor Huntsman Navistar International Lyondell Chemical Toys “R” Us Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Vision & Mission Research results are mixed, however, firms with formal mission statements generally see a: 2x 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

Global Perspective Social Policies on Retirement: Japan Versus the World 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

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

MISSION STATEMENT COMPONENTS 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

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

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

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

Teamwork Write a mission statement, either for a business, personal or family. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall

Review 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

Review 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

Review 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

Review What is your college or university’s self-concept? 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

Review In your opinion, what are the 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