Learning Objectives  Appreciate the various uses of organizational missions  Identify the strategic direction of a firm  Create a mission statement, including the elements of vision, business definition and organizational values  Understand the five ethical frames of reference and how they influence organizational values

Influences on Strategic Direction BroadEnvironment ExternalStakeholders InternalStakeholders History and Inertia Strategic Direction Vision Mission Business Definition Growth Orientation Organizational Ethics OrganizationalActionsOrganizational Outcomes Outcomes Feedback that Guides Impressions, Expectations and Behavior

Multiple Uses of Mission Statements  Used for Decision Making and Resource Allocations Managers and employees are targeted Managers and employees are targeted Mission statements should use terms that are understandable to internal stakeholdersMission statements should use terms that are understandable to internal stakeholders Communicate mission to internal stakeholders on a regular basisCommunicate mission to internal stakeholders on a regular basis  Used to Inspire Higher Levels of Performance and Pride in Association Also targets managers and employees Also targets managers and employees Should be inspiringShould be inspiring However, organization must act accordinglyHowever, organization must act accordingly

Multiple Uses of Mission Statements  Communicates Organizational Purpose and Values Targets primarily managers, employees, shareholders and potential investors Targets primarily managers, employees, shareholders and potential investors Helps managers and employees resolve dilemmas when faced with tradeoffsHelps managers and employees resolve dilemmas when faced with tradeoffs Helps external stakeholders know what to expect from the organization in particular situationsHelps external stakeholders know what to expect from the organization in particular situations

Multiple Uses of Mission Statements  Enhances Organizational Reputation Targets society and most external stakeholder groups, especially customers and potential venture partners Targets society and most external stakeholder groups, especially customers and potential venture partners Carefully articulated to enhance reputationCarefully articulated to enhance reputation Catchy slogans (but not cliché) are helpfulCatchy slogans (but not cliché) are helpful Should be short enough so that external stakeholders will attempt to read themShould be short enough so that external stakeholders will attempt to read them Widely dispersed to media sources and apparent in public settingsWidely dispersed to media sources and apparent in public settings

Business Definition  What is our business? Who is being satisfied (markets)? Who is being satisfied (markets)? What is being satisfied (functions provided)? What is being satisfied (functions provided)? How are customer needs satisfied (capabilities and technologies)? How are customer needs satisfied (capabilities and technologies)? What are our products and services? What are our products and services?

Business Definitions of Three Companies

Industry Supply Chain for Manufacturing Firms RawMaterialsExtractionPrimaryManufac-turing FinalProductManufac-turing Whole- saling Retailing

Organizational Vision  A sense of what the organization will be in the future CEO has primary responsibility for defining vision CEO has primary responsibility for defining vision  Microsoft Vision Statement Empowering people through great software – any time, any place and on any deviceEmpowering people through great software – any time, any place and on any device Bill Gates wants Microsoft to dominate the software systems that link all digital transactions and communications Bill Gates wants Microsoft to dominate the software systems that link all digital transactions and communications

Organizational Values  The underlying philosophies that guide decisions and behavior in a firm Also called core values OR organizational ethics Also called core values OR organizational ethics  CEO and other top managers have the most influence on organizational values  Also a reflection of societal values

Social Responsibility  Economic Responsibilities  Legal Responsibilities  Moral Obligations  Discretionary Responsibilities

Enterprise Strategy  Joins ethical and strategic thinking  Best possible reason for the actions it takes  Focused on which stakeholder needs are given priority  Mission statements often provide clues regarding the enterprise strategy of a firm “We focus on satisfying customer needs” “We focus on satisfying customer needs” “Our goal is to provide a satisfying work environment in which our employees can grow and develop” “Our goal is to provide a satisfying work environment in which our employees can grow and develop” “Our primary purpose is to maximize shareholder returns” “Our primary purpose is to maximize shareholder returns” “We focus on giving back to the communities in which we operate” “We focus on giving back to the communities in which we operate”

Ethical Frames of Reference  Economic Theory The purpose of business organizations is to maximize profits The purpose of business organizations is to maximize profits  Legal Theory Compliance with laws ensures ethical behavior Compliance with laws ensures ethical behavior  Religious Theory Everyone should act in accordance with religious teachings Everyone should act in accordance with religious teachings

Ethical Frames of Reference  Utilitarian Theory Focus on outcomes from decisions. Everyone should act in a way that generates the greatest benefits for the largest number of people Focus on outcomes from decisions. Everyone should act in a way that generates the greatest benefits for the largest number of people  Universalist Theory Focus on the intent of the decision. “Would I be willing for everyone else in the world to make the same decision?” Focus on the intent of the decision. “Would I be willing for everyone else in the world to make the same decision?”

Codes of Ethics  Communicate the values of the corporation to employees and other stakeholders  Ethics systems are sometimes established to ensure compliance  Formal systems may not be enough to ensure ethical behavior Often people don’t personalize ethical behavior Often people don’t personalize ethical behavior  Ethical issues are even more difficult for firms working in more than one country

Major Concepts in Chapter 4  Strategic managers provide long-term direction for their organizations, while at the same time balancing the competing interests of stakeholders  Mission statements communicate ideals and a sense of direction and purpose to internal and external stakeholders  A mission is what a company is and its reasons for existing, while a vision is a forward-looking view of what the organization wants to become  Businesses are defined in terms of customers, needs satisfied, capabilities and technologies, and products and services

Major Concepts in Chapter 4  Organizational values guide organizational decisions and help determine the firm’s attitude towards social responsibility and the treatment of various stakeholder groups (enterprise strategy).  A code of ethics can communicate the values of the organization to employees and other stakeholders  Globalization makes dealing with values and ethics even more difficult