Chapter 2: Mission Statement
CHAPTER 2
STRATEGY FORMULATION: The Business Vision and Mission
Chapter Objectives
After studying this chapter, you should be able to do the following
• 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 statements of different organizations.
• Write good vision and mission statements.
2.1. Introduction
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.
2.2. Vision Statement
It is especially important for managers and executives in any organization to agree on the basic
vision that the firm strives to achieve in the long term. A vision statement should answer the basic
question, “What do we want to become?” The vision statement should be short, preferably one
sentence, and as many managers as possible should have input into developing the statement.
When writing a vision statement, your mission statement and your core competencies can be a
valuable starting point for articulating your values.
Vision defines the desired or intended future state of an organization or enterprise in terms of its
fundamental objective and/or strategic direction.
In short, a vision statement;
• is a statement about a company’s long-term direction;
• hope for the reality to be;
• desired situation opposing the existing situation;
• not realized in short or one’s life time;
• keeps an organization moving forward;
• should be a description of the desired outcome of the strategic plan;
2.3. Mission Statements: What Is Our Business?
Current thought on mission statements is based largely on guidelines set forth in the mid-1970s by
Peter Drucker, who is often called “the father of modern management” for his pioneering studies
at General Motors and for his 22 books and hundreds of articles. Drucker believes that asking the
question “What is our business?” is synonymous with asking “What is our mission?” An enduring
Compiled by Mehari H. (Ass. Prof, MBA, MA, BA) E-mail: [email protected]
1
Chapter 2: Mission Statement
statement of purpose that distinguishes one organization from other similar enterprises, the mission
statement is a declaration of an organization’s “reason for being.” It answers the Pivotal question
“What is our business?” A clear mission statement is essential for effectively establishing
objectives and formulating strategies. Sometimes a mission statement is also 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. All organizations have a reason for being.
2.4. Characteristics of a Mission Statement
➢ Broad in scope; does not include monetary amounts, numbers, percentages, ratios, or
objectives
➢ An effective mission statement should not be too lengthy; recommended length is less than
250 words.
➢ An effective mission statement should arouse positive feelings and emotions about an
organization; it should be 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—from all socioeconomic groups
of people
➢ Reveals that the firm is socially responsible.
➢ Reveals that the firm is environmentally responsible.
➢ Includes nine components: customers, products or services, markets, technology, concern
for survival/growth/profits, philosophy, self-concept, concern for public image, concern
for employees
➢ A mission statement needs to be broad to reconcile differences effectively among, and
appeal to, an organization’s diverse 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) , the individuals and groups of individuals who have a special stake or claim
on the company.
➢ The statement of mission should be sufficiently broad to allow judgments about the most
promising growth directions and those considered less promising.
2.5. Benefits of Having a Clear Mission and Vision statements
➢ Achieve clarity of purpose among all managers and employees.
➢ Provide a basis for all other strategic planning activities, including internal and external
assessment, establishing objectives, developing strategies, choosing among alternative
strategies, devising policies, establishing organizational structure, allocating resources, and
evaluating performance.
➢ Provide direction.
➢ Provide a focal point for all stakeholders of the firm.
➢ Resolve divergent views among managers.
➢ Promote a sense of shared expectations among all managers and employees.
Compiled by Mehari H. (Ass. Prof, MBA, MA, BA) E-mail: [email protected]
2
Chapter 2: Mission Statement
➢ Project a sense of worth and intent to all stakeholders.
➢ Project an organized, motivated organization worthy of support.
➢ Achieve higher organizational performance.
➢ Achieve synergy among all managers and employees.
2.6. 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. Customer: 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?
Compiled by Mehari H. (Ass. Prof, MBA, MA, BA) E-mail: [email protected]
3
Chapter 2: Mission Statement
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?
Example:
Company A’s 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.”
Discuss the elements of this mission statement.
Compiled by Mehari H. (Ass. Prof, MBA, MA, BA) E-mail: [email protected]
4
