Chapter One

Strategic Management

At the end of this course you will be able to:

Define Strategic management

Describe stages of Strategic management

Explain the key terms Strategic management & Over view of types of strategy

The strategic management approach of Strategic management

Describe benefits of Strategic management

Elaborate Business ethics & Strategic management activities

Introduction:

Strategic management: ―a bridge to somewhere‖

 Is the most exciting of the management disciplines

 Is about success and failure

 Is about the ability to plan wars and win them "Without a strategy, an organization is like a
ship without a rudder, going around in circles. It’s like a tramp; it has no place to go." —Joel
Ross and Michael Kami "If a man takes no thought about what is distant, he will find sorrow
near at hand. He who will not worry about what is far off will soon find something worse than
worry." —Confucius

Effective strategic management can:

 Transform the performance of an organization

 Make fortunes for shareholders or

 Change the structure of an industry

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Ineffective strategic management can:  Bankrupt the company  Ruin the careers of chief
executives,etc.

Defining Strategic Management

Strategic management can be defined as the art and science of formulating, implementing, and
evaluating cross-functional decisions that enable an organization to achieve its objectives. The
purpose of strategic management is to exploit and create new and different opportunities for
tomorrow; long-range planning.

 The definition implies strategic management focuses on integrating:  management 

marketing,  finance/accounting,  production/operations,  research and development, and 
information systems to achieve organizational success.

Strategic management can be defined as the art and science of formulating, implementing, and
evaluating cross-functional decisions that enable an organization to achieve its objectives. As
this definition implies, strategic management focuses on integrating management, marketing,
finance/accounting, production/operations, research and development, and information systems
to achieve organizational success.

Strategic management is an art and Skill/science:  It’s a skill because there is a body of
knowledge that can be learnt and techniques that can be used. Strategic managers should be
trained, highly skilled analytical thinkers.  It is an art because it deals with the future that is
unknowable and with the heart and minds of the people that transcend(excel) reason.

Based on past experiences, judgment, and feelings, most people recognize that intuition is
essential to make good strategic decisions. Intuition is particularly useful for making decisions
in situations of great uncertainty or little precedent. Good strategic management requires both
clear and thought and sound judgment.

It is also the process of specifying the organizations objectives, developing policies and plan to
achieve these objectives and allocating resources to implement the policies and plans to achieve
the organizations objectives.

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 ―The on-going process of formulating, implementing and controlling broad plans that guide
the organization in achieving the strategic goods given its internal and external environment‖

The term strategic management in this text is used synonymously with the term strategic
planning. The latter term is more often used in the business world, whereas the former is often
used in academia. Sometimes the term strategic management is used to refer to strategy
formulation, implementation, and evaluation, with strategic planning referring only to strategy
formulation. The purpose of strategic management is to exploit and create new and different
opportunities for tomorrow; long-range planning, in contrast, tries to optimize for tomorrow the
trends of today. The term strategic planning originated in the 1950s and was very popular
between the mid-1960s and the mid-1970s. During these years, strategic planning was widely
believed to be the answer for all problems. At the time, much of corporate America was
―obsessed‖ with strategic planning. Following that ―boom,‖ however, strategic planning was cast
aside during the 1980s as various planning models did not yield higher returns. The 1990s,
however, brought the revival of strategic planning, and the process is widely practiced today in
the business world. A strategic plan is, in essence, a company’s game plan. Just as a football
team needs a good game plan to have a chance for success, a company must have a good
strategic plan to compete successfully. Profit margins among firms in most industries have been
so reduced by the global economic recession that there is little room for error in the overall
strategic plan. A strategic plan results from tough managerial choices among numerous good
alternatives, and it signals commitment to specific markets, policies, procedures, and operations
in lieu of other, ―less desirable‖ courses of action. The term strategic management is used at
many colleges and universities as the subtitle for the capstone course in business administration.
This course integrates material from all business courses.

Stages of Strategic Management

The strategic-management process consists of three stages: strategy formulation, strategy

implementation, and strategy evaluation.

Strategy formulation includes developing a vision and mission, identifying an organization’s

external opportunities and threats, determining internal strengths and weaknesses, establishing
long-term objectives, generating alternative strategies, and choosing particular strategies to
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pursue. Strategy-formulation issues include deciding what new businesses to enter, what
businesses to abandon, how to allocate resources, whether to expand operations or diversify,
whether to enter international markets, whether to merge or form a joint venture, and how to
avoid a hostile takeover. Because no organization has unlimited resources, strategists must
decide which alternative strategies will benefit the firm most. Strategy-formulation decisions
commit an organization to specific products, markets, resources, and technologies over an
extended period of time. Strategies determine long-term competitive advantages. For better or
worse, strategic decisions have major multifunctional consequences and enduring effects on an
organization. Top managers have the best perspective to understand fully the ramifications of
strategy-formulation decisions; they have the authority to commit the resources necessary for
implementation.

Strategy implementation requires a firm to establish annual objectives, devise policies, motivate
employees, and allocate resources so that formulated strategies can be executed. Strategy
implementation includes developing a strategy-supportive culture, creating an effective
organizational structure, redirecting marketing efforts, preparing budgets, developing and
utilizing information systems, and linking employee compensation to organizational
performance. Strategy implementation often is called the ―action stage‖ of strategic management.
Implementing strategy means mobilizing employees and managers to put formulated strategies
into action. Often considered to be the most difficult stage in strategic management, strategy
implementation requires personal discipline, commitment, and sacrifice. Successful strategy
implementation hinges upon managers’ ability to motivate employees, which is more an art than
a science. Strategies formulated but not implemented serve no useful purpose. Interpersonal
skills are especially critical for successful strategy implementation. Strategy-implementation
activities affect all employees and managers in an organization. Every division and department
must decide on answers to questions, such as ―What must we do to implement our part of the
organization’s strategy?‖ and ―How best can we get the job done?‖ The challenge of
implementation is to stimulate managers and employees throughout an organization to work with
pride and enthusiasm toward achieving stated objectives. Strategy evaluation is the final stage in
strategic management.

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Managers desperately need to know when particular strategies are not working well; strategy
evaluation is the primary means for obtaining this information. All strategies are subject to future
modification because external and internal factors are constantly changing. Three fundamental
strategy-evaluation activities are (1) reviewing external and internal factors that are the bases for
current strategies, (2) measuring performance, and (3) taking corrective actions. Strategy
evaluation is needed because success today is no guarantee of success tomorrow! Success always
creates new and different problems; complacent organizations experience demise. Strategy
formulation, implementation, and evaluation activities occur at three hierarchical levels in a large
organization: corporate, divisional or strategic business unit, and functional. By fostering
communication and interaction among managers and employees across hierarchical levels,
strategic management helps a firm function as a competitive team. Most small businesses and
some large businesses do not have divisions or strategic business units; they have only the
corporate and functional levels. Nevertheless, managers and employees at these two levels
should be actively involved in strategic-management activities.

Key terms strategic Management

Nine key terms: competitive advantage, strategists, vision and mission statements, external
opportunities and threats, internal strengths and weaknesses, long-term objectives, strategies,
annual objectives, and policies.

Competitive Advantage

Strategic management is all about gaining and maintaining competitive advantage. This term
can be defined as ―anything that a firm does especially well compared to rival firms.‖ When a
firm can do something that rival firms cannot do, or owns something that rival firms desire, that
can represent a competitive advantage. For example, in a global economic recession, simply
having ample cash on the firm’s balance sheet can provide a major competitive advantage. Some
cash-rich firms are buying distressed rivals. For example, BHP Billiton, the world’s largest
miner, is seeking to buy rival firms in Australia and South America. Freeport-McMoRan Copper
& Gold Inc. also desires to expand its portfolio by acquiring distressed rival companies. French
drug company SanofiAventis SA also is acquiring distressed rival firms to boost its drug
development and diversification. Cash-rich Johnson & Johnson in the United States also is

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acquiring distressed rival firms. This can be an excellent strategy in a global economic recession.
Having less fixed assets than rival firms also can provide major competitive advantages in a
global recession. For example, Apple has no manufacturing facilities of its own, and rival Sony
has 57 electronics factories. Apple relies exclusively on contract manufacturers for production of
all of its products, whereas Sony owns its own plants. Less fixed assets has enabled Apple to
remain financially lean with virtually no long-term debt. Sony, in contrast, has built up massive
debt on its balance sheet.

Strategists

Strategists are the individuals who are most responsible for the success or failure of an
organization. Strategists have various job titles, such as chief executive officer, president, owner,
chair of the board, executive director, chancellor, dean, or entrepreneur. Jay Conger, professor of
organizational behavior at the London Business School and author of Building Leaders, says,
―All strategists have to be chief learning officers. We are in an extended period of change. If our
leaders aren’t highly adaptive and great models during this period, then our companies won’t
adapt either, because ultimately leadership is about being a role model.‖ Strategists help an
organization gather, analyze, and organize information. They track industry and competitive
trends, develop forecasting models and scenario analyses, evaluate corporate and divisional
performance, spot emerging market opportunities, identify business threats, and develop creative
action plans. Strategic planners usually serve in a support or staff role. Usually found in higher
levels of management, they typically have considerable authority for decision making in the
firm. The CEO is the most visible and critical strategic manager. Any manager who has
responsibility for a unit or division, responsibility for profit and loss outcomes, or direct
authority over a major piece of the business is a strategic manager (strategist).

1.4. Over view of types of strategy

 After environmental analysis, the next step is to identify the various strategic alternatives;

 And they have to be evaluated to match them with the environmental analysis.

 The different alternatives strategies can be broadly categorized into:

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Types of strategy

Integration Strategies: such as forward, backward, vertical, horizontal, etc…

Intensive Strategies: such as market penetration, market development, product development,

etc….

Diversification/expansion Strategies: such as concentric diversification, horizontal

diversification, conglomerate diversification…..

Defensive Strategies: such as joint venture, retrenchment, divestiture, liquidation,

combination….

Stability strategy: not doing anything but sustaining a moderate growth in line with the existing
trends and others

1.5. The strategic management approach

There are many quite different approaches to the strategic development of organisations.
Johnson and Scholes (2OO2) believe that these different approaches can be clustered into three
broad perspectives. They describe these as different 'lenses' or 'ways of seeing' strategy. The
three different perspectives are: ◦ strategy as design ◦ strategy as experience ◦ strategy as ideas

Strategy as design;

This is fundamentally a rational approach to planning. It is based on 'the view that strategy
development can be a logical process in which forces and constraints on the organisation are
weighed carefully through analytical and evaluative techniques to establish clear strategic
direction and in turn carefully planned in its implementation.

Strategy as experience;

This approach emphasises the way in which the future can be shaped by reflection on the past.

◦ It is based on 'the view that future strategies of organisations are based on an adaptation of past
strategies influenced by the experience of managers and others in the organisation.

Strategy as ideas
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 This approach emphasises innovations and the characteristics of organisations that are able to
innovate.

 It is based on the view that the role of strategic leadership is not so much to control the
development of the organisation, but to sponsor a climate in which others care about the
organisation and wish to contribute to its future direction.

1.6 Business is a cooperative activity whose very existence requires ethical behavior.

Business ethics can be defined as principles of conduct within organizations that guide decision
making and behavior. It is an application of our understanding of what is good and right to an
assortment of institutions, technologies, transactions, activities and pursuits that we call business.
Good business ethics –Prerequisite for good strategic management.

Code of business

Ethics provides basis on which policies can be devised to guide daily behaviour and decisions in
the workplace. Ethics is an accepted standards of behavior for an occupation, trade or a
profession.

Morality in contrast is the percepts of personal behavior based on religious and philosophical
grounds .

Law refers to formal codes that permit or forbid a behavior and may or may not enforce ethics or
morality. If business people do not act ethically, government will be forced to pass laws
regulating their actions and usually increasing their costs. One way to do that is by developing
codes of ethics. Another is by providing guidelines for ethical behavior. Being unethical can be
very expensive:

Eg. Largest payout for legal fraud suits: Enron ($7.16 billion), WorldCom ($6.16 billion),
Cendant ($3.53 billion), Tyco ($2.98 billion),

A code of ethics

A code of business ethics is a document that provides behavioral guidelines that cover daily
activities and decisions within an organization. The ethical issues that managers confront cover
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a wide range of topics, but most arise because of a potential conflict among ◦ the goals of the
enterprise or ◦ the goals of individual managers and ◦ the fundamental rights of important
stakeholders

Stakeholders have basic rights that should be respected, and it is unethical to violate those
rights. Stockholders have the right to timely and accurate information about their investment,
and it is unethical to violate that right.

◦ Customers have the right to be fully informed about the products and services they purchase. ◦
Employees have the right to safe working conditions, fair compensation for the work they
perform, and to be treated in a just manner by managers.

Suppliers have the right to expect contracts to be respected, and the firm should not take
advantage of a power disparity between itself and a supplier to opportunistically rewrite a
contract. Competitors have the right to expect that the firm will abide by the rules of competition.

In addition, the business actions considered to be unethical are:  misleading advertising or

labeling,  causing environmental harm,  poor product or service safety,  padding expense
accounts, insider trading, dumping banned or flawed products in foreign markets,  not
providing equal opportunities for women and minorities,  overpricing, moving jobs overseas,
and  sexual harassment.

Social responsibility

What are the responsibilities of a business firm and how many of them must be fulfilled?

Milton Friedman and Archie Carroll offer two contrasting views of the responsibilities of
business firms to society. According to Friedman, a business person who acts ―responsibly‖ by
cutting the price of the firm’s product to prevent inflation, or by making expenditures to reduce
pollution, or by hiring the unemployed, is spending the shareholder’s money for a general social
interest. He stated that: there is one and only one social responsibility of business—to use its
resources and engage in activities designed to increase its profits so long as it stays within the
rules of the game, which is to say, engages in open and free competition without deception or
fraud. Otherwise, taking on the burden of these social costs, the business becomes less efficient.

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However, Friedman stated that the primary goal of business is profit maximization is only one
side of an ongoing debate regarding corporate social responsibility (CSR). He proposed four
responsibilities of business organizations: ◦ Economic responsibilities: to produce goods and
services of value to society so that the firm may repay its creditors and shareholders. ◦ Legal
responsibilities: that are defined by governments in laws that management is expected to obey.
E.g. hiring people without discrimination ◦ Ethical responsibilities: to follow the generally held
beliefs about behavior in a society. ◦ Discretionary responsibilities are the purely voluntary
obligations a corporation assumes. E.g. training the unemployed person, and providing day-care
centers, etc.

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CHAPTER TWO

THE BUSINESS VISION AND MISSION

Strategy Formulation:

The business mission, vision and values

At the end of this unit, students will be able to:

 Define the concept of vision, mission and values of a business

 Develop vision and mission statements;
 Describe the importance of mission, vision and values
 Explain the nature of business mission
 Illustrate components of mission statement
 Describe strategic issues
 set goals and objectives

In addition, the chapter describes the nature and importance of organizational values and mission
statements. Guidelines are presented for preparing mission statements. Organizational mission
statements should include nine components: customers, product or service, markets, technology,
concern for survival, growth and profitability, philosophy, self-concept, concern for public
image, and concern for employees.

I. WHAT DO WE WANT TO BECOME?

A. Importance of a Vision Statement

1. A vision statement should answer the basic question, ―What do we want to become?‖ A clear
vision provides the foundation for developing a comprehensive mission statement.

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2. Many organizations have both a vision and a mission statement, but the vision statement
should be established first and foremost. a. The vision statement should be short, preferably one
sentence, and as many managers as possible should have input into developing the statement.

II. WHAT IS OUR BUSINESS?

A. Mission Statements

1. Drucker says asking the question, ―What is our business?‖ is synonymous with asking the
question, ―What is our mission?‖ a. 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.‖ b. 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.

B. Vision versus Mission

1. 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?‖

C. The Process of Developing a Vision and Mission Statement

1. As indicated in the strategic-management model, a clear mission statement is needed before

alternative strategies can be formulated and implemented.

2. It is important to involve as many managers as possible in the process of developing a

mission statement, because through involvement, people become committed to an organization.
3. A widely used approach to developing a mission statement is to a. Select several articles about
mission statements and ask all managers to read these as background information. b. Ask
managers to prepare a mission statement for the organization.

c. A facilitator, or committee of top managers, should then merge these statements into a single
document and distribute this draft to all managers.

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d. A request for modifications, additions, and deletions is needed next along with a meeting to
revise the document.

III. IMPORTANCE OF VISION AND MISSION STATEMENTS A.

The Importance of Mission Statements is Well Documented 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.

B. Reasons for Developing a Written Mission Statement

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 the translation of these purposes into objectives in
such a way that cost, time, and performance parameters can be assessed and controlled

C. A Resolution of Divergent Views

1. Developing a comprehensive mission statement is important because divergent views among

managers can be revealed and resolved through this process.

2. Considerable disagreement among an organization’s strategists over vision and mission can
cause trouble if not resolved.

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3. An organization that fails to develop a vision statement as well as a comprehensive and
inspiring mission statement loses the opportunity to present itself favorably to existing and
potential stakeholders.

IV. CHARACTERISTICS OF A MISSION STATEMENT

A. A Declaration of Attitude

1. A mission statement is a declaration of attitude and outlook more than a statement of specific
details. It is usually broad in scope for at least two reasons: a. First, a good mission statement
allows for the generation and consideration of a range of feasible alternative objectives and
strategies without unduly stifling management creativity. b. Second, a mission statement needs to
be broad to effectively reconcile differences among and appeal to an organization’s diverse
stakeholders, the individuals and groups of persons who have a special stake or claim on the
company.

2. An effective mission statement arouses positive feelings and emotions about an organization;
it is inspiring in the sense that it motivates readers to action. 3. It should be short – less than 200
words.

B. A Customer Orientation

1. A good mission statement reflects the anticipation of customers. Rather than developing a
product and then trying to find a market, the operating philosophy of organizations should be to
identify customers’ needs and then to provide a product or service to fulfill those needs.

2. According to Vern McGinnis, mission statements should

1) define what the organization is and what it aspires to be,

2) be limited enough to exclude some ventures and broad enough to allow for creative growth,

3) distinguish a given organization from all others,

4) serve as a framework for evaluating both current and prospective activities, and

5) be stated in terms sufficiently clear to be widely understood throughout the organization.

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C. A Declaration of Social Policy

1. The words social policy embrace managerial philosophy and thinking at the highest levels of
an organization. For this reason, social policy affects the development of a business mission
statement.

2. Despite differences in approaches, most American companies try to assure outsiders that they
conduct business in a socially responsible way. The mission statement is an effective instrument
for conveying this message. Tip: Students may find it interesting to know that not only
corporations find mission statement useful. Steven Covey, the author of the highly successful
book, The Seven Habits of Highly Successful People, has written two books that explain how
individuals and families can use mission statements to help them determine who they are and
what they want to accomplish. The first book, How to Develop and Use a Personal Mission
Statement, explains why individuals should write mission statements to provide a sense of
direction and purpose for their lives. The second book, How to Develop a Family Mission
Statement, applies the same principles in a family concept. Laurie Beth Jones advances a similar
set of ideas in her popular book, The Path: Creating Your Mission Statement for Work and for
Life.

V. COMPONENTS OF A MISSION STATEMENT

A. Components and Questions That a Mission Statement Should Answer

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?

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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? Examples of these nine
essential components of a mission statement are provided in power point (PPT). Tip: If you are
interested in obtaining the mission statement for a particular company, a good place to look is the
company’s website or its annual report. Annual reports can be obtained directly from a company
or through a service that disseminates annual reports. An example of the latter is The Public
Register’s Annual Report Service at {http://www.prars.com}. This service provides free access
to the annual reports of over 3,600 public companies.

VI. WRITING AND EVALUATING MISSION STATEMENTS

Perhaps the best way to develop a skill for writing and evaluating mission statements is to study
actual company missions.

Importance (Benefits) of Vision and Mission Statements

The importance (benefits) of vision and mission statements to effective strategic management is
well documented in the literature, although research results are mixed. 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; however, some studies have found that having a
mission statement does not directly contribute positively to financial performance.6 The extent
of manager and employee involvement in developing vision and mission statements can make a
difference in business success.

This chapter provides guidelines for developing these important documents. In actual practice,
wide variations exist in the nature, composition, and use of both vision and mission statements.

King and Cleland recommend that organizations carefully develop a written mission statement in
order to reap the following benefits:

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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

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. Reuben Mark,
former CEO of Colgate, maintains that a clear mission increasingly must make sense
internationally. Mark’s thoughts on vision are as follows: When it comes to rallying everyone to
the corporate banner, it’s essential to push one vision globally rather than trying to drive home
different messages in different cultures. The trick is to keep the vision simple but elevated: ―We
make the world’s fastest computers‖ or ―Telephone service for everyone.‖ You’re never going to
get anyone to charge the machine guns only for financial objectives. It’s got to be something that
makes people feel better, feel a part of something profitability of the firm.

Characteristics of a Mission Statement

A Declaration of Attitude

A mission statement is more than a statement of specific details; it is a declaration of attitude and
outlook. It usually is broad in scope for at least two major reasons. First, a good mission
statement allows for the generation and consideration of a range of feasible alternative objectives
and strategies without unduly stifling management creativity. Excess specificity would limit the
potential of creative growth for the organization. However, an overly general statement that does
not exclude any strategy alternatives could be dysfunctional. Apple Computer’s mission
statement, for example, should not open the possibility for diversification into pesticides—or
Ford Motor Company’s into food processing. Second, a mission statement needs to be broad to
reconcile differences effectively among, and appeal to, an organization’s diverse stakeholders,

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the individuals and groups of individuals who have a special stake or claim on the company.
Thus a mission statement should be reconcilatory.

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. Stakeholders affect and are affected
by an organization’s strategies, yet the claims and concerns of diverse constituencies vary and
often conflict. For example, the general public is especially interested in social responsibility,
whereas stockholders are more interested in profitability. Claims on any business literally may
number in the thousands, and they often include clean air, jobs, taxes, investment opportunities,
career opportunities, equal employment opportunities, employee benefits, salaries, wages, clean
water, and community services. All stakeholders’ claims on an organization cannot be pursued
with equal emphasis. A good mission statement indicates the relative attention that an
organization will devote to meeting the claims of various stakeholders. The fine balance between
specificity and generality is difficult to achieve, but it is well worth the effort. George Steiner
offers the following insight on the need for a mission statement to be broad in scope: Most
business statements of mission are expressed at high levels of abstraction. Vagueness
nevertheless has its virtues. Mission statements are not designed to express concrete ends, but
rather to provide motivation, general direction, an image, a tone, and a philosophy to guide the
enterprise. An excess of detail could prove counterproductive since concrete specification could
be the base for rallying opposition. Precision might stifle creativity in the formulation of an
acceptable mission or purpose. Once an aim is cast in concrete, it creates a rigidity in an
organization and resists change. Vagueness leaves room for other managers to fill in the details,
perhaps even to modify general patterns. Vagueness permits more flexibility in adapting to
changing environments and internal operations. It facilitates flexibility in implementation.

In addition to being broad in scope, 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. A mission statement should be enduring. All of these are desired
characteristics of a statement. An effective mission statement generates the impression that a
firm is successful, has direction, and is worthy of time, support, and investment—from all
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socioeconomic groups of people. It reflects judgments about future growth directions and
strategies that are based on forward-looking external and internal analyses. A business mission
should provide useful criteria for selecting among alternative strategies. A clear mission
statement provides a basis for generating and screening strategic options. The statement of
mission should be dynamic in orientation, allowing judgments about the most promising growth
directions and those considered less promising.

A 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 ;

(1) define what the organization is and what the organization aspires to be,

(2) be limited enough to exclude some ventures and broad enough to allow for creative growth,
(3) distinguish a given organization from all others,

(4) serve as a framework for evaluating both current and prospective activities, and

(5) be stated in terms sufficiently clear to be widely understood throughout the organization.

A good mission statement reflects the anticipations of customers. Rather than developing a
product and then trying to find a market, the operating philosophy of organizations should be to
identify customers’ needs and then provide a product or service to fulfill those needs.

Ten Benefits of Having a Clear Mission and Vision

1. Achieve clarity of purpose among all managers and employees.

2. Provide a basis for all other strategic planning activities, including the internal and
external assessment, establishing objectives, developing strategies, choosing among
alternative strategies, devising policies, establishing organizational structure, allocating
resources, and evaluating performance.
3. Provide direction.
4. Provide a focal point for all stakeholders of the firm.

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 5. Resolve divergent views among managers.
6. Promote a sense of shared expectations among all managers and employees.
7. Project a sense of worth and intent to all stakeholders.
8. Project an organized, motivated organization worthy of support.
9. Achieve higher organizational performance.
10. Achieve synergy among all managers and employees.

The following utility statements are relevant in developing a mission statement:

Do not offer me things. Do not offer me clothes. Offer me attractive looks. Do not offer me
shoes. Offer me comfort for my feet and the 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 books. Offer me hours
of pleasure and the benefit of knowledge. Do not offer me CDs. Offer me leisure and the sound
of music. Do not offer me tools. Offer me the benefits and the pleasure that come from making
beautiful things. Do not offer me furniture. Offer me comfort and the quietness of a cozy place.
Do not offer me things. Offer me ideas, emotions, ambience, feelings, and benefits. Please, do
not offer me things.

A major reason for developing a business mission statement is to attract customers who give
meaning to an organization. Hotel customers today want to use the Internet, so more and more
hotels are providing Internet service. A classic description of the purpose of a business reveals
the relative importance of customers in a statement of mission: It is the customer who determines
what a business is. It is the customer alone whose willingness to pay for a good or service
converts economic resources into wealth and things into goods. What a business thinks it
produces is not of first importance, especially not to the future of the business and to its success.
What the customer thinks he/she is buying, what he/she considers value, is decisive it determines
what a business is, what it produces, and whether it will prosper. And what the customer buys
and considers value is never a product. It is always utility, meaning what a product or service
does for him or her. The customer is the foundation of a business and keeps it in existence.

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Mission Statement Components

Mission statements can and do vary in length, content, format, and specificity. Most practitioners
and academicians of strategic management feel that an effective statement should include nine
components. Because a mission statement is often the most visible and public part of the
strategic-management process, it is important that it includes the nine characteristics well as the
following nine components:

1. Customers are who are the firm’s customers?

2. Products or services what are the firm’s major products or services?

3. Markets are 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 is what are the basic beliefs, values, aspirations, and ethical priorities of the firm?
7. Self-concept is 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?

Characteristics of a Mission Statement

Broad in scope; do not include monetary amounts, numbers, percentages, ratios, or objectives

• Less than 250 words in length

• Inspiring • Identify the utility of a firm’s products • Reveal that the firm is socially responsible
• Reveal that the firm is environmentally responsible • Include nine components customers,
products or services, markets, technology, concern for survival/growth/ profits, philosophy, self-
concept, concern for public image, concern for employees • Reconciliatory • Enduring

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Examples of the Nine Essential Components of a Mission Statement

1. Customers -we believe our first responsibility is to the doctors, nurses, patients, mothers, and
all others who use our products and services. (Johnson & Johnson) To earn our customers’
loyalty, we listen to them, anticipate their needs, and act to create value in their eyes. (Lexmark
International)

2. Products or Services -AMAX’s principal products are molybdenum, coal, iron ore, copper,
lead, zinc, petroleum and natural gas, potash, phosphates, nickel, tungsten, silver, gold, and
magnesium. (AMAX Engineering Company) Standard Oil Company (Indiana) is in business to
find and produce crude oil, natural gas, and natural gas liquids; to manufacture high-quality
products useful to society from these raw materials; and to distribute and market those products
and to provide dependable related services to the consuming public at reasonable prices.

3. Markets- We is dedicated to the total success of Corning Glass Works as a worldwide

competitor. (Corning Glass Works) Our emphasis is on North American markets, although
global opportunities will be explored.

4. Technology- Control Data is in the business of applying micro-electronics and computer

technology in two general areas: computer-related hardware; and computing-enhancing services,
which include computation, information, education, and finance. We will continually strive to
meet the preferences of adult smokers by developing technologies that have the potential to
reduce the health risks associated with smoking.

5. Concern for Survival, Growth, and Profitability In this respect, the company will conduct its
operations prudently and will provide the profits and growth which will assure Hoover’s ultimate
success. To serve the worldwide need for knowledge at a fair profit by adhering, evaluating,
producing, and distributing valuable information in a way that benefits our customers,
employees, other investors, and our society.

6. Philosophy Our world-class leadership is dedicated to a management philosophy that holds

people above profits. A spirit of sharing and caring where people give cheerfully of their time,
knowledge, and experience.

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7. Self-Concept Crown Zellerbach is committed to leapfrogging ongoing competition within
1,000 days by unleashing the constructive and creative abilities and energies of each of its
employees.

8. Concern for Public Image -To share the world’s obligation for the protection of the
environment.

To contribute to the economic strength of society and function as a good corporate citizen on a
local, state, and national basis in all countries in which we do business.

9. Concern for Employees- To recruit, develop, motivate, reward, and retain personnel of
exceptional ability, character, and dedication by providing good working conditions, superior
leadership, compensation on the basis of performance, an attractive benefit program, opportunity
for growth, and a high degree of employment security. To compensate its employees with
remuneration and fringe benefits competitive with other employment opportunities in its
geographical area and commensurate with their contributions toward efficient corporate
operations.

Business values
It includes all forms values that determine the health and well-being of the firm in the long run. It
often embraces intangible assets not necessarily attributable to any stake holder group. Company
values are the values or standards that guide the way you do business.

Strategic issues

Is essentially an issue – an unresolved question or fundamental policy questions or critical

challenges needing decisions or waiting for some clarifying future event.

Strategic issues can be defined as developments, events and trends having the potential to impact
an organizational strategy. A matter of the decision of which involves important consequences.
Issues are events, developments and trends that an organization’s members collectively
recognize as having some consequence to the organization. Emerging developments trends or

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events which in the judgment of some strategic decision makers are, likely to have a significant
impact on the organization’s present or future strategy.

Strategic issues typically have the following characteristics:

- Require large amount of the firm's resources,

- Often affect the firm's long term prosperity,

- They are future oriented,

- Usually have multifunctional consequences,

- They require consideration of the firm's external environment, and

- Require top management decisions

A strategic issue is an analytically distinct sub-system of a strategic problem, pertaining to a

specific topic.

Strategic issues are not something to be a priori prepared and packaged, but also managers
identify, interpret and formulate them through paying selective attention to some environmental
aspects and ignoring some other aspects.

Therefore perhaps it could be said that one of the reasons why different organizations in the same
environment make different decisions and employ different strategies is due to organizations'
difference in paying attention to issues they face.

Goal

Goals help managers translate general intentions into specific actions. ―Goals establish an end
result, a direction of pursuit, a method of measurement, and foster team work and achievement.
Goals help us perform beyond our capabilities and keep us on focused when the going gets
tough.‖

There are many benefits of goal setting. Some of the more notable advantages of goal setting
that managers can benefit from include these:

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•Goals help to direct attention and actions because they give managers a target. People can
become confused if they do not have a specific goal toward which to direct their efforts. Goals
nurture an atmosphere that produces specific results within specific time periods.

•Goals are useful in helping people perform at peak levels. Setting goals makes managers aware
of the mental, emotional, and physical energy they will need for the task and encourages them to
conserve and mobilize energy carefully.

•Goals can help bolster persistence. The absence of strong goals can distract from one’s mission
and foster a temptation to quit when facing a challenge.

•Goals aid managers in developing innovative strategies. Club managers that set important goals
will be surprised at how ingenious they can be in devising their strategies to reach their goals.

•Goal setting will provide managers with a short and long-term game plan. If set properly and
realistically, managers can map out their futures with their clubs, or effect plans to achieve other
aspirations.

•Goals can assist in preventing stress. A comprehensive goals program can help avoid burnout
and produce positive feelings.

Conclusion

All firms have a strategy, even if it is informal, unstructured, and sporadic. All organizations are
heading somewhere, but unfortunately some organizations do not know where they are going.
The old saying ―If you do not know where you are going, then any road will lead you there!‖
accents the need for organizations to use strategic-management concepts and techniques. The
strategic-management process is becoming more widely used by small firms, large companies,
nonprofit institutions, governmental organizations, and multinational conglomerates alike. The
process of empowering managers and employees has almost limitless benefits. Organizations
should take a proactive rather than a reactive approach in their industry, and they should strive to
influence, anticipate, and initiate rather than just respond to events. The strategic-management
process embodies this approach to decision making. It represents a logical, systematic, and
objective approach for determining an enterprise’s future direction. The stakes are generally too

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high for strategists to use intuition alone in choosing among alternative courses of action.
Successful strategists take the time to think about their businesses, where they are with their
businesses, and what they want to be as organizations and then they implement programs and
policies to get from where they are to where they want to be in a reasonable period of time. It is a
known and accepted fact that people and organizations that plan ahead are much more likely to
become what they want to become than those that do not plan at all. A good strategist plans and
controls his or her plans, whereas a bad strategist never plans and then tries to control people!

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.

Drucker says that developing a clear business vision and mission is the ―first responsibility of
strategists.‖ A good mission statement reveals an organization’s customers; products or services;
markets; technology; concern for survival, growth, and profitability; philosophy; self-concept;
concern for public image; and concern for employees. These nine basic components serve as a
practical framework for evaluating and writing mission statements. As the first step in strategic
management, the vision and mission statements provide direction for all planning activities.
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 re-examine their vision and mission
statements annually. Effective mission statements stand the test of time.

"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

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