FORMULATING THE BUSINESS MISSION AND VISION

CHAPTER II

Formulating the Business Mission and Vision

OVERVIEW OF CLASS MODULE

This module focuses on the concepts and tools needed to evaluate and write business vision and
mission statements. A practical framework for developing mission statements is provided. Actual
mission statements from large and small organizations and for-profit and nonprofit enterprises are
presented and critically examined. The process of creating a vision and mission statement is discussed.

The global economic recession has resulted in many firms changing direction and thereby altering their
entire vision and mission in order to survive. For example, in the Philippines, the largest food and
beverage company, San Miguel Corp., recently diversified by purchasing Petron Corp., the country’s
largest oil refiner. San Miguel also purchased Meralco, formally named Manila Electric, thus broadening
its mission to include energy-related businesses.

LEARNING OBJECTIVES

By the end of this module, the students should be able to:

1. Describe the nature and role of vision and mission statements in strategic management;
2. Discuss why the process of developing a mission statement is as important as the resulting
document;
3. Identify the components of mission statements;
4. Discuss the benefits of a clear vision and mission statements to other strategic-management
activities;
5. Evaluate mission statements of different organizations; and
6. Write good vision and mission statements.

LEARNING CONTEXT

WHAT DO WE WANT TO BECOME?

It is especially important for managers and executives in

“A business is not defined by its
any organization to agree on the basic vision that the firm name, statutes, or articles of
strives to achieve in the long term. A vision statement should incorporation. It is defined by the
answer the basic question, “What do we want to become?” A business mission. Only a clear
clear vision provides the foundation for developing a definition of the mission and
purpose of the organization makes
comprehensive mission statement. possible clear and realistic business
objectives.”
A vision indicates what the company wants to create in
-Peter Drucker
the future, the guiding philosophy, a tangible image, and
central concept of the organization. It is significant in developing a relevant and suitable
mission statement. When the set vision is achieved, a new vision need to be developed.

Many organizations have both a vision and mission statement, but the vision statement
should be established first and foremost. The vision statement should be short, preferably
one sentence, and as many managers as possible should have input into developing the
statement. Exhibit 2.1 shows some vision statements of known companies all over the world.
“To be one of the world’s leading producers and providers of
entertainment and information.”
-Disney

“To provide access to the world’s information in one click.”

-Google

“Capture and share the world’s moments.”

-Instagram

“To bring inspiration and innovation to every athlete in the

world.”
Exhibit 2.1 Vision Statements
-Nike of Some Known
Companies

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 FORMULATING THE BUSINESS MISSION AND VISION
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 Corporation and for his 22 books and hundreds of articles. Harvard Business Review
has called Drucker “the preeminent management thinker of our time.”

Drucker says that asking the question “What is our business?” is synonymous with asking the
question “What is our 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.” It answers the pivotal question “What is our business?” 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. All
organizations have a reason for being, even if strategists have not consciously transformed this reason
into writing.

A business mission is the foundation for priorities, strategies, plans, and work assignments. It is
the starting point for the design of managerial jobs and, above all, for the design of managerial
structures. It provides connection between the societal requirements and organization business
conduct. Exhibit 2.2 shows examples of mission statements.

“To entertain, inform and inspire people around the globe through the
power of unparalleled storytelling.”
-Disney

“To organize the world’s information and make it universally

accessible and useful.”
-Google

Exhibit 2.2 Sample Mission

Statements
As illustrated in Figure 2-1, carefully prepared statements of vision and mission are widely
recognized by both practitioners and academicians as the first step in strategic management.

Figure 2.1 Comprehensive Strategic-

Management Model

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 FORMULATING THE BUSINESS MISSION AND VISION
IMPORTANCE OF VISION AND MISSION STATEMENTS

The importance 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. The extent of manager and employee involvement in developing
vision and mission statements can make a difference in business success.

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

1. To ensure agreement 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; and
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.

CHARACTERISTICS OF A MISSION STATEMENT

 Market is the focal point rather than products

- The market/customers are considered key factors in determining an organization’s mission

statement.
- Key feature must be external rather than internal focus.
- Focus on the broad class of market needs that the organization is intending to satisfy
(external focus).
- Must have an intention to meet the requirement of a niche market and with the intention
to satisfy a particular need of that market.

 Achievable

- Expectations of a high performance must be at the same time realistic or viable and
practically can be attain.
- Should not drive organizations to execute impossible projects/organizational activities that
is far beyond its capabilities.
- Should open a vision of new opportunities.

 Motivating

- Should serve as a guide to its stakeholders.

- Shared purpose
- Customer to feel pride for associating himself/herself with that organization.

 Specific

- Precise that provides direction and guidelines for the management.

 Distinctive

- Should be unique from those of the direct competitors or those who fall on the same
category of market they serve.

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 FORMULATING THE BUSINESS MISSION AND VISION
- Organizational mission must be unique in the perspective of different markets they serve,
use of different technology and produce different and high quality of products and/or
services.

 Clear

- Should be clearly stated in order to avoid confusion in its mission.

 Indicate Major Components of Strategy and Objectives

- Mission statement must have objectives and strategies formulated.

- The basis of formulation of objectives and strategy is mission.
- Mission statement without objectives and strategy is incomplete.

 Achievement of Policies

- Essential part of mission statements for the reason that policies are bound to be followed
in the pursuit of the organization’s mission.
- Policies establish ground rules for the organization in its relationship with the stakeholders.

FUNCTIONS OF A MISSION STATEMENT

1. Defines what the organization is what the organization aspires to be;

2. Limited enough to exclude some projects and broad enough to allow for creative growth;
3. Distinction of an organization from all others;
4. Serves a framework for evaluating both current and prospective organizational activities; and
5. Stated clearly and sufficiently to be understood throughout the organization.

CONTENTS OF A MISSION STATEMENT

 Markets

- Describes the niche market and customers that the organization intends to serve.

 Company Product or Service

- Identifies the products and/or services produced by the organization.

 Technology

- Techniques and processes by the organization that is implemented in the production of

products and/or services.

 Organizational Objectives

- General ways that are proposed for dealing with key stakeholders like shareholders,
customers, and employees.

 Organizational Philosophy

- Reflect the basic beliefs and values that should guide the stakeholders in conducting
business.

 Organizational Self Concept

- Company’s own view or impression of itself. Through assessing its own strengths and
weaknesses, competition and ability to survive in the market place.

 Public Image

- Type of impression that the organization want to leave with its external environment or
the public.
- Public opinion forms in the basis of the company’s activities and performances

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- Conventional firms try to position an image and modern firms express their true
characters.

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. There is no one best mission statement for a particular organization, so good
judgment is required in evaluating mission statements. Realize that some individuals are more
demanding than others in assessing mission statements in this manner.

For example, if a statement merely includes the word “customers” without specifying who the
customers are, is that satisfactory? Ideally a statement would provide more than simply inclusion of a
single word such as “products” or “employees” regarding a respective component. Why? Because the
statement should be informative, inspiring, enduring, and serve to motivate stakeholders to action.

Evaluation of a mission statement regarding inclusion of the nine components is just the
beginning of the process to assess a statement’s overall effectiveness.

KEY TAKEAWAYS

In this module, you learned:

 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.”
 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.

SOURCE:

 David, Fred R. (2011). “Strategic Management: Concepts and Cases.” 13th Edition. Pearson
Education, Inc.

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