Chapter 2: Formulating the Business Vision and Mission Statement

The Mission Statement
n The mission statement can be defined as a broad statement of characteristics (product and market), goals (profit and growth), and philosophies of a business; or simply its purpose and philosophies. It is an expression of the vision for the company. The statement lays a foundation for the future actions, and the major philosophies (values) that underlie those actions.
Importance of Mission Statements
n Firms with mission statements generally outperform those without one. In a study of the Business Week 1000, firms with mission statements were seen that they had an average return on stockholder’s equity of 16,6%, while the return for those without mission statements was 9,7%. The figures indicate a 71,1% disparity between the two groups of firms.
Reasons for a Mission Statement
n To help promote clarity of purpose throughout the company,
n To function as a foundation point for major decisions,
n To motivate management and employees of the firm; to gain commitment within the company,
n To foster understanding and support outside the company (helps external public relations)
Central Issues in the Creation of a Mission Statement
Peter Drucker stresses the importance of answering three questions during the process of preparing the firm’s mission:
What is our business?
n This must be defined based on the customer’s perception: What are the key satisfactions (and values) derived from purchasing our product or service? Why do target customers purchase the company’s products or services? Customers buy the satisfaction of a need – the core benefit. The core benefit of a restaurant would be satisfaction of hunger?, Status? The actual product or value enhancing attributes would be quality, large plates of food, unique spices, fresh baked bread, a convenient location, a relaxing atmosphere, courteous service, fast or leisurely service, status or price.
What will our business be?
n Although today’s product offering may be quite successful, it may not elicit the same prosperity next year, in the future. Will restaurants change their present menu mix, pricing, promotional and distribution strategies in the next three to five years? Will changes in the economy, personnel supply or characteristics, societal trends or technological changes have an effect on managerial decisions? What current or future needs of customers are not currently being met? Are there certain features that could be added to the business, such as delivery, internet reservations or advertising, upgraded product quality or services, less fat, more spices, or market penetration in nontraditional locations.
What should our business be?
n Are there forecasted changes in the environment that should be incorporated into the business’s current operating philosophy? If there is perceived opportunity for rapid expansion, should the firm proceed? If 50% of customers say they want something that no competitor is currently offering but the service would require a major change in current operating logistics, should the service be considered?
Mission Statement Components
Mission statements can do vary in length, content, format, and specificity. Most practitioners and academicians of strategic management feel that an effective statement exhibits 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 includes all of these essential components:
1. Customers – who are the firm’s customer?
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?
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 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 products and services. (Johnson & Johnson)
To earn our customers’ loyalty, we listen to them, anticipate their needs, and ct to create value in their eyes. (Lexmark International)
2. Products or Services
AMAX’s principal products are molybdenum, coal, iron ore, copper, zinc, petroleum and natural gas, potash, phosphates, nickel, tungsten, silver, gold, and magnesium. (AMAX Engineering Company)
Standard Oil Company 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. (Standard Oil Company)
3. Markets
We are 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. (Blockway)
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. (Control Data)
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. (RJ Reynolds)
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. (Hoover Universal)
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. (McGraw-Hill)
6. Philosophy
Our world-class leadership is dedicated to a management philosophy that holds people above profits. (Kellogg)
It’s all part of the Mary Kay philosophy - a philosophy based on the golden rule. A spirit of sharing and caring where people give cheerfully of their time, knowledge, and experience. (Mary Kay Cosmetics)
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. (Crown Zellerbach)
8. Concern for Public Image
To share the world’s obligation for the protection of the environment. (Dow Chemical)
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. (Pfizer)
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. (The Wachovia Corporation)
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. (Public Service Electric & Gas Company)
Characteristics of a Mission Statement
· Broad in scope
· 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
· Enduring
Examples of Mission Statements
Fleetwood Enterprises will lead the recreational vehicle and manufactured housing industries (2, 7) in providing quality products, with a passion for customer-driven innovation (1). We will emphasize training, embrace diversity and provide growth opportunities for our associates and our dealers (9). We will lead our industries in the application of appropriate technologies (4). We will operate at the highest levels of ethics and compliance with a focus on exemplary corporate governance (6). We will deliver value to our shareholders, positive operating results and industry-leading earnings (5). (Author comment: Statement lacks two components: Markets and Concern for Public Image)
We aspire to make PepsiCo the world’s (3) premier consumer product company, focused on convenient foods and beverages (2). We seek to produce healthy financial rewards for investors (5) as we provide opportunities for growth and enrichment to our employees (9), our business partners and the communities (8) in which we operate. And in everything we do, we strive to act with honesty, openness, fairness and integrity (6). (Author comment: Statement lacks three components: Customers, Technology, and Self-Concept)
We are loyal to Royal Caribbean and Celebrity and strive for continuous improvement in everything we do. We always provide service with a friendly greeting and a smile (7). We anticipate the needs of our customers and make all efforts to exceed our customer’s expectations (1). We take ownership of any problem that is brought to our attention. We engage in conduct that enhances our corporate reputation and employee morale (9). We are committed to act in the highest ethical manner and respect the rights and dignity of others(6). (Author comments: Statement lacks five components: Products/Services, Markets, Technology, Concern for Survival/Growth/Profits, Concern for Public Image)
Dell’s mission is to be the most successful computer company (2) in the world (3) at delivering the best customer experience in markets we serve (1). In doing so, Dell will meet customer expectations of highest quality; leading technology (4); competitive pricing; individual and company accountability (6); best-in-class service and support (7); flexible customization capability (7); superior corporate citizenship (8); financial stability (5). (Author comment: Statement lacks only one component: Concern for Employees)
Procter & Gamble will provide branded products and services of superior quality and value (7) that improve the lives of the world’s (3) consumers. As a result, consumers (1) will reward us with industry leadership in sales, profit (5), and value creation, allowing our people (9), our shareholders, and communities (8) in which we live and work to prosper. (Author comment: Statement lacks three components: Products/Services, Technology, and Philosophy)

Conclusion
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 on 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 reexamine their vision and mission statements annually. Effective mission statements stand the test of time.