Business Policy and Strategy
Lecture 06
Business Strategy and Policy
1
Recap
• Vision and Mission Statement
– “What is our business?”- Mission Statement
– “What do we want to become?” Vision Statement
• Examples
• Characteristic of Mission Statement
Business Strategy and Policy
2
Today’s Lecture
• Importance of Vision and Mission Statement
• Reason for developing a written Mission
Statement
• Components of Mission Statement
Business Strategy and Policy
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Importance of Vision and Mission Statement
• Mission Statements must be well documented
– Firms with a formalized mission statement have twice
the
average
return
on
shareholders
equity than those firms without a formalized
mission statement.
– Research highlighted that there is positive relationship
between
mission
statement
and
organizational
performance.
– Business
Week
reported
that
firms
using
mission statement have a 30 percent higher return on fina
ncial measures than those without such statements.
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Reasons for Developing a Written Mission Statement
• To ensure unity of purpose within the organization
• To provide a basis, or standard, for allocating organization
al resources
• To establish a general tone or organizational climate
• To serve as a focal point for individuals to identify
organization’s purpose and direction, and to discourage
those who cannot from participating further in
the organization’s activities
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Reasons for Developing a Written Mission Statement
• To facilitate the translation of objectives into a work
breakdown structure
• To specify organizational purposes and the translation
of these purposes into objectives. It helps in
– Assessment and controlling of cost time and
performance parameters.
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Why Written Mission Statement is important?
• Developing a comprehensive mission statement is
important
because
divergent
views
important
among managers can be revealed and resolved through this
process.
• Considerable disagreement among an organization’s
strategists over vision and mission can cause trouble if not
resolved.
• An organization that fails to develop a vision statement
loses the opportunity to present itself favorably to existing
potential stakeholders.
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Components of Mission Statement
• Customers: Who are the firm’s customers?
• Products or services: What are the firm’s major
products?
• Markets: Geographically, where does the firm
compete?
• Technology: Is the firm technologically current?
• Concern for survival, growth, and profitability: Is
the firm committed to growth
– and financial soundness?
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• Philosophy:
– What are the basic beliefs, values, aspirations, and eth
ical priorities of the firm?
• Self Concept:
– What is the firm’s distinctive competence or major
competitive advantage?
• Concern for public image:
– Is the firm responsive to social, community, and
environmental concerns?
• Concern for employees:
– Are employees a valuable asset of the firm?
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Summary
• Importance of Vision and Mission Statement
– Business Week reported that firms using mission
statement have a 30 percent higher return on
financial measures that those without such
statements.
• Reason for developing a written Mission
Statement
– Considerable disagreement among an organization’s
strategists over vision and mission can cause trouble if
not resolved.
Business Strategy and Policy
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Components of Mission Statement
1.
2.
3.
4.
5.
6.
7.
8.
9.
Customers
Products or services
Markets
Technology
Concern for survival, growth, and profitability
Philosophy
Self Concept
Concern for public image
Concern for employees
Business Strategy and Policy
11
Next Lecture
• Why Firms do not Plan strategically?
• Benefits of planning Strategically
Business Strategy and Policy
12