LECTURE NOTES

STRATEGIC MANAGEMENT BY FAHEEM A KHAN

1

CHAPTER 2

THE BUSINESS VISION AND MISSION

CHAPTER OUTLINE
¨ What Do We Want to Become?
¨ What is Our Business?
¨ Importance of Vision and Mission Statement
¨ Characteristics of a Mission Statement
¨ Components of a Mission Statement
¨ Writing and Evaluating Mission Statements

CHAPTER OBJECTIVES

After studying this chapter, you should be able to do the following:

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 how clear vision and mission statements can benefit other
strategic-management activities.
5. Evaluate mission statement of different organizations.
6. Write good vision and mission statements.

CHAPTER OVERVIEW

Chapter 2 focuses on the concepts and tools needed to evaluate and write business
mission statements. A practical framework for developing mission statements is
provided. Actual mission statements of large and small organizations and profit and
nonprofit enterprises are presented and critically examined. The process of creating a
vision and mission statement is discussed.

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.
LECTURE NOTES
STRATEGIC MANAGEMENT BY FAHEEM A KHAN
2

EXTENDED CHAPTER OUTLINE

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.

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.

b. Table 2-1 provides examples of several vision and mission statements.

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.

c. See Figure 2-1 – the comprehensive strategic management model. It

shows developing mission and vision as the first step in strategic
management.

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?”

2. Several examples are given in Table 2-1 in the textbook.

LECTURE NOTES
STRATEGIC MANAGEMENT BY FAHEEM A KHAN
3

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.
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

LECTURE NOTES
STRATEGIC MANAGEMENT BY FAHEEM A KHAN
4

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.

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.
LECTURE NOTES
STRATEGIC MANAGEMENT BY FAHEEM A KHAN
5

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.

Natural Environment Perspective: Is Your Firm Environmentally Proactive? This

box describes the differences between proactive and reactive environmental policy and
gives the reasons for having a proactive policy.

E-Commerce Perspective: Business Over The Internet Skyrocketing. This box

describes the growth of e-commerce. Internet-based companies dominate several
industries now including automobile, travel, and computer sales.

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?
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 Table 2-2.

VI. WRITING AND EVALUATING MISSION STATEMENTS

A. Perhaps the best way to develop a skill for writing and evaluating mission
statements is to study actual company missions. Therefore, eight mission
statements are presented in Table 2-3.

B. These statements are evaluated in Table 2-4.

LECTURE NOTES
STRATEGIC MANAGEMENT BY FAHEEM A KHAN
6