Business Policy and Strategy
Lecture 06
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Business Strategy and Policy
Recap
•Vision and Mission Statement
–“What is our business?”- Mission Statement
–“What do we want to become?” Vision Statement
•Examples
•Characteristic of Mission Statement
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Business Strategy and Policy
Today’s Lecture
• Importance of Vision and Mission Statement
•Reason for developing a written MissionStatement
• Components of Mission Statement
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Business Strategy and Policy
Importance of Vision and Mission Statement
•Mission Statements must be well documented
–Firms with a formalized mission statement have twicethe average return on shareholdersequity than those firms without a formalizedmission statement.
–Research highlighted that there is positive relationshipbetween mission statement and organizationalperformance.
–Business Week reported that firms usingmission statement have a 30 percent higher return on financial measures than those without such statements.
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Business Strategy and Policy
Reasons for Developing a Written Mission Statement
•To ensure unity of purpose within the organization
•To provide a basis, or standard, for allocating organizational resources
•To establish a general tone or organizational climate
•To serve as a focal point for individuals to identifyorganization’s purpose and direction, and to discouragethose who cannot from participating further inthe organization’s activities
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Business Strategy and Policy
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 andperformance parameters.
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Business Strategy and Policy
Why Written Mission Statement is important?
•Developing a comprehensive mission statement isimportant because divergent views importantamong managers can be revealed and resolved through thisprocess.
•Considerable disagreement among an organization’sstrategists over vision and mission can cause trouble if notresolved.
•An organization that fails to develop a vision statementloses the opportunity to present itself favorably to existingpotential stakeholders.
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Business Strategy and Policy
Components of Mission Statement
•Customers: Who are the firm’s customers?
•Products or services: What are the firm’s majorproducts?
•Markets: Geographically, where does the firmcompete?
•Technology: Is the firm technologically current?
•Concern for survival, growth, and profitability: Isthe firm committed to growth
–and financial soundness?
Business Strategy and Policy
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•Philosophy:
–What are the basic beliefs, values, aspirations, and ethical priorities of the firm?
•Self Concept:
–What is the firm’s distinctive competence or majorcompetitive advantage?
•Concern for public image:
–Is the firm responsive to social, community, andenvironmental concerns?
•Concern for employees:
–Are employees a valuable asset of the firm?
Business Strategy and Policy
9
Summary
•Importance of Vision and Mission Statement
–Business Week reported that firms using missionstatement have a 30 percent higher return onfinancial measures that those without suchstatements.
•Reason for developing a written MissionStatement
–Considerable disagreement among an organization’sstrategists over vision and mission can cause trouble ifnot resolved.
Business Strategy and Policy
10
Components of Mission Statement
1.Customers
2.Products or services
3.Markets
4.Technology
5.Concern for survival, growth, and profitability
6.Philosophy
7.Self Concept
8.Concern for public image
9.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