Unit 5 Corporate Mission, Objectives and Responsibility: Structure

Strategic Management and Business Policy
Unit 5
Unit 5
Corporate Mission, Objectives

and Responsibility
Structure
5.1 Introduction
5.2 Caselet
Objectives
5.3 Definition of Business
5.4 Mission Statement
5.5 Corporate Philosophy
5.6 Corporate Objectives and Goals
5.7 Strategic Intent
5.8 Company Responsibility
5.9 Corporate Social Responsibility
5.10 Social Audit
5.11 Case Study
5.12 Summary
5.13 Glossary
5.14 Terminal Questions
5.15 Answers
5.16 References
5.1 Introduction
For formulation of corporate strategy, an organization needs to consider three
major things: first, the corporate mission and objectives; second, its internal
competence; and third, the external environment. We shall discuss corporate
mission and objectives in this unit. Internal competence and resources and the
environmental factors will be analysed in the next two units.
The starting point for the formulation of any strategy is the mission
statement of a company.
The mission statement actually starts with a definition of business of the
company. Related to mission is vision. Also related to mission statement or
development is corporate philosophy. From mission statement and corporate
philosophy follow corporate objectives, goals and also strategic intent. In
developing its mission and objectives, a company has certain responsibility to
Sikkim Manipal University
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its stakeholders and the society. This is expressed in stakeholders approach to

company responsibility and corporate social responsibility. Corporate social
responsibility also implies social audit. We will discuss all these in this unit.
5.2 Caselet
No corporation functions without a strategy; and the starting point for the
formulation of any strategy is the mission statement of a company. Microsoft
Corporation, an American multinational corporation, is no exception. The
largest and most well known software corporation in the world, it is best
known for its extremely popular Windows operating system and Microsoft
Office software. The company has a mission statement:
At Microsoft, we work to help people and businesses throughout the
world realize their full potential. This is our mission. Everything we do
reflects this mission and the values that make it possible.
The mission continues to guide Microsoft.
Objectives
After studying this unit, you should be able to:
Define what is business
Explain the terms corporate mission and corporate vision
Define what is corporate philosophy
Discuss the corporate objectives and goals of a company
Explain strategic intent and company responsibility
Explain the concept of corporate social responsibility
Discuss social audit as a tool to measure companies social performance
5.3 Definition of Business

It may appear very simple or obvious as to what a companys business is. A
steel mill makes steel; an engineering company makes engineering products;
an electronic manufacturer makes electronic goods; a courier company delivers
letters and parcels; a bank lends money, etc. But, it may not be as simple as
this. In fact, defining the business of a company precisely is a difficult job. Let
us explain this. A textile manufacturer makes textiles goods; but, this may mean
suitings, shirtings, sarees or inner garments; it may be cotton textiles, silk or
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synthetics; it may be high-priced or premium product, medium-priced or average

product or low-priced or discount product.
To define a companys business with precision is the job or responsibility
of the planners and strategists. Precise or correct definition of business of a
company is the foundation for mission statement, objectives, priorities, plans,
strategies and work and resource allocations; and, therefore, along with the top
management, the strategists have an important role to play in this.
Many companies and managers are not clear about the exact nature of
their business, nor are they always aware of the significance of this. Precise
definition of the business of a company should be based on four major factors
or considerations: i. product, ii. technology, iii. customer segment and iv. market
competitiveness (Figure 5.1).
Product
Technology
Business
definition
Market
competitivenes
Customer
segment
Figure 5.1 Business Definition of an Organization
Management thinkers like Peter Drucker feel that business definition

should strongly focus on the customer. According to Drucker, in defining the
business, the following questions about the customer should be asked1:
Who is the customer?
o Where is the customer located?
o How does the customer buy?
o How can the customer be reached?
What does the customer buy?
What does the customer consider value?
In addition to focussing on customer behaviour, answers to these questions
also indicate the nature and quality of the product, production process or
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technology and market environment or competitiveness. We can also see how

companies define their businesses. Business definitions of Hindustan Unilever,
Hero Honda, Kodak India and Hero Cycles are given in Table 5.1.
Table 5.1 Business Definitions of Hindustan Unilever, Hero Honda,
Kodak India and Hero Cycles
Company
Business definition
Hindustan Unilever To meet everyday needs of Indian people everywhere with

branded products
Hero Honda
World class auto products which provide the highest level of

customer satisfaction
Kodak India
A high quality photographic system for the customer who

desires instant photography
Hero Cycles
Functionally valuable bicycle which common people can afford

to buy
The above business definitions show that some generality in definition

remains. To remove the generality or make business definition more meaningful,
this should be read with mission statement and corporate objectives or goals.
These together give definiteness to the business of a company.
Self-Assessment Questions
1. To define a companys business with precision is the job or responsibility
of the _________and _________.
2. Management thinkers like Peter Drucker feel that business definition
should strongly focus on the__________.
5.4 Mission Statement

A business is not defined by its name, statutes or articles of incorporation.
It is defined by the business mission. Only a clear definition of the mission
and the purpose of the organization makes possible clear and realistic
business objectives.
Peter Drucker
But ... business mission is so rarely given adequate thought is perhaps the
most important single cause of business frustration.
Peter Drucker
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This emphasizes the need for organizations to take their mission statement
seriously and formulate it properly. What is a mission statement? Or, what is a
company mission? The mission statement of a company is variously called a
statement of philosophy, a statement of beliefs, a statement of purpose and, a
statement of business principles. A mission statement is many in one. It embodies
the business philosophy of a companys decision makers, implies the image
the company wishes to project for itself, reflects the companys self-concept;
indicates the companys principal product or service areas and, the customer
needs the company seeks to satisfy. In short, it describes the companys product,
market and technological focus; and it does so in a way that reflects the values
and priorities of the companys strategic decision makers.2
The mission statement should be as explicit or comprehensive as possible.
Some feel that the mission statement should have seven dimensions or serve
seven different purposes or objectives.
These are:
To ensure unanimity of purposes within the organization
To develop a basis or standard for allocating organizational resources
To provide a basis for motivating the use of the organizations resources
To establish a general culture or organizational climate; for example, to
suggest a business-like approach
To facilitate the translation of objectives and goals into jobs and
responsibilities and assignment of tasks to responsible segments within
the organization
To serve as a focal point for those who can identify themselves with the
organizations purpose and business
To specify organizational purposes and inspire translation of these
purposes into goals in such a way that cost, time and performance
parameters can be assessed and controlled.3
5.4.1 Mission and Vision

Sometimes, mission and vision of a company are used synonymously or
interchangeably. This is not correct. A clear distinction exists between the two.
Mission is concerned more with the present; the vision more with the future.
The mission statement answers the question: What is our business? The vision
statement answers the question: What do we want to become or, which way
should we be going? The mission statement focusses on the present strategic
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thrust, while the vision statement outlines the strategic path. All visionary
companies have a vision statement. The vision of Microsoft (since 1999) has
been to broadbase its outlook to empower people through great software
anytime, anywhere and on any device including the PC and an incredibly rich
variety of digital devices accessing the power of the Internet.
Most progressive companies develop both a mission statement and a
vision statement. Indian Oil Corporation (IOC) is a good example. Vision and
mission statements of IOC4 are:
Vision: Indian Oil aims to achieve international standards of excellence
in all aspects of energy and diversified business with focus on customer
delight through quality products and services.
Mission: Maintaining national leadership in oil refining, marketing and
pipeline transportation.
Vision and mission statements can be generally found in the beginning of
annual reports of companies. These statements are also seen in the corporate
or long-term strategic plans of companies. These also appear in many company
reports or documents like customer service agreements, loan requests, labour
relations contracts, etc. Many companies also display them at prominent points
or locations in company premises.
5.4.2 Mission Statements of Some Companies

Mission statements of individual companies vary widely. We give below, as
examples, mission statements of two Indian companiesTata Steel and Hero
Honda Motorsand, two US companiesPepsico and Dell computer. All these
companies are in different kinds of business.
Tata Iron and Steel Company (TISCO)
The fundamental mission of TISCO (Tata Iron and Steel Company Limited; now
Tata Steel) is to strengthen Indias industrial base through increased productivity,
effective utilization of manpower and material resources, and continued
application of modern scientific managerial methods as well as through
systematic growth in keeping with the national aspirations. The company
recognizes that while honesty and integrity are the essential ingredients of a
strong and stable enterprise, profitability provides the main spark for economic
activity. It affirms its faith in democratic values and in the importance of success
of individuals, collective and corporate enterprise for the emancipation and
prosperity of the country. Guided by its basic philosophy, the company believes
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in discharging its responsibility towards shareholders, employees, customers

and the community.
Hero Honda Motors
It is our mission to strive for synergy between technology, systems and human
resources to produce products and services that meet the quality, performance
and price aspirations of our customers. While doing so, we maintain the highest
standards of ethics and societal responsibilities. This mission is what drives us
to new heights in excellence and helps us to forge a unique and mutually
beneficial relationship with all our stakeholders. We are committed to moving
ahead resolutely on this path.
Pepsico
Pepsicos mission is to increase the value of our shareholders investment. We
do this through sales growth, cost controls and wise investment resources. We
believe our commercial success depends upon offering quality and value to our
consumers and customers; providing products that are safe, wholesome,
economically efficient and environmentally sound and, providing a fair return to
our investors while adhering to the highest standards of integrity.
Dell Computer
Dell Computers mission is to be the most successful computer company in the
world at delivering the best customer experience in markets we serve. In doing
so, Dell will meet customer expectations of the highest quality with leading
technology, competitive pricing, individual and company accountability, best-inclass service and support, flexible customization capability, superior corporate
citizenship and financial stability.
Some companies combine their mission statements with statements of
values and guiding principles of the organization. Ford Motor Company is an
excellent example of this. Fords mission statement combined with statements
of values and guiding principles is presented in Box 5.1.
Box 5.1: Fords Mission, Values and Guiding Principles

Mission
Ford Motor Company is a worldwide leader in automotive and automotiverelated products and services as well as in newer industries such as
aerospace, communications and financial services. Our mission is to
improve continually our products and services to meet our customers needs,
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allowing us to prosper as a business and to provide a reasonable return for

our stockholders, the owners of our business.
Values
How we accomplish our mission is as important as the mission itself.
Fundamental to success for the Company are these basic values:
PeopleOur people are the source of our strength. They provide us
corporate intelligence and determine our reputation and vitality. Involvement
and teamwork are our core human values.
ProductsOur products are the end result of our efforts, and they should
be the best in serving customers worldwide. As our products are viewed,
so are we viewed.
ProfitsProfits are the ultimate measure of how efficiently we provide
customers with the best products for their needs. Profits are required to
survive and grow.
Guiding Principles
Quality comes firstTo achieve customer satisfaction, the quality of our
products and services must be our number one priority.
Customers are the focus of everything we doOur work must be done
with our customers in mind, providing better products and services than
our competition.
Continuous improvement is essential to our successWe must strive
for excellence in everything we doin our products, in their safety and
value and in our services, our human relations, our competitiveness and
our profitability.
Employee involvement is our way of lifeWe are a team. We must
treat each other with trust and respect.
Dealers and suppliers are our partnersThe Company must maintain
mutually beneficial relationships with dealers, suppliers and our other
business associates.
Integrity is never compromisedThe conduct of our Company worldwide
must be pursued in a manner that is socially responsible and commands
respect for its integrity and for its positive contributions to society. Our doors
are open to men and women alike without discrimination and without regard
to ethnic origin or personal beliefs.
Source: Ford Motor Company
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Activity 1
Conduct a comparitive analysis of the mission and vision statements of
any three companies of your choice.
3. The ________of a company is variously called a statement of philosophy,
a statement of beliefs, a statement of purpose and, a statement of business
principles.
4. Mission is concerned more with the ________; the vision more with
the__________.
5.5 Corporate Philosophy

Corporate or company philosophy is sometimes called company creed, and the
statement of corporate philosophy is called the creed statement. Normally, the
corporate philosophy statement accompanies or appears as part of the mission
statement. It envisages the basic beliefs, values, aspirations and philosophical
priorities of a company which the management or strategic decision makers
are committed to. The mission statement should reflect the corporate philosophy
of an organization as clearly demonstrated in the mission statements of
companies like Ford.
Generally, corporate philosophies should not vary widely from one company
to another. But, in practice, corporate philosophy statements of some companies
may appear quite different or contrasting in terms of the guiding values or principles.
ITC, the Indian multinational and Nissan Motor Manufacturing (UK) are two such
examples. Corporate philosophy of ITC highlights concerns for various
stakeholders whereas Nissan UKs philosophy focuses on two basic principles:
people principles and key corporate principles. Statements of corporate
philosophies of both the companies are given in Box 5.2.
Box 5.2: Corporate Philosophies of ITC and Nissan Motor (UK)

Corporate Philosophy of ITC
1. Concern for their ultimate customersmillions of customers.
2. Concern for their intermediate customersthe trade.
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3. Concern for their suppliersthe source of raw materials and ancillaries.

4. Concern for their employeestheir most valued assets.
5. Concern for their competitors whom they wish wellfor healthy
competition ultimately benefits the customers.
6. Concern for the national aspirationIndias future.
Corporate Philosophy of Nissan Motor (UK)
People Principles
(All other objectives can only be achieved by people)
Selection: Hire the highest calibre people; look for technical capabilities
and emphasize attitude.
Responsibility: Maximize the responsibility; staff by devolving decision
making.
Teamwork: Recognize and encourage individual contributions with
everyone working towards the same objectives.
Flexibility: Expand the role of the individual: multiskilled, no job description,
generic job titles.
Kaizen: Continuously seek 100.1 per cent improvements; give ownership
of change.
Communications: Every day, face to face.
Training: Establish individual continuous development programmes.
Supervisors: Regard as the professionals at managing the production
process; give them much responsibility normally assumed by individual
departments; make them the genuine leaders of their teams.
Single status: Treat everyone as a first class citizen; eliminate all illogical
differences.
Trade unionism: Establish single union agreement with AEU emphasizing
the common objective for a successful enterprise.
Key Corporate Principles
Quality: Building profitably the highest quality car sold in Europe.
Customers: Achieve target of No. 1 customer satisfaction in Europe.
Volume: Always achieve required volume.
New Products: Deliver on time, at required quality, within cost.
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Suppliers: Establish long-term relationships with single-source suppliers;

aim for zero defects and just-in-time delivery; apply Nissan principles to
suppliers.
Production: Use most appropriate technology; develop predictable best
method of doing job; build in quality.
Engineering: Design quality and ease of working into the product and
facilities; establish simultaneous engineering to reduce development time.
Source: ITC Limited and Business Horizons, January-February, 1995, 51
5. Corporate or company philosophy is sometimes called company creed.
(True/False)
6. Generally, the corporate philosophy statements of most companies appear
quite similar. (True/False)
5.6 Corporate Objectives and Goals

The mission statement of an organization is more generalized; corporate
objectives are more focused and specific and generally have a clear time frame
or period during which objectives should be fulfilled. Mission statements are
qualitative; objectives are usually quantitative. Most of the objectives should be
measurable in terms of results or achievements. But, the link between the mission
statement and objectives should be quite intimate; objectives should follow from
the mission statement or, be fully consistent with it.
Corporate objectives and goals are similar, but, a distinction is generally
made between the two. There is also difference of opinion among strategy
analysts about what should be the correct distinction, or, rather, relationship,
between the two. Ackoff has defined or distinguished the two as follows:
Desired states or outcomes are objectives. Goals are objectives that
are scheduled for attainment during planned period.5
One need not make too much of a distinction between the two, which
may become only a theoretical exercise without much of practical relevance. It
is evident that objectives and goals have overlapping connotations. We will
generally use the two terms synonymously with the only stipulation or rider that
goals may be of longer term than objectives. Objectives can sometimes be
purely short term.
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All businesses or companies have at least two common objectives: first,

to make profit and, second, to offer to the owners reasonable rate of return on
their capital. Most of the other objectives of a company either follow from or are
related to these two basic objectives. These objectives may sometimes be
tempered by some social or welfare factors or considerations, which may be
included as additional input(s) in the objective statement.
Details of objectives, however, including even profit objectives, can be
different from one company to another. For example, some companies may
seek short-term profit maximization or maximization of immediate financial
returns; some other companies may decide to sacrifice short-term profit in the
interest of long-term profitability. Some others may choose to have low profit on
a sustained basis for competitive survival.
Various company objectives can be broadly classified into three types or
categories: strategic, tactical or operational. Strategic objectives are generally
long term; tactical objectives are similar to strategic objectives, but, less strategic
in nature; operational strategies are purely short term or operational as the
name indicates. Examples of these three types of objectives are given below.
Strategic Objectives
Achieving a predetermined overall rate of return on capital employed
Becoming a market leader in a particular product/market group
Increasing shareholders earnings per share as far as possible
Reducing companys dependence on borrowed capital
Improving employee relations (particular focus on industrial relations)
Tactical Objectives
Increasing market share in some market segments
Opening a subsidiary in a particular country within a specific period
Extending the companys range of products or brands
Introducing a new technology or a new manufacturing process
Revising the organizational structure of one of the companys divisions or
SBUs
Operational Objectives
Improving plant utilization
Undertaking cost-cutting programmes
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Increasing sales during the next quarter

Managing cash inflows/outflows
Improving credit control or plant utilization measures6
Another way to distinguish among objectives is in terms of corporate
objectives and unit objectives, because these indicate different levels of
objectives with different characteristics. Corporate objectives, more correctly
called corporate-level objectives, relate to the entire organization and are primarily
expressed in financial termsprofitability, rates of growth of sales or turnover,
dividend rates, share valuations, etc. Corporate-level objectives can also be of
non-financial nature such as technology improvement or innovation, productmarket diversifications, objectives relating to stakeholders like customers,
suppliers, employees or the community. But, many of these objectives also
generally have a financial connotation.
Unit objectives or unit-level objectives relate to individual units or SBUs
and, not the entire organization. Unit-level objectives can be financial as well as
non-financial, but, they always pertain to the individual units. Most of the unitlevel objectives generally follow from the corporate-level objectives. For example,
an SBU may have a profit objective, but, this will be a translation of the corporate
profit objective into the business unit-level objective. Many unit-level objectives
are of an operational nature; and, because operations are many, multiple
objectives are more common at the unit level than at the corporate level.
5.6.1 Organizational Life Cycle, Objectives and Strategy

Glueck and Jauch (1984) have mentioned about organizational life cycles and
the linkages between life cycles, objectives and strategic focus of organizations.
They have distinguished seven stages in organizational life cycle: birth, infancy,
youth, youth adult, adult, maturity and old age. At each stage of the life cycle,
there is a thrust on a particular objective, which is most important at that stage
of the life cycle. Depending on the objective at each stage, the strategic focus
of the organization will vary.
Organizational life cycles vary from industry to industry and from company
to company. Generally, high technology industries and companies will have
shorter life cycles than low technology or labour-intensive industries and
companies. Most of the industrial products and consumer durables, particularly
consumer electronics, fall in the first category; consumer non-durables,
particularly FMCGs, fall in the second category.
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But, it is a fundamental fact that every organization passes through a life

cycle. And, during different stages of the life cycle, the predominant objectives
will be different and, so also organizational strategies or strategic focus. The
way to prolong the life cycle is to adopt newer technologies or to innovate. This
is what steel and engineering companies do. Tata Steel is a good example.
7. Corporate objectives are more focused and specific compared to
the_____.
8. Birth, infancy, youth, youth adult, adult, maturity and old age are part of
the ______.
5.7 Strategic Intent

From corporate objective, we now move on to strategic intent. If a particular
objective of a company becomes extremely focused and directed towards a
specific target, the company is showing a strategic intent. To be a strategic
intent, the objective has to be both ambitious and aggressive.
The phase strategic intent was coined by Hamel and Prahalad (1989).
According to Hamel and Prahalad, strategic intent goes beyond the conventional
model of matching internal competence and resources with company objectives
or targets. Strategic intent indicates a stretch; it involves setting goals or targets
which demand stretching of the present resource base and capabilities for their
fulfilment.
Strategic intent may often mean challenging or overtaking the market
leader. Some of the examples are: Toyota vs General Motors; British Airways vs
Pan Am; Sony vs RCA; Komatsu vs Caterpillar and Titan vs HMT. Komatsus
strategic intent in challenging Caterpillar is analysed in Box 5.3.
Box 5.3: Komatsus Strategic Intent to Challenge Caterpillar

Komatsus strategic intent to challenge Caterpillar embodies the companys
changing mission, goal and objective. Today, Komatsu is the second largest
producer of earth-moving equipment in the world next only to its arch-rival
Caterpillar of US. The company has progressed to this position over a long
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period of timea period characterized by clear strategic intent, goal

redefinition and evolving objective.
In the 1950s, Komatsu was producing a limited range of low-quality products
and, with a protected home market, had little or no incentive to improve.
This position changed almost dramatically when Japan opened its market
to foreign competition in the early 1960s. In 1964, Kawai succeeded his
father as the chairman of Komatsu and announced the goal of Maru C: to
encircle Caterpillar. This statement of strategic intentto concentrate all
its efforts on surpassing Caterpillarwas to be the driving force behind the
companys goal for more than two decades.
Komatsu focussed initially on the objective of improving product quality to
stop loss of sales in its home market. The company then signed licensing
agreements with Caterpillars competitors to gain access to the latest
American technology. This move enabled the company to expand its product
range which made it more attractive to dealer networksvital for Komatsu
to build up sales volume. The next step towards its goal was to enter
secondary export markets such as China and eastern Europe which helped
to build the critical mass required to challenge Caterpillar in the main markets
of Europe and the US. By the 1980s, Komatsu was very successful: its
growth from a regional producer of low-quality products to the second largest
producer was impressive, and this was primarily attributed to its goal of
challenging and encircling Caterpillar.
But, the goal and strategy which had served the company so well for over
two decades were beginning to be challenged by the changing business
environment. Komatsus sales began to fall as demand for heavy earthmoving equipment decreased and competition intensified. But, Komatsu
was less focussed on its market needs and continued to concentrate on
outdoing Caterpillar. This strategy was beginning to be questioned, but,
not the strategic intent of the company.
As a response to environmental changes, Katada, Komatsus third president,
changed the companys emphasis from providing construction equipment
to being a total technology enterprise, and the new goal of Growth, Global,
Groupwide was adopted. In three years since the new goal was introduced,
Komatsu has reversed its sales decline and registered a 40 per cent growth
in its non-construction equipment business.
Komatsus strategic intent of Maru C continues.
Source: Adapted from G Johnson and K Scholes, Exploring Corporate Strategy
(Prentice Hall of India, 1999), 245.
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Strategic intent of a company is clear about the end or the target, but, it is
flexible with regard to the means and leaves room for creativity and improvization.
Pursuit of a strategic intent may initially create a misfit between targets or
ambitions and resources. This becomes a challenge to the top management of
a company. The management strives to bridge the gap by relentlessly building
new capabilities or strategic advantages. The essence of the strategy here lies
in creating competitive advantage faster than the target competitor or the leader.
9. The phase ________indicates a stretch; it involves setting goals or targets
which demand stretching of the present resource base and capabilities
for their fulfilment.
10. The phase strategic intent was coined by ________and _________.
11. If a particular objective of a company becomes extremely focused and
directed towards a specific target, the company is showing a strategic
intent. (True/False)
12. Strategic intent does not mean challenging or overtaking the market leader.
(True/False)
5.8 Company Responsibility

In developing mission statements, corporate objectives and goals and, business
strategies, organizations must constantly remind themselves about certain
responsibilities. These responsibilities are towards various stakeholders and
the society at large.
If companies have to balance various stakeholder expectations, many
times, they may have to sacrifice short-term profit. Sometimes, profit objective
may lead to the neglect of corporate governance and responsibilities. Examples
are: Exxons oil leak in Alaska ; defective tyres of Firestone; Ford recalling many
of their trucks; Union Carbide gas leak in India (Bhopal gas tragedy), etc.
Companies, therefore, need to carefully examine the economic and social
impacts of their missions, objectives and strategies.
5.8.1 Stakeholder Approach to Company Responsibility

We had defined stakeholders in the previous unit. But, many authors and
practitioners of strategic management define stakeholders in a very broad sense.
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In the broadest sense, a stakeholder of a company is anybody or any organization

who/which has something to do with the company. In this sense, stakeholders
will include competitors, the government and the general public in addition to
those mentioned in Unit 4. All these stakeholders have their expectations from
the company and their own notions about company responsibility towards them.
An illustrative statement of stakeholders view of company responsibility in terms
of stakeholders claims is presented in Table 5.3.
Table 5.3 Stakeholders view of Company Responsibility
Stakeholder
Expectations/Claims
Stockholders
Sharing of profits; additional stock offerings; assets on liquidation;

inspection of company books; transfer of stock; election of board of
directors; and applicable additional rights.
Creditors
Interest payments as due and return of principal amount; security of
pledged assets; relative priority in the event of liquidation;
management and ownership prerogatives if conditions exist with the
company (such as default of interest payments).
Employees
Attractive compensation package; job satisfaction; freedom from
arbitrary behaviour on the part of company officials; share in fringe
benefits; freedom to join union and participate in collective bargaining;
satisfactory working conditions.
Customers
Competitive price; service provided with the product; suitable
warranties; R&D leading to product improvement; facilitation of credit
on attractive terms.
Suppliers
Continuing business; timely payment and servicing of credit
obligations; professional relationship in contracting for purchasing and
receiving goods and services.
Governments
Taxes (income, excise, sales, etc.); adherence to public policy dealing
with the requirement of fair and free competition; discharge of legal
obligations of business people (and business organizations);
adherence to business law (MRTP, FEMA, etc).
Unions
Recognition as the negotiating agent for employees; to be recognized
as a participant in the business organization; managements cooperation in fair wage settlement.
Competitors
Observation of the norms for competitive conduct established by the
industry and society; ethical business practices; no price war.
Local communities Place for productive and healthy employment; participation of
company officials in community affairs; provision of regular
employment; fair play; interest in and, support of, local government;
support of cultural and charitable projects.
The general public Participation in, and contribution to, society as a whole; assumption of
some proportion of the burden of government and society; fair price for
products and generating healthy competition.
Source: Adapted from Pearce and Robinson (2000), 50 (Figure 2.3)
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As shown in Table 5.3, each interest group of stakeholders has multiple

expectations or claims. For all the stakeholders taken together, the expectations/
claims are too many and varied. Many of them are conflicting. So, if an
organization attempts to incorporate all the interests of various stakeholder
groups in the mission statements or objectives, it becomes almost an impossible
task. Therefore, before attempting such an exercise, companies should do proper
stakeholder analysis. Four steps or tasks are involved in such analysis:
(a) Identification of important internal and external stakeholders
(b) Understanding stakeholders specific claims
(c) Reconciliation of stakeholders claims and prioritizing them
(d) Matching stakeholder claims with other inputs or elements of the
company mission or objectives.
Every business or company faces different types of stakeholder groups
which vary in number, size, influence and importance. Planners and strategy
makers must identify all the important stakeholder groups and assess their
relative weights and claims and their ability to affect companys performance
and success. This would also involve understanding or analysing stakeholders
claims carefully. Since claims can be too many, prioritization of claims is
necessary. After prioritization, the problem of reconciliation comes. Reconciliation
is essential to resolve the competiting, conflicting and contradicting claims of
stakeholders. Finally, the distilled stakeholder claimsprioritized and
reconciledhave to be matched or coordinated with other principal elements of
the mission statement or objectives. These elements relate to the business for
which the organization exists and, the product-market situation. When all these
factors or elements are combined in a harmonized way, the mission statement,
objective and strategies would be internally consistent and are likely to produce
desired results. Methodologically, this is presented in Figure 5.2.
Internal
stakeholders
Board of directors
Executive officers
Stockholders
Employees
Union*
Business/
product-market
Company
mission
External
stakeholders
Customers
Suppliers
Creditors
Government
Union*
Competitors
General public
Objectives
Figure 5.2 Stakeholders Chains, Company Mission and Objectives

*Union is shown both as internal and external stakeholder because there is a difference
of opinion on this.
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13. Corporates have responsibilities towards various stakeholders and the
society at large. (True/False)
14. The competitors, government and the general public are all ______of a
company.
5.9 Corporate Social Responsibility

As mentioned above, external stakeholders of an organization are too many
and varied and many of them represent different sections or social groups. This
implies that organizations should be socially responsible; that is, in addition to
the interests of the shareholders, businesses or companies should also serve
the society. This is corporate social responsibility (CSR). Corporate social
responsibility can be defined as the alignment of business operations with social
values.
The conflict between internal and external stakeholders can go much
further than mentioned so far. Some feel that this is the most problematic issue
in deciding company responsibility. External stakeholders argue that internal
stakeholders demand be made secondary to the greater need of the society;
that is, greater good of the external stakeholders. Many of them feel that issues
like pollution, waste disposals, environmental safety and conservation of natural
resources should be the overriding considerations for formulation of policy and
strategic decision making. Internal stakeholders, on the other hand, think that
the competing or social claims of external stakeholders should be balanced in
such a way that it protects the company mission, objectives and profitability.
The debate continues.
Strong exponents of CSR also talk of social policy for companies. They
feel that social responsibilities of companies should be clearly enunciated and
declared as social policy. Social policies may directly affect a companys products
and services, technology, markets, customers and self-image. According to these
thinkers, an organizations social policy should be integrated into all management
activities including the mission statement and objectives. Many feel that corporate
social policy should be articulated during strategy formulation, administered
during strategy implementation and reaffirmed or changed during strategy
evaluation.7
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5.9.1 CSR Practices in Corporates

Worldwide, companies are trying to integrate corporate social responsibility into
their business operations and strategies. Microsoft, Coca-Cola, McDonalds,
FedEx, IBM and Johnson & Johnson are some of the leading companies. In
India also, many companies are integrating CSR into their business practices
and making significant contributions to society. Companies like Infosys, Wipro,
Hero Honda, ITC, Dr. Reddys, Godrej, Mahindra & Mahindra and Tata Steel
are the foremost among them. Some of these companies have also established
foundations to cater to the needs of society.
Infosys and Wipro are two new-age companies which have integrated
CSR initiatives into their business capabilities and have achieved stronger brand
recognition through it. The Infosys Foundation works for both economic and
social upliftment of the villages it has adopted. The foundation focusses on an
overall development of the village. The developmental activities range from
conducting rehabilitation to construction of orphanages, setting up libraries and
promoting art and culture. Hero Honda has adopted a number of villages in and
around its plant in Dharughera (near Delhi) for integrated rural development.
ITCs E-choupals have not only helped to meet the information requirements of
rural households, but also immensely contributed to the establishment of better
relations with customers and rural suppliers. This has helped the process of
integrated rural development. Many banks and financial institutions along with
FMCG companies like Hindustan Unilever have recognized the importance of
development of the rural sector.
At the global level, CSR initiatives of companies are observed with interest.
The Wall Street Journal has rated top 15 companies in terms of their social
responsibility.8 These companies are
1. Johnson & Johnson
9. McDonalds
2. Coca-Cola
10. 3M
3. Wal-Mart
11. UPS
4. Anheuser Bush
12. FedEx
5. Hewlett-Packard
13. Target
6. World Disney
14. Home Depot
7. Microsoft
15. General Electric
8. IBM
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It should be noted that there is a difference in focus between CSR initiatives

of Indian companies and the western companies. In India, CSR initiatives are
mostly designed for the upliftment of the economically backward classes or
sections of society with particular emphasis on the rural sector. In companies in
developed countries, the focus is more on adoption of environment-friendly
measures or schemes. A poll carried out by the American Society for Quality
(ASQ) in 2006 for the ISO 26,000 Social Responsibility standards shows growing
interest in CSR among organizations. Integration of CSR into business is likely
to receive greater thrust with the creation of ISO 26,000 standards. The ISO
26,000 would provide guidelines on social responsibility of corporations and
other organizations. This would help preparation of a road map by companies
wishing to align their business activities with social initiatives.9
5.9.2 Corporate Social Responsibility and Profitability

Milton Friedman said in 1962: Few trends could so thoroughly undermine
the very foundations of our free society as the acceptance by corporate
officials of a social responsibility other than to make as much money for
their stockholders as possible.
Capitalism and Freedom, 1962
Even after four decades since Friedman said this, corporate social
responsibility has remained a contentious issue. Managers are struggling to
decide to what extent they should adopt CSR in their strategy-building process.
The debate or dichotomy is clear: Should a company behave in a socially
responsible manner and make the profitability policy follow from this; or, should
a company aim at profit maximization and try to be as socially responsible as
possible. Exponents of CSR argue that business depends on, exists to serve
and, cannot be separated from the environment; the environment is represented
by external stakeholders like customers, competitors, suppliers, government
agencies, local communities and society in general. Proponents of profit
maximization like Friedman, on the other hand, think that a company has
responsibility only for the financial well-being of its stockholders; and other
objective or policy may threaten the health and prosperity of the company.
The relationship between CSR and profit is complex. Although the two
are not mutually exclusive, neither of them is a prerequisite for the other.
Advocates of corporate pragmatism suggest that CSR and profit need not
necessarily be viewed as two competing concepts. It may be more rational to
include CSR as a factor or component in the strategy-building process of the
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business which should determine, along with other objectives, how to increase
or maximize profit.
Several research studies10 have been undertaken to determine the
relationship between corporate social performance and financial performance.
But, none of these studies has been able to establish the precise nature of
relationship between the two. There may be a number of reasons for this. One
reason may be that there is no significant correlation between social and financial
performance. Another reason may be that the benefits of CSR are offset by its
negative effect on profitability with no consequentially visible financial impact
on the company. Other reasons include methodological weaknesses or
drawbacks and/or problems with operational definitions or inadequacy of the
conceptual models used in the studies. A general conclusion from these studies,
however, is that certain relationship between CSR and profitability may exist,
but, the nature of the relationship is not clear.
Activity 2
Choose any five companies that are well known for their CSR practices.
You may choose the companies mentioned in the text above. Write a report
on each of the companys CSR activities.
15. _________can be defined as the alignment of business operations with
social values.
16. In India, CSR initiatives are mostly designed for the upliftment of the
economically backward classes or sections of society with particular
emphasis on the rural sector. (True/False)
5.10 Social Audit

Exponents of CSR do not just want companies to be socially responsible. They
also want to know how much or how far have they shown their social
responsibility, that is, what is their social performance against stated social
objectives. This can be measured through social audit. Social audit and social
accounting are sometimes used synonymously. But, there is a distinction
between the two. Social accounting is the process of selecting firm level
performance variables, measures and measurement procedures; systematically
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developing information useful for evaluating the firms social performance to

concerned social groups, both within and outside the firm.11 Social audit, on the
other hand, is more specific or focussed; as just mentioned, social audit evaluates
or measures a companys performance against planned or laid down social
objectives or goals.
A social audit should be like a financial audit or a commercial audit. Some
even feel that social audit should be based on a social balance sheet with a
"credit" side and a "debit" side ("inputs" and "outputs" or "costs" and "benefits").12
A social audit may be undertaken internally by companies; or, they may engage
outside consultants to conduct the audit. But, as with financial audit, an outside
consultant or agency minimizes organizational biases and brings more credibility
to the evaluation process and the company.
Social audit is important not only because a company wants to ensure
that it has implemented CSR policy as planned or committed, but, also because
it improves its public image and social standing. Also, social audit is conducted
by some companies not only to evaluate their social performance, but, also for
other purposes which are connected with their corporate performance and image
building. Some companies, for example, use social audit to scan the external
environment and determine their vulnerabilities to it; some others conduct social
audit to improve their relations with the government and public bodies. Others
use social audit to institutionalize CSR within their companies.
17. The social performance of companies can be measured against the stated
social objectives through_________.
18. A social audit is always undertaken internally by companies. (True/False)
5.11 Case Study

Corporate Social Responsibility: Tata Group Goes Green*
In India, many companies are integrating corporate social responsibility
(CSR) into their business practices and are making significant contributions
to society. Some of them have also set up foundations to cater to the needs
of the society. Tata Group of companies, along with some others, are
foremost among them. As an extension of CSR practices, Tata Group
companies are going green. From being on the fringe for some time, the
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Unit 5
green movement is gaining momentum within the group. The movement

covers all the major companies of the group, namely, Tata Steel, Tata Motors,
Tata Chemicals and Indian Hotels.
Tata Steel is planning to reduce carbon dioxide emissions at its Jamshedpur
plant from the current 1.8 tonne to 1.7 tonne per tonne of liquid steel made
by 2012. The ideal global benchmark though is 1.5. Tata Motors is setting
up an eco-friendly showroom using natural building materials for its flooring
and energy-efficient lights. The project is in its initial stages. The Indian
Hotels Company, which runs the Taj Chain, is in the process of creating
eco rooms, which will have energy-efficient minibars, organic bed linen
and napkins made from recycled paper. There will not be any carpets since
chemicals are used to clean these. And when it comes to illumination, the
rooms will have CFLs or LEDs. About 5 per cent of the total rooms at a Taj
hotel would sport a chic eco-room design.
Another eco-friendly consumer durable product that is in the works is Indica

EV, an electric car that will run on polymer lithium ion batteries. Tata Motors
plans to introduce the Indica EV soon.
The groups large companies such as Tata Steel, Tata Motors, Tata
Chemicals and Tata Consultancy Services contribute 80 per cent of the
groups overall emissions and a panel, headed by Tata Sons Director J J
Irani, has been formed to address this issue. Several companies have
already implemented or are in the process of implementing clean
development mechanism (CDM) projects. Tata Steel says it is currently
working on more than 17 CDM projects with Ernst & Young and these
projects are at various stages of approval at United Nations Framework
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Convention on Climate Change. Tata Power has said that of the total power,
it would generate in the next 10 years, 25 per cent would be from renewable
energy sources. Tata Motors is collecting environmental and energy data
across its dealer and supply chain to compute their carbon footprint and
indentify opportunities for cutting down on carbon dioxide emission. This
initiative will enable sharing and deployment of ideas throughout the value
chain.
One of the most interesting innovations has come in the form of a biogasbased power plant at Taj Green Cove in Kovalam, which uses the waste
generated at the hotel to meet its cooking requirements. Indian Hotels
Management has mentioned that all of its domestic and international hotels
would now be certified by Green Globe, an international agency.
Tata Group Chairman Ratan Tata had said during the launch of Swatch, a
low-cost water purifier made form natural ingredients: We have embarked
on a group-wise initiative to create awareness and implement eco-friendly
process wherever it is possible and in fact, look at some of our older
processes to see how we can ensure that they are in compliance with the
stateof- the-art exhibits. This is going to be long and expensive journey and
we are fairly committed to it.
This summarizes well the Tata Groups initiatives to promote the green
movement.
* Mostly based on Going green: Tatas new mantra, The Times of India (Times
Business), January 4, 2010.
5.12 Summary
Let us recapitulate the important concepts discussed in this unit:
To define a companys business with precision is the job or responsibility
of the planners and strategists. Precise or correct definition of business
of a company is the foundation for the mission statement, objectives,
plans, strategies and work and resource allocations.
A mission statement is many in one. It embodies the business philosophy
of a companys decision makers, implies the image the company wishes
to project, reflects the companys self-concept, indicates the companys
principal product or service areas and the customer needs the company
seeks to satisfy.
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Corporate or company philosophy is sometimes called company creed; it

envisages the basic beliefs, values, aspirations and philosophical priorities
of a company.
Corporate objectives are more focussed and specific compared to
corporate mission. The mission statement is more general and qualitative;
corporate objectives are usually quantitativemost of the objectives
should be measurable in terms of results or achievements. But, corporate
objectives should be fully consistent with the mission statement for its
performance.
Glueck and Jauch (1984) have mentioned about organizational life cycles
and the linkages between life cycles, objectives and strategic focus of
organizations. They have distinguished seven stages in organizational
life cycle; birth, infancy, youth, youth adult, adult, maturity and old age.
Worldwide, companies are trying to integrate corporate social responsibility
into their business operations and strategies. Microsoft, Coca-cola,
McDonalds, FedEx, IBM and Johnson & Johnson are some of the leading
companies.
5.13 Glossary
Corporate mission: The business philosophy of a company, declaring
what business the company is in and who its customers are. It provides
focus and direction for the corporate development.
Corporate philosophy: The beliefs, values, aspirations and philosophical
priorities of a company which the management or strategic decision
makers are committed to.
Corporate vision: Refers to a companys specific intentions that are broad,
all-intrusive and forward-thinking.
Organizational life cycle: A model which proposes that over the course
of time, business firms move through a fairly predictable sequence of
developmental stages.
Strategic intent: Setting goals or targets which demand stretching of the
present resource base and capabilities for their fulfilment.
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5.14 Terminal Questions

1. How would you properly define a business? Explain with a diagram.
2. What is a mission statement? Differentiate between a mission statement
and a vision statement.
3. Specify seven stages of organizational life cycle. Discuss the linkages
between organizational life cycle, corporate objectives and strategy.
4. What is strategic intent? How is strategic intent different from corporate
objective? Explain strategic intent with some examples.
5. What is corporate social responsibility (CSR)? Which are the issues
involved in analysis of CSR? Name three companies with high CSR rating.
6. Explain the concept of social audit. Discuss Tata Steels social audit. Would
you recommend social audit for every company?
5.15 Answers
Answers to Self-Assessment Questions
1. Planners, strategists
2. Customer
3. mission statement
4. present, future
5. True
6. False
7. mission statement
8. Organizational life cycle
9. strategic intent
10. Hamel, Prahalad
11. True
12. False
13. True
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Unit 5
14. stakeholders
15. Corporate social responsibility
16. True
17. social audit
18. False
Answers to Terminal Questions

1. To define a companys business with precision is the job or responsibility
of the planners and strategists. Refer to Section 5.3 for further details.
2. The mission statement of a company is variously called a statement of
philosophy, a statement of beliefs, a statement of purpose and, a statement
of business principles. Refer to Section 5.4 and 5.4.1 for further details.
3. Glueck and Jauch (1984) have distinguished seven stages in
organizational life cycle: birth, infancy, youth, youth adult, adult, maturity
and old age. Refer to Section 5.4 and 5.7 for further details.
4. The phase strategic intent was coined by Hamel and Prahalad (1989).
Refer to Section 5.7 for further details.
5. Organizations should be socially responsible; that is, in addition to the
interests of the shareholders, businesses or companies should also serve
the society. Refer to Section 5.8 for further details.
6. A companys social performance against stated social objectives can be
measured through social audit. Refer to Section 5.9 for further details.
5.16 References
1. Aupperle, K E, A B Carroll, J D Hatfield. 1985. An Empirical Examination
of the Relationship between Corporate Social Responsibilities and
Profitability. Academy of Management Journal. 28 June.
2. CarrolL, A, and F Hoy. Integrating Corporate Social Policy into Strategic
Management. 1984. Journal of Business Strategy 4, Winter.
3. Drucker, P F. 1974. Management: Tasks, Responsibilities and Practices.
New York: Harper & Row.
4. Ghosh, P K. 2003. Strategic Planning and Management. New Delhi: Sultan
Chand & Sons.
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Unit 5
6. Hamel, G, and C K Prahalad. 1989. Strategic Intent, Harvard Business

Review, MayJune.
7. Pearce, J R, and R B Robinson. 2000. Strategic Management. 7th ed.
New Delhi: McGraw Hill.
Endnotes
1
P F Drucker, Management: Tasks, Responsibilities and Practices (New York: Harper &
Row, 1974), 63.
J R Pearce, and R B Robinson, Strategic Management, 7 th ed. (Mc Graw-Hill, 2000), 27.
W R King, and D I Cleland, Strategic Planning and Policy (New York: Van Nostrand
Reinhold, 1978), 124.
An Interview with M A Pathan, Chairman, IOC, Financial Express, August 30, 1999
R Ackoff, A Concept of Corporate Planning (New York: John Wiley, 1970).
R Bennett, Corporate Strategy , 2nd ed. (Financial Times/Pitman Publishing, 1999),

1819.
A Carroll, and F Hoy, Integrating Corporate Social Policy into Strategic Management,
Journal of Business Strategy, 4, No. 3 (Winter 1984).
R Alsop, Perils of Corporate Philanthrophy, Wall Street Journal (January 16, 2002).
Trying to Make a Difference, Financial Times (New Delhi: Times Publishing House, April
7, 2006).
10
Two important studies are: K E Aupperle, A B Carroll, and J D Hatfield, An Empirical

Examination of the Relationship between Corporate Social Responsibility and Profitability,
Academy of Management Journal, (1985) 446 63; W N Davidson, and D L Worrell, A
Comparison and Test of the Use of Accounting and Stock Market Data in Relating Corporate
Social Responsibility and Financial Performance, Akron Business and Economic Review,
21 (Fall 1990), 7 1
11
K V Ramanathan, Theory of Corporate Social Accounting, Accounting Review (July,

1976): 516 28.
12
C C Abt, The Social Audit for Management (New York: AMA, 1977): 44 45.
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Strategic Management and Business Policy

Corporate Mission, Objectives

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Strategic Management and Business Policy

its stakeholders and the society. This is expressed in stakeholders approach to

The mission continues to guide Microsoft.

5.3 Definition of Business

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synthetics; it may be high-priced or premium product, medium-priced or average

Figure 5.1 Business Definition of an Organization

Management thinkers like Peter Drucker feel that business definition

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technology and market environment or competitiveness. We can also see how

Hindustan Unilever To meet everyday needs of Indian people everywhere with

World class auto products which provide the highest level of

A high quality photographic system for the customer who

Functionally valuable bicycle which common people can afford

The above business definitions show that some generality in definition

5.4 Mission Statement

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5.4.1 Mission and Vision

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5.4.2 Mission Statements of Some Companies

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in discharging its responsibility towards shareholders, employees, customers

Box 5.1: Fords Mission, Values and Guiding Principles

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allowing us to prosper as a business and to provide a reasonable return for

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5.5 Corporate Philosophy

Box 5.2: Corporate Philosophies of ITC and Nissan Motor (UK)

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3. Concern for their suppliersthe source of raw materials and ancillaries.

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Suppliers: Establish long-term relationships with single-source suppliers;

5.6 Corporate Objectives and Goals

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All businesses or companies have at least two common objectives: first,

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Increasing sales during the next quarter

5.6.1 Organizational Life Cycle, Objectives and Strategy

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But, it is a fundamental fact that every organization passes through a life

5.7 Strategic Intent

Box 5.3: Komatsus Strategic Intent to Challenge Caterpillar

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