Company Mission: Chapter Summary

Chapter 02 - Company Mission
Chapter 2
Company Mission
Chapter Summary
Defining the mission statement for a company is often one of the most slighted tasks in strategic
management. It is much easier for many executives to emphasize operational aspects of long-term
management activities rather than making sure short-term activities are in sync ith the long-term
goals.
!he principal value of the mission statement is its specification of the firm"s ultimate aims. # firm
gains a heightened sense of purpose hen its $oard of directors and its top executives address
these issues% &'hat $usiness are e in() &'hat customers do e serve() and &'hy does this
organization exist() #m$iguous generalizations are not enough to address these *uestions. # firm
must clearly articulate its long-term intentions if it expects its goals to serve as a $asis for shared
expectations+ planning+ and performance evaluation.
# mission statement that is clearly articulated can promote a sense of shared expectations among
all levels and generations of employees. It consolidates values over time and across individuals
and interest groups. !he firm"s sense of orth and intent can $e clearly identified $y outside
stakeholders. ,astly+ it asserts the firm"s commitment to responsi$le action in sym$iosis ith the
preservation and protection of the essential claims of insider stakeholders" survival+ groth+ and
profita$ility.
Learning Objectives
-. Descri$e a company mission and explain its value.
2. .xplain hy it is important for the mission statement to include the company"s $asic product
or service+ its primary markets+ and its principal technology.
/. .xplain hich goal of a company is most important% survival+ profita$ility+ or groth.
0. Discuss the importance of company philosophy+ pu$lic image+ and company self-concept to
stockholders.
1. 2ive examples of the neest trends in mission statement components% customer emphasis+
*uality+ and company vision.
3. Descri$e the role of a company"s $oard of directors.
4. .xplain agency theory and its value in helping a $oard of directors improve corporate
governance.
Lecture Outline
I. 'hat is a Company Mission(
#. Company mission is a $roadly framed $ut enduring statement of a firm"s intent. It is the
uni*ue purpose that sets a company apart from others of its type and identifies the scope of
its operations in product+ market+ and technology terms.
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5 20-/ $y Mc2ra-6ill .ducation. !his is proprietary material solely for authorized instructor use. 7ot authorized for sale or
distri$ution in any manner. !his document may not $e copied+ scanned+ duplicated+ forarded+ distri$uted+ or posted on a e$site+ in
hole or part.
-. !he 7eed for an .xplicit Mission
a8 7o external $ody re*uires a company to define its mission. 9urthermore+
defining it can $e time-consuming and tedious. It contains $roadly outlined
o$:ectives and strategies rather than specific directives.
$8 !he mission statement is a message designed to include the expectations of all
stakeholders regarding company performance over the long run.
c8 !he riters attempt to provide a unifying purpose for the company that ill
provide a $asis for strategic o$:ective setting and decision making.
d8 Mission statements address the folloing *uestions%
;-8 'hy is this firm in $usiness(
;28 'hat are our economic goals(
;/8 'hat is our operating philosophy in terms of *uality+ company image+ and
self-concept(
;08 'hat are our core competencies and competitive advantages(
;18 'hat customers do and can e serve(
;38 6o do e vie our responsi$ilities to stockholders+ employees+
communities+ environment+ social issues+ and competitors(
II. 9ormulating a Mission
#. !he typical $usiness $egins ith the $eliefs+ desires+ and aspirations of a single
entrepreneur.
-. <uch an oner-manager"s sense of mission usually is $ased on the folloing
fundamental $eliefs%
a8 !he product or service of the $usiness can provide $enefits at least e*ual to
its price.
$8 !he product or service can satisfy a customer need of specific market segments
that is currently not $eing met ade*uately.
c8 !he technology that is to $e used in production ill provide a cost- and *uality-
competitive product or service.
d8 'ith hard ork and the support of others+ the $usiness can not only survive
$ut also gro and $e profita$le.
e8 !he management philosophy of the $usiness ill result in a favora$le pu$lic
image and ill provide financial and psychological reards for those ho are
illing to invest their la$or and money in helping the $usiness succeed.
f8 !he entrepreneur"s self-concept of the $usiness can $e communicated to and
adopted $y employees and stockholders.
2. #s the $usiness gros or is forced to alter its product+ market+ or technology+
redefining the company mission may $e necessary.

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hole or part.
=. =asic >roduct or <ervice? >rimary Market? >rincipal !echnology
-. !hree indispensa$le components of the mission statement are specification of the
$asic product or service+ specification of the primary market+ and specification of
the principal technology for production or delivery. !hey are only descriptive of
the $usiness hen they are shon in com$ination ith each other.
2. @ften the most referenced pu$lic statement of a company"s selected products and
markets appears in &silver $ullet) form in the mission statement. <ometimes
outsider"s value condensed overvies of the mission.
C. Company 2oals% <urvival? 2roth? >rofita$ility
-. !hree economic goals guide the strategic direction of almost every $usiness. !he
mission reflects the firm"s intention to secure survival through growth and
profitability.
2. # firm that is una$le to survive ill $e incapa$le of satisfying the aims of any of
its stakeholders.
a. @ften+ survival is taken for granted to the point of $eing neglected as a
principal criterion in strategic decision making. 'hen this happens+ the firm
may focus on the short run at the expense of the long run.
$. Concerns for a *uick fix or a $argain may displace the assessment of long-
term impact. !he result can $e near-term economic failure oing to a lack of
resource synergy and sound $usiness practice.
/. # firm"s profitability is the mainstay goal of a $usiness.
a. 7o matter ho profit is measured or defined+ profit over the long term is the
clearest indication of a firm"s a$ility to satisfy the principal claims and
desires of employees and stockholders.
$. !he emphasis is over the long term.
c. =asing decisions on a short-term concern for profita$ility ould lead to
strategic myopia.
d. @verlooking the enduring concerns of customers+ suppliers+ creditors+
ecologists+ and regulatory agents may product profit in the short term+ $ut+
over time+ the financial conse*uences are likely to $e detrimental.
0. # firm"s growth is tied inextrica$ly to its survival and profita$ility. 2roth in this
sense must $e $roadly defined.
a. #lthough product impact market studies ;>IM<8 have shon that groth in
market share is correlated ith profita$ility+ other important forms of groth
do exist.
;-8 2roth in the num$er of markets served+ in the variety of products
offered+ and in the technologies that are used fre*uently leads to
improvements in a firm"s competitive a$ility.
;28 2roth means change+ and proactive change is essential in a dynamic
$usiness environment.
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hole or part.
$. !he issue of groth raises a concern a$out the definition of the company
mission. 6o can e have an effective+ complete mission statement ithout
precluding the exercise of unanticipated strategic options(
c. # mission statement can outline the conditions under hich the firm might
depart from ongoing operations.
D. Company >hilosophy
-. !he statement of a company"s philosophy+ often called company creed+ usually
accompanies or appears ithin the mission statement. It reflects the $asic $eliefs+
values+ aspirations+ and philosophical priorities to hich strategic decision makers
are committed in managing the company.
a. 9ortunately+ the philosophies vary little from one firm to another. @ners and
managers implicitly accept a general+ unritten+ yet pervasive code that
governs $usiness actions and allos them to $e largely self-regulated.
$. Anfortunately+ statements of philosophy are often so similar and so
platitudinous that they read more like >B handouts than commitments to
values.
2. Exhibit 2.3 Strategy in !ction + demonstrates Cad$ury"s position on
sustaina$ility. It indicates the company"s clearly defined initiatives for satisfying
its stakeholders.
/. Exhibit 2." Strategy in !ction + shos #IM"s $oard of directors and executives
have esta$lished especially clear directions for company decision making and
action $ased on groth.
0. Exhibit 2.# $lobal Strategy in !ction + shos ho the philosophy of 7issan
Motor Manufacturing is expressed $y the company"s >eople >rinciples and Cey
Corporate >rinciples.
a. !hey form the $asis of the ay the company operates on a daily $asis.
$. !hey address the principal concepts used in meeting the company"s
esta$lished goals.
c. .mployees can link their productivity and success to the productivity and
success of the company.
d. 2iven these principles+ the company is a$le to concentrate on the issues most
important to its survival+ groth+ and profita$ility.
1. Exhibit 2.% Strategy in !ction + provides an example of ho 2M uses a
statement of company philosophy to clarify its environmental principles.
3. Exhibit 2.& 'op Strategist + profiles #etna"s C.@"s *uest to fulfill the company"s
mission.
.. >u$lic Image
-. =oth present and potential customers attri$ute certain *ualities to particular
$usinesses.
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hole or part.
a. Mission statements should reflect the pu$lic"s expectations+ $ecause this
makes achievement of the firm"s goals more likely.
$. # negative pu$lic image often prompts firms to reemphasize the $eneficial
aspects of their mission.
2. 9irms seldom address the *uestion of their pu$lic image in an intermittent fashion.
a. #lthough pu$lic agitation often stimulates greater attention to this *uestion+
firms are concerned a$out their pu$lic image in even in the a$sence of such
agitation.
$. Exhibit 2.( Strategy in !ction + presents a marketing translation of the
essence of mission statements of six high-end shoe companies. !he
impressive feature is that closely competing firms can incorporate su$tle+ yet
meaningful+ differences into their mission statements.
9. Company <elf-Concept
-. # ma:or determinant of a firm"s success is the extent to hich the firm can relate
functionally to its external environment.
a. !o achieve its proper place in a competitive situation+ the firm must
realistically evaluate its competitive strengths and eaknesses. !his idea is
the essence of the company self-concept.
$. !he idea is not commonly integrated into theories of strategic management?
still+ its importance for individuals has $een recognized since ancient times.
2. !he a$ility of firms to survive in a dynamic and highly competitive environment
ould $e severely limited if they did not understand their impact on others or of
others on them.
a. 9irms take on personalities of their on.
$. Much $ehavior is organizationally $ased? it acts on its mem$ers in other
ays than their individual interactions.
c. 9irms are entities hose personality transcends the personalities of their
mem$ers.
d. !hey can set decision-making parameters $ased on different aims and distinct
from the aims of their mem$ers.
e. !hese organizational considerations have pervasive effects.
/. @rdinarily+ descriptions of the company self-concept per se do not appear in
mission statements.
2. 7eest !rends in Mission Components
-. Becently+ several issues have $ecome so important in the strategic planning
process that they are increasingly $ecoming integral parts in the development and
revisions of mission statements% sensitivity to consumer ants+ concern for
*uality+ and statements of company vision.
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hole or part.
2. Customers
a. &!he customer is our top priority) is a slogan that ould $e claimed $y the
ma:ority of $usinesses in the Anited <tates and a$road.
$. Many A.<. firms maintain extensive product safety programs to help ensure
consumer satisfaction. <ome provide toll-free telephone lines to anser
customer concerns and complaints.
c. # focus on customer satisfaction causes managers to realize the importance
of providing *uality customer service.
d. <trong customer service initiatives have led some firms to gain competitive
advantages in the marketplace. 6ence+ many corporations have made
customer service a key component of developing corporate mission.
/. Duality
a. &Duality is :o$ oneE) is a rallying point for many resurging A.<.
$usinesses.
$. '. .dards Deming and F. M. Furan"s messages foster a orldide
emphasis on *uality in manufacturing.
c. Deming"s ideas are summarized in -0 points%
;-8 Create constancy of purpose.
;28 #dopt the ne philosophy.
;/8 Cease dependence on mass inspection to achieve *uality.
;08 .nd the practice of aarding $usiness on price tag alone. Instead+
minimize total cost+ often accomplished $y orking ith a single
supplier.
;18 Improve constantly the system of production and service.
;38 Institute training on the :o$.
;48 Institute leadership.
;G8 Drive out fear.
;H8 =reak don $arriers $eteen departments.
;-08 .liminate slogans+ exhortations+ and numerical targets.
;--8 .liminate ork standards ;*uotas8 and management $y o$:ective.
;-28 Bemove $arriers that ro$ orkers+ engineers+ and managers of their
right to pride of orkmanship.
;-/8 Institute a vigorous program of education and self-improvement.
;-08 >ut everyone in the company to ork to accomplish the
transformation.
d. 9irms in the Anited <tates responded aggressively. !he ne philosophy is
that *uality should $e the norm.
e. Exhibit 2.) Strategy in !ction + presents the integration of the *uality
initiative into the mission statements of three corporations .
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hole or part.
0. Iision <tatement
a. !he vision statement is a statement that presents a firm"s strategic intent
designed to focus the energies and resources of the company on achieving a
desira$le future.
$. # vision statement and mission statement are fre*uently com$ined into a
single statement in actual practice.
c. 'hen they are separated+ a vision statement is usually a memora$le single
sentence.
d. # vision is often expressed as a uni*ue ay to com$ine competitive
influences in a ay that directs a firm to pursue a revolutionary strategy.
e. Exhibit 2.*+ g ives examples of vision statements .
6. #n .xemplary Mission <tatement
-. !he Chapter 2 !ppendix presents ==J!"s vision+ mission+ and purpose
statement in its entirety.
2. It also includes detailed expressions of the company"s values and vies on the role
of emotions+ management style+ the management concept+ attri$utes of an
outstanding employee+ the importance of positive attitude+ o$ligations to its
employees+ virtues of an outstanding credit culture+ achieving the company goal+
the nature of a &orld standard) revenue-driven sales organization+ the nature of a
&orld-standard) client service community $ank+ the company"s commitment to
education and learning+ and its passions .
III. =oards of Directors
#. <trategic decision makers are responsi$le for the folloing%
-. Determining the firm"s mission
2. #c*uiring and allocating resources so the firm can thoughtfully develop and
implement a strategic plan
/. Monitoring the firm"s success in the competitive marketplace to determine hether
that plan as ell designed and activated
=. Most organizations have multiple levels of strategic decision makers? typically+ the
larger the firm+ the more levels it ill have.
C. !he board o, directors is the group of stockholder representatives and strategic
managers responsi$le for overseeing the creation and accomplishment of the company
mission.
-. !he $oard operates as the representatives of the firm"s stockholders.
2. .lected $y the stockholders+ the $oard has these ma:or responsi$ilities%
a. !o esta$lish and update the company mission.
$. !o elect the company"s top officers+ the foremost of hom is the C.@.
c. !o esta$lish the compensation levels of the top officers+ including their
salaries and $onuses.
d. !o determine the amount and timing of the dividends paid to stockholders.
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hole or part.
e. !o set $road company policy on such matters as la$or-management relations+
product or service lines of $usiness+ and employee $enefit packages.
f. !o set company o$:ectives and to authorize managers to implement the long-
term strategies that the top officers and the $oard have found agreea$le.
g. !o mandate company compliance ith legal and ethical dictates.
/. In the current $usiness environment+ $oards of directors are accepting the
challenge of shareholders and other stakeholders to $ecome active in esta$lishing
the strategic initiatives of the companies that they serve.
0. !he $oard"s greatest impact on the $ehavior of a firm results from its
determination of the company mission. !he philosophy espoused in the company
mission sets the tone $y hich the firm and all of its employees ill $e :udged.
1. !hrough its appointment of top executives and its decisions a$out their
compensation+ the $oard reveals its priorities for organizational achievement.
II. #gency !heory
#. 'henever there is a separation of the oners ;principals8 and the managers ;agents8 of
a firm+ the potential exists for the ishes of the oner to $e ignored.
-. !gency theory is a set of ideas on organizational control $ased on the $elief that
the separation of the onership from management creates the potential for the
ishes of oners to $e ignored.
2. 'henever oners ;or managers8 delegate decision-making authority to others+ the
agency relationship exists $eteen the to parties.
/. #gency relationships can $e very effective as long as managers make investment
decisions in ays that are consistent ith stockholders" interests.
0. 'hen the interests of managers diverge from those of oners+ then managers"
decisions are more likely to reflect the managers" preferences than the oners"
preferences.
a. In general+ oners seek stock value maximization.
$. 'hen managers hold important $locks of company stock+ they too prefer
strategies that result in stock appreciation.
c. 6oever+ hen managers resem$le &hired hands) more than oner-partners+
they often prefer strategies that increase their personal payoffs rather than
those of shareholders.
1. If+ as agency theory argues+ self-interested managers act in ays that increase their
on elfare at the expense of the gain of corporate stockholders+ then oners ho
delegate decision-making authority to their agents ill incur $oth the loss of
potential gain that ould have resulted from oner-optimal strategies andKor the
costs of monitoring and control systems that are designed to minimize the
conse*uences of such self-centered management decisions.
a. !he cost of agency pro$lems plus the cost of actions taken to minimize
agency pro$lems are collectively termed agency costs.
$. #gency costs can often $e identified $y their direct $enefit for the agents and
their negative present value.
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hole or part.
c. #gency costs are found hen there are differing self-interests $eteen
shareholders and managers+ superiors and su$ordinates+ or managers of
competing departments or $ranch offices.
=. 6o #gency >ro$lems @ccur
-. =ecause oners have access to only a relatively small portion of the information
that is availa$le to executives a$out the performance of the firm and cannot afford
to monitor every executive decision or action+ executives are often free to pursue
their on interests. !his is the moral ha-ard problem.
2. #s a result of moral hazards+ executives may design strategies that provide the
greatest possi$le $enefits for themselves+ ith the elfare of the organization
$eing given only secondary consideration.
/. Anchecked executives may advance their on self-interests $y doing the
folloing%
a. <lacking on the :o$
$. #ltering forecasts to maximize their performance $onuses
c. Anrealistically assessing ac*uisition targets" outlooks in order to increase the
pro$a$ility of increasing organizational size through their ac*uisition
d. Manipulating personnel records to keep or ac*uire key company personnel
0. # second ma:or reason for agency costs is adverse selection% an agency pro$lem
caused $y the limited a$ility of stockholders to precisely determine the
competencies and priorities of executives at the time they are hired.
1. =ecause principals cannot initially verify an executive"s appropriateness as an
agent of the oners+ unanticipated pro$lems of non-overlapping priorities $eteen
oners and agents are likely to occur.
3. !he most popular solution to moral dilemma and adverse selection pro$lems is for
oners to attempt to more closely align their on $est interests ith those of
agents through use of executive $onus plans.
a. 9oremost among these plans are stock option plans+ hich ena$le executives
to $enefit directly from the appreciation of the company"s stock :ust as other
stockholders do.
$. Mostly+ executive $onus plans are una$ashed attempts to align the interests of
the oners and executives and to there$y induce executives to support
strategies that increase stockholder ealth.
c. !hese plans do help to reduce the costs associated ith moral dilemmas and
adverse selections.
C. >ro$lems !hat Can Besult from #gency
-. 9rom a strategic management perspective there are five different kinds of
pro$lems that can arise $ecause of the agency relationship $eteen corporate
stockholders and their company"s executives%
a. .xecutives pursue groth in company size rather than earnings.
;-8 <hareholders generally ant to maximize earnings+ $ecause earnings
groth yields stock appreciation.
2-H
hole or part.
;28 =ecause managers are typically more heavily compensated for increases
in firm size than for earnings groth+ they may recommend strategies
that yield company groth such as mergers and ac*uisitions.
;/8 Managers" stature in the $usiness community is commonly associated
ith company size. !his $enefits them in :o$ mo$ility and career
advancement.
;08 .xecutives need an enlarging set of advancement opportunities for
su$ordinates hom they ish to motivate ith nonfinancial
inducements. #c*uisitions can provide the needed positions.
$. .xecutives attempt to diversify their corporate risk.
;-8 <tockholders can vary their investment risks through management of
their individual stock portfolios. Managers" careers and stock
incentives+ hoever+ are tied to the performance of a single corporation
;al$eit one that employs them8.
;28 .xecutives are tempted to diversify their corporation"s operation+
$usinesses+ and product lines to moderate the risk incurred in any single
venture.
;/8 !his approach serves the executives" personal agendas and compromises
the &pure play) *uality of their firm as an investment.
;08 Diversifying a corporation reduces the $eta associated ith the firm"s
return+ hich is an undesira$le outcome for many stockholders.
c. .xecutives avoid risk.
;-8 .xecutives are illing to restrict the diversification of their companies+
and are tempted to minimize the risk that they face.
;28 .xecutives are often fired for failure+ $ut rarely for mediocre corporate
performance.
;/8 !herefore+ executives may avoid desira$le levels of risk+ if they
anticipate little reard and opt for conservative strategies that minimize
the risk of company failure.
;08 If they do avoid desira$le levels of risk+ executives ill rarely support
plans for innovation+ diversification+ and rapid groth.
;18 9rom an investor"s perspective+ risk taking is desira$le hen it is
systematicLhen investors can reasona$ly expect that their company
ill generate higher long-term returns from assuming greater risk.
;38 !he agency pro$lem creates a pro$lemLshould executives prioritize
their :o$ security or the company"s financial returns to stockholders(
d. Managers act to optimize their personal payoffs.
;-8 If executives can gain more from an annual performance $onus $y
achieving o$:ective - than from stock appreciation resulting from the
achievement of o$:ective 2+ then oners must anticipate that the
executives ill target o$:ective - and their priority+ even though
o$:ective 2 is clearly in the $est interest of the shareholders.
;28 .xecutives may pursue a range of expensive per*uisites that have a net
negative effect on shareholder returns. !hese include elegant corner
offices+ corporate :ets+ large staffs+ golf mem$erships+ limousines+ etc.
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hole or part.
e. .xecutives act to protect their status.
;-8 'hen their companies expand+ executives ant to ensure that their
knoledge+ experience+ and skills remain relevant and central to the
strategic direction of the corporation.
;28 .xecutives favor doing more of hat they already do ell.
;/8 @n the other hand+ investors may prefer revolutionary advancement to
incremental improvement.
;08 Bevolutionary strategies are most likely to occur hen executives are
given assurances that they ill not make themselves o$solete ithin the
changing company that they create.
D. <olutions to the #gency >ro$lem
a. In addition to defining an agent"s responsi$ilities in a contract and including
elements like $onus incentives that help align executives" and oners"
interests+ principals can take several other actions to minimize agency
pro$lems%
;-8 @ners pay executives a premium for their service. !his helps
executives to see their loyalty to the stockholders as key to achieving
personal financial targets.
;28 .xecutives receive $ackloaded compensation. !his means executives
are paid a handsome premium for superior future performance.
;/8 Creating teams of executives across different units of a corporation can
help to focus performance measures on organizational rather than
personal goals. @ners" interests receive deserving priority.
.uestions ,or /iscussion
-. Beread 7icor Inc."s mission statement in .xhi$it 2.-+ <trategy in #ction. ,ist five insights into
7icor that you feel you"ve gained from knoing its mission.
Beading the mission statement of 7icor+ Inc. reveals the folloing things a$out the company%
It is involved in the energy $usiness.
'hile it competes in the area of providing energy to consumers+ it may engage in
other related activities.
It operates primarily in the Anited <tates.
It recognizes that it has various stakeholders+ each ith their on interests. !hus+
it explicitly identifies stakeholders such as investors+ customers+ employees+ and
the pu$lic.
It recognizes its ecological responsi$ilities $y stating its concern for the optimum
utilization of natural resources.
It seeks to earn optimum+ long-range profits for its investors.
2---
hole or part.
2. ,ocate the mission statement of a company not mentioned in the chapter. 'here did you find it(
'hat it presented as a consolidated statement+ or ere you forced to assem$le it yourself from
various pu$lications of the firm( 6o many of the mission statement elements outlined in this
chapter ere discussed or revealed in the statement you found(
!here are various sources for o$taining companies" mission statements. @ne can rite to the
company and ask for an investor packet+ hich very likely ould include the company"s
mission. !he most common ay today is to access the company"s e$site and o$tain the
mission statement through that. In the case of most companies+ the mission ould $e a
consolidated statement. 9or example the e$site .ge.com is the e$site of 2eneral
.lectric. 2."s mission statement is on the e$site. Do Chemical"s mission is also on its
e$ site .dochemical.com . It is unlikely that all the mission statements contain all the
elements mentioned in the chapter.
/. >repare a to-page typeritten mission statement for your school of $usiness or for a firm
selected $y your instructor.
!his is a good exercise designed to help students develop an actual mission statement+ either
for their school of $usiness or for a selected firm. In practice+ most organizations use a
participatory approach ;for example+ the faculty mem$ers of the $usiness school may meet
several times to develop their school"s mission8 to develop mission statements. !he instructor
may design this as an individual or a group exercise.
0. ,ist five potentially vulnera$le areas of a firm ithout a stated company mission.
# good ay to approach this *uestion is to look at each of the mission statement components
discussed in the chapter and ask hat ould happen to the firm if this component ere not
included.
'ithout a mission+ the folloing areas could $e vulnera$le%
identification of competitors $ecause of lack of definition of $asic product or service
identification of competitors $ecause of lack of definition of primary market
no common agreement among employees regarding groth and profita$ility
no sense of the $asic philosophy M $eliefs+ values+ etc.
confusion a$out the pu$lic image that the company ants to pro:ect
confusion a$out its on strengths and eaknesses
2--2
hole or part.
1. Mission statements are often criticized for $eing lists of platitudes. 'hat can strategic managers
do to prevent their statements from appearing to $e simple statements of o$vious truths(
# company"s philosophy is often stated in the company creed+ hich accompanies or appears
ithin the mission statement. Creeds are ritten statements regarding the company+ and
actually vary little from one company to the next. !his is one element of the mission statement
that can $e perceived as largely platitudinous ;see &Company >hilosophy)8. @ne ay for
strategic managers to make the mission statement less platitudinous is to highlight the
differences $eteen their firm and the next. !hey should differentiate the firm"s mission
statement :ust as they actually differentiate the firm and its products or services. # company
that can list a uni*ue perspective in its mission ill $e perceived as original and not the &same
as the rest.) #lso+ they should make sure to emphasize ho they actually practice integrity or
commitment to the environment+ etc. Instead of listing a passive statement a$out $eliefs+ they
could sho dynamic examples of ho they put those $eliefs into practice.
3. 'hat evidence do you see that mission statements are valua$le(
Mission statements are a useful tool companies use to communicate ith their employees+
managers+ community+ potential investors+ and outside stakeholders. !he mission statement can
provide a clear link $eteen individual and company-ide senses of purpose. Asing key
principles outlined in the mission statement+ a company is a$le to concentrate on the most
important aspects of its $usiness% survival through groth and profita$ility. It can outline the
general ays in hich these goals can $e accomplished and demonstrate to everyone here their
strongest strategic commitments lay.
4. 6o can a mission statement $e an enduring statement of values and simultaneously provide a
$asis of competitive advantage(
!he mission statement is designed to provide insight into a company"s values. Ialues are sustained
over the course of the company"s existence. !hey are long-term declarations of ho the company
and its employees should manage its $usiness affairs. <till+ the mission should convey competitive
advantage. !he goals of survival+ groth+ and profita$ility are dependent on good strategies to
achieve sustaina$le competitive advantages. ,ong-term statements a$out values and principles do
not negate a company"s flexi$ility or adapta$ility in achieving competitive advantage. ;<ee section
titled &Company 2oals% <urvival? 2roth? >rofita$ility.)8
G. If the goal of survival refers to a$ility to maintain a specific legal form+ hat are the comparative
advantages of sole proprietorships+ partnerships+ and corporations(
!he advantages of sole proprietorships include% ease of esta$lishment+ independence+ secrecy
;your plans do not have to $e revealed to anyone8+ and tax advantages ;pay taxes at personal
income tax rate8. !he advantages for partnerships include% easy to form and taxed at personal
income tax rate+ greater profit potential due to pooled talents+ can raise money *uicker than
proprietorships and generally have higher credit ratings+ and may have a longer life span. =oth of
these forms have unlimited lia$ilities and limited resource issues. #lso limited life and managerial
pro$lems may $e an issue. 9inally+ the corporations" advantages include% poer to $ring together
large sums of capital+ resources+ and talent? limited lia$ility? li*uidity? and unlimited life span.
<ome disadvantages may $e cum$ersome paperork+ pu$lic disclosure of finances and operations+
and higher tax rates.
2--/
hole or part.
H. In the -HH0s many 7asda* firms favored groth over profita$ility? in the 2000s the goal of
profita$ility is displacing groth. 6o might each preference $e explained(
>rofita$ility is the mainstay goal of a $usiness. >rofit over the long term is the clearest indication
of a firm"s a$ility to satisfy the principal claims and desires of employees and stockholders. !he
key to profita$ility is long-term results. 2roth on the other hand is a$out increasing the size of
the firm in one of the various ays% groth in the num$er of markets served+ in the variety of
products offered+ and in the technologies that are used to provide goods or services. In the -HH0s+
companies that gre ere favored and ere their stocks ere valued highly on the expectation
that those firms+ particularly Internet-$ased &dot-coms+) ould $e profita$le in the future based on
their large market shares. !oday+ profita$ility is the num$er one factor in determining the financial
valuation of stocks.
@ne key point is that no matter hat goals the company is measured $y+ it should $e evaluated on
the $asis of its long-term via$ility+ not short-term results or goals. 9or more explanation+ refer to
&Company 2oals% <urvival? 2roth? >rofita$ility.)
-0. Do you agree that a mission statement provides su$stantive guidance hile a vision statement
provides inspirational guidance( .xplain.
<tudents" responses ill vary. # mission statement is meant to provide long-term guidance
regarding hat a firm does+ hat customers it serves+ and hat principles are most important to
the company as a hole. It includes more information than the vision statement+ hich is easy to
remem$er+ usually only one or to sentences long. !he vision statement has to $e more
inspirational and make its point more *uickly than the mission. It is also developed to express the
aspirations of the firm+ hereas the mission statement shos hat $usiness the company is in
now. 9or more explanation+ refer to &Iision <tatement+.)
2--0
hole or part.

Company Mission: Chapter Summary

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Chapter 02 - Company Mission

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