TABLE 2.

1: FACTORS TO CONSIDER IN DECIDING ON A COMPANYS FUTURE

DIRECTION

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KEY ELEMENTS OF A STRATEGIC VISION

Delineates managements aspirations for the business
Provides a panoramic view of where we are going
Charts a strategic path
Is distinctive and specific to
a particular organization
Avoids use of generic language that
is dull and boring and that could
apply to most any company

Captures the emotions of

employees and steers them
in a common direction
Is challenging and a bit beyond a
companys immediate reach

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ROLE OF A STRATEGIC VISION

A well-conceived, well-communicated vision functions as a
valuable managerial tool to

Give the organization a sense of direction, mold organizational identity,

and create a committed enterprise
Illuminate the companys directional path
Provide managers with a reference point to

Make strategic decisions

Translate the vision into hard-edged
objectives and strategies
Prepare the company for the future
A strategic vision exists only as words and has no
organizational impact unless and until it wins the commitment
of company personnel and energizes them to act in ways that
move the company along the intended strategic path!
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TABLE 2.2: CHARACTERISTICS OF AN EFFECTIVELY WORDED VISION

STATEMENT

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TABLE 2.3: COMMON SHORTCOMINGS IN COMPANY VISION STATEMENTS

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EXAMPLE OF STRATEGIC VISION

Red Hat
To extend our position as the most trusted Linux
and open source provider to the enterprise.
We intend to grow the market for Linux
through a complete range of enterprise Red
Hat Linux software, a powerful Internet
management platform, and associated
support and services.
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EXAMPLE OF STRATEGIC VISION

UBS
We are determined to be the best global financial services company.
We focus on wealth and asset management, and on investment banking

and securities businesses.

We continually earn recognition and trust from clients, shareholders, and
staff through our ability to anticipate, learn and shape our future.
We share a common ambition to succeed by delivering quality in what we
do.
Our purpose is to help our clients make financial decisions with confidence.
We use our resources to develop effective solutions and services for our
clients.
We foster a distinctive, meritocratic culture of ambition, performance and
learning as this attracts, retains and develops the best talent for our
company.
By growing both our client and our talent franchises, we add sustainable
value for our shareholders.
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EXAMPLES OF STRATEGIC VISIONS

Caterpillar
Be the global leader in customer value.

eBay
Provide a global trading
platform where practically anyone
can trade practically anything.
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WHAT IS A COMPANY MISSION?

A broadly framed but enduring statement

of a firms intent. It is the unique 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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STRATEGIC VISION VS. MISSION

A strategic vision

concerns a firms future

business path - where
we are going
Markets to be pursued
Future product/market/
customer/technology focus
Kind of company
management is
trying to create

A companys mission

statement typically
focuses on its present
business purpose - who
we are and what we do
Current product and
service offerings
Customer needs and
customer groups being
served
Geographic
coverage

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CHARACTERISTICS OF A MISSION
STATEMENT

Identifies boundaries of a companys current business and

says something about

Present products and services

Types of customers served
Geographic coverage

Conveys

Who we are,
What we do, and
Why we are here

A good mission statement describes a companys business

makeup and purpose in language specific enough to give
the company its own identity and distinguish it from
other enterprises in the same or other industries!
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QUESTIONS ADDRESSED IN A MISSION STATEMENT

Why is this firm in business?
What are our economic goals?
What is our operating philosophy in terms of quality,
company image, and self-concept?
What are our core competencies and competitive
advantages?
What customers do and can we serve?
How do we view our responsibilities to stockholders,
employees, communities, environment, social issues,
and competitors?

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FORMULATING A MISSION

The typical business begins with the beliefs,

desires, and aspirations of a single
entrepreneur
These beliefs are usually the basis for the
companys mission
As the business grows or is forced to alter its
product, market, or technology, redefining the
company mission may be necessary

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EX. 2.2 (ADAPTED)

1.
2.
3.
4.
5.
6.
7.
8.

MISSION STATEMENT COMPONENTS

Customer-market
Product-service
Geographic Domain
Technology
Concern for Survival
Philosophy
Self-concept
Concern for Public Image

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THREE ESSENTIAL COMPONENTS:

Basic Product or Service

Primary Market
Principal Technology
If a firm uses a silver bullet mission for
outsiders to read, it will include these three
components.

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PRIMARY COMPANY GOALS

Survival A firm that is unable to

survive will be incapable of
satisfying the aims of any of its
stakeholders.
This goal is often taken for granted
If neglected, firm may focus on short-term
aims

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PRIMARY COMPANY GOALS (CONTD.)

Profitability A firms profitability is the

mainstay goal of a business.
Clearest indication of firms ability to satisfy
principal claims and desires of employees and
stockholders

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PRIMARY COMPANY GOALS (CONTD.)

Growth A firms growth is tied inextricably

to its survival and profitability. Growth in
this sense must be broadly defined.
Important to define growth i.e., in terms of
market share, etc.

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COMPANY PHILOSOPHY
Company philosophy is often called company
creed.
Usually accompanies or appears within the
mission statement
Reflects the basic beliefs, values, aspirations,
and philosophical priorities to which strategic
decision makers are committed in managing
the company

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PUBLIC IMAGE
Both present and potential customers
attribute certain qualities to particular
businesses.
Firms seldom address the question of
their public image in an intermittent
fashion.
Firms should be concerned with their
public image even when there is no
public agitation.

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COMPANY SELF-CONCEPT
A major determinant of a firms success is the extent
to which the firm can relate functionally to its
external environment.
The ability of firms to survive in a dynamic and highly
competitive environment would be severely limited if
they did not understand their impact on others or of
others on them.
Ordinarily, descriptions of the company self-concept
per se do not appear in mission statements.

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NEWEST TRENDS IN MISSION COMPONENTS

Sensitivity to customer wants

The customer is our top priority
Importance of consumer satisfaction
The Penney Idea
Importance of customer service

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NEWEST TRENDS IN MISSION COMPONENTS

(CONTD.)

Quality
Quality is job one!
The work of W. Edwards Deming and J.M.
Juran
Malcolm Baldridge Awards

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DEMINGS 14 POINTS:
1.
2.
3.
4.
5.
6.
7.

Create constancy of purpose.

Adopt the new philosophy.
Cease dependence on mass inspection to achieve
quality.
End the practice of awarding business on price tag
alone. Instead, minimize total cost, often accomplished
by working with a single supplier.
Improve constantly the system of production and
service.
Institute training on the job.
Institute leadership.

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DEMINGS 14 POINTS (CONTD):

8.
9.
10.
11.

Drive out fear.

Break down barriers between departments.
Eliminate slogans, exhortations, and numerical targets.
Eliminate work standards (quotas) and management by
objective.
12. Remove barriers that rob workers, engineers, and
managers of their right to pride of workmanship.
13. Institute a vigorous program of education and selfimprovement.
14. Put everyone in the company to work to accomplish the
transformation.

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NEWEST TRENDS IN MISSION COMPONENTS

(CONTD.)

Statement of companys vision

A statement that presents a firms strategic
intent designed to focus the energies and
resources of the company on achieving a
desirable future

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BOARDS OF DIRECTORS

The board of directors is the group of

stockholder
representatives
and
strategic managers responsible for
overseeing
the
creation
and
accomplishment of the company
mission.

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MAJOR BOARD RESPONSIBILITIES:

Establish and update mission
Elect top officers & CEO
Establish compensation for top officers
Determine amount & timing of dividends
Set broad company policy
Set objectives and authorize managers to
implement long-term strategy
Mandate companys legal and ethics compliance

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AGENCY THEORY

Agency theory is a set of ideas on

organizational control based on the
belief that the separation of the
ownership from management creates
the potential for the wishes of owners to
be ignored.

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AGENCY COSTS

The cost of agency problems plus the cost

of actions taken to minimize agency
problems are collectively termed agency
costs.

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HOW AGENCY PROBLEMS OCCUR

Moral hazard problem

Executives are often free to pursue their own
interests because of the disproportionate
access they have to company information.
This is the moral hazard problem.

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HOW AGENCY PROBLEMS OCCUR

(CONTD.)

Adverse selection
is an agency problem caused by the
limited ability of stockholders to
determine the competencies and
priorities of executives at hire.

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PROBLEMS RESULTING FROM AGENCY

Executives pursue growth in company

size rather than earnings
Executives attempt to diversify their
corporate risk
Executives avoid healthy risk
Managers act to optimize their personal
payoffs
Executives protect their status
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SOLUTIONS TO AGENCY PROBLEM

Owners pay executives a premium for their
service to increase loyalty
Executives receive back-loaded compensation.
Creating teams of executives across different
units of a corporation can help to focus
performance measures on organizational rather
than personal goals.

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ALIGNING EXECUTIVE INTERESTS WITH

OWNER INTERESTS

Stock Option Plans

Bonus plans
Incentives for Long-Term
Performance

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REFERENCES
Pearce, J.A. & Robinson, R.B. 2013. Strategic
Management: Formulation, Implementation & Control,
13th Edition. McGraw-Hill International edition,
Chapter 2.
Thompson & Strickland, 2010, Crafting and Executing
Strategy: The Quest for Competitive Advantage:
Concepts and Cases, Chapter 2

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