Chapter Two

The Business Mission, Vision and Values

Nature of Mission statement

 A mission is defined as the fundamental purpose of the
organization and its scope of operation.

 Mission refers to the purpose or reason for the

organization existence.

 It distinguish one business form other similar firms.

 It defines scope of firms operations in product and

market terms.
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 Cont…
 A mission statement broadly charts the future direction of an
organization.
For example, the mission of Ambo University is
• to produce competent and determined human resource
through programs at graduate, undergraduate, and short term
training programs.
• conducting research and consultancy and rendering
community service to public, private and non-profit
organizations.

so that beneficiaries could receive superior value products and

services and thereby enriches our staff and partners to share
our success.” 2
 The importance of a clear mission
 To ensure unanimity of purpose within the
organization.

 To provide a basis for motivating the use of the

organization’s resources.

 To develop a basis, or standard, for allocating

organizational resources.

 Provides the boarding for strategy formulation.

 It provide guidance for strategy making

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 Cont….

Mission statement acts as touch stone for decision

making.

 Mission statement outlines norms of individual

behavior. It provides ethical standard for organization

To facilitate the translation of objectives and goals into

a work structure involving the assignment of tasks to
responsible elements within the organization.

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 Cont….
 Formally acknowledge responsibilities toward various
stakeholders & set standards for organizational performance
along a stated dimension.

• Stakeholders are interested parties which affects and

affected by organization.
• Stakeholder include;
Shareholders
Customers
Staff
Suppliers
Market intermediaries
Government etc.
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 Characteristic of good mission

 While framing the mission statement, the following

points should be taken into consideration so that it serves
the purpose for which it is prepared:

 It should be feasible. Followers should not fill it is

impossible.
 It should be precise – not to narrow and not to broad.

 It should be clear, both in terms of intentions and words

used to lead to action.

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 Cont….

 It should be motivating for employees , customers and

society.
 It should be distinctive or unique.

 It should indicate major components of strategy.

 It should indicate how objectives are to be accomplished-

give clue how to accomplish objective.

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 Components of a Mission Statement

Customers – Who are the firm’s customers?

Products or services – What are the firm’s major products or

services?
Concern for survival, growth, and profitability – Is the firm
committed to growth and financial soundness?

Philosophy – What are the basic beliefs, values, aspirations, and

ethical priorities of the firm?

Self-concept – What is the firm’s distinctive competence or major

competitive advantage?

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 Cont….

Markets – Geographically, where does the firm compete?

Technology – Is the firm technologically current?

Concern for employees – Are employees a valuable, asset

of the firm?

Concern for public image – Is the firm responsive to

social, community, and environmental concerns?

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 Vision Statement

Vision refers to category of intentions that are broad, all inclusive,

and forward looking.

Vision statement defines what the organization what to be in the

future.
It answers the question “What do we want to become/ what do we
want to be”.
Vision is a mental journey from known to the unknown, creating the
future on the basis of current facts, hopes, dreams, dangers (threats)
and opportunities.

For example, the vision of Ambo University is “We envision being the
leading university in East Africa in education, research and consultancy
and community service and finally advance the welfare of the society.”
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 Cont….

Characteristics of Visionary Leaders

 Search for ideas, concepts, and ways of thinking until clear vision
crystallizes;
 Persuade employees to embrace the vision by setting an
example of hard work;
 Act in a supportive and expressive way that says, “ we are all in
this together”
 Relate the vision to the cares and concerns of individuals;
 Remain at the center of the vision, as its prime shaper;
 Articulate the vision into an easy-to-grasp philosophy that
integrates strategic direction and cultural values etc.

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 Strategies in Action

 Many firms have to use strategy to earn revenues and

more profits.
Strategies are the means by which long-term objectives will
be achieved.
Strategies are potential actions that require top
management decisions and large amounts of the firm’s
resources.
In addition, strategies affect an organization’s long-term
prosperity, typically for at least five years, and thus are
future-oriented.
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 Cont….

Types of Strategies
There are four major types of strategies
1. Integration strategies
2. Intensive strategies
3. Diversification strategies and
4. Defensive strategies

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 1. Integration strategies
 Integration strategy is divided in to 3
a. Forward integration
b. Backward integration and
c. Horizontal Integration

a. Forward integration: gaining ownership or increased control

over distributors or retailers.
Guidelines for forward integration strategies
• Present distributors are incapable of meeting firm’s needs
• Availability of quality distributors is limited
• Advantages of stable production are high

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 Cont….
b. Backward integration is a strategy of seeking ownership or
increased control of a firm's suppliers.

Guidelines for Backward Integration

• Present suppliers are expensive, or incapable of meeting needs
• Number of suppliers is small and number of competitors large
• High growth in industry sector

C. Horizontal integration refers to a strategy of seeking ownership of

or increased control over a firm's competitors.

Guidelines for Horizontal Integration

• Firm can gain monopolistic characteristics
• Competes in growing industry
• Increased economies of scale
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 2. Intensive Strategies
 Intensive strategy is classified in to 3

a . Market penetration seeks to increase market share for present

products or services in present markets through greater marketing
efforts.
Guidelines for Market Penetration
• Current markets not saturated
• Usage rate of present customers can be increased
• Market shares of competitors declining
b. Market development involves introducing present products or
services into new geographic areas.

Guidelines for Market Penetration

• Untapped or unsaturated markets
• Excess production capacity
• Basic industry rapidly becoming global 16
 Product Development
Product development is a strategy that seeks increased sales by improving
or modifying present products or services.

Guidelines for Product Development

 Products in maturity stage of life cycle
 Compete in high-growth industry
 Strong research and development capabilities

3. Diversification Strategies
Diversification strategy is divided in to three strategies
a. concentric diversification: adding new, but related, products or services.
Guidelines for Concentric Diversification
• New & related products offered at competitive prices
• Current products are in decline stage of the product life cycle
• Strong management team
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 Cont….
b. Conglomerate diversification: adding new, unrelated products
or services.
Guidelines for Conglomerate Diversification
Declining annual sales and profits.
Financial synergy between the acquired and acquiring firms.
Exiting markets for present products are saturated.
c. Horizontal Diversification: adding new, unrelated products or
services for present customers.
Guidelines for Horizontal Diversification
Present distribution channels can be used to market new products
to current customers.
New products have counter cyclical sales patterns compared to
existing products.
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 4. Defensive Strategies

Defensive strategy is divided in to four strategies

a. Retrenchment occurs when an organization reforms through cost
and asset reduction to reverse declining sales & profits.

- Retrenchment can entail selling off land and buildings to raise

needed cash, reducing product lines, closing obsolete factories,
reducing the number of employees, and instituting expense
control systems.

Guidelines for Retrenchment

 Firm is one of the weaker competitors
 Inefficiency, low profitability, poor employee morale
 When an organization’s strategic managers have failed
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 Cont….
b. Divestiture is selling a division or part of an organization.
- It is used to raise capital for further strategic acquisitions or
investments.
Guidelines for Divestiture
When a division needs more resources than the firm can provide
When a division is responsible for the firm’s overall poor
performance
C. Liquidation is selling all of a company's assets, in parts, for their
tangible worth.
Guidelines for Liquidation
• When both retrenchment and divestiture have been pursued
unsuccessfully
• If the only alternative is bankruptcy, liquidation is an orderly
alternative 20
 Cont….
D. Joint venture is a popular strategy that occurs when two or more
companies form a temporary partnership or consortium for the
purpose of capitalizing on some opportunity.

Guidelines for Joint Ventures

 Distinctive competencies of two or more firms are
complementary
 Two or more smaller firms have trouble competing with larger
firm
 A need exists to introduce a new technology quickly

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 Michael Porter’s generic strategies
 According to Porter, strategies allow organizations to gain competitive
advantage from three different bases:
• Differentiation
• Cost leadership
• Focus
a. Differentiation Strategy
 Differentiation involves creating a product that is perceived as unique.
 The unique features or benefits should provide superior value for the
customer if this strategy is to be successful.

 the process of adding meaningful and valued differences to distinguish the

company’s offering from the competition.
 an organization seeks to provide a unique or superior value to the buyer in
terms of product quality, special features, or after sale service.
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A firm can differentiate along 5 dimensions

1. Product Differentiation
• performance quality, conformance quality (ability to meet
designed specifications) , durability, reliability, reparability, style,
design form, attractive pricing customization, bundling, additional
packing materials not required in bulk case shipments to
wholesalers and retailers.

2. Service Differentiation
• ordering ease, delivery, installation, customer training, customer
consulting, maintenance and repair, miscellaneous services

• customer service can be enhanced by 24-hour customer feedback

and the ability to respond more rapidly to customer concerns.
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 Cont.....
3. Personnel Differentiation

• competence, courtesy, credibility, reliability, responsiveness,

communication
• automated processes, reduced dependence on personnel, lower
transaction cost.

4. Channel Differentiation
• Typically around half the price paid for a product by a customer is
absorbed by the activities involved in getting that product to the
customer
• Direct channel, where the company sales its products directly to
the final consumers
• Indirect channel, but shorter one
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 Cont....
5. Image Differentiation
A company can differentiate itself by creating a unique experience
A company or brand image should convey the product’s distinctive benefit and positioning
Through experience branding firms can better retain customers, target key segments, and
enhance profitability.

 The most commonly used specific differentiation strategies include

• Being the first to enter the market.

• Owning a product attribute in the mind of the consumer.
• Demonstrating product leadership.
• Utilizing an impressive company history or heritage.
• Supporting and demonstrating the differentiating idea.
• Communicating the difference.
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 b. Cost leadership strategy

 Cost leadership Strategies emphasizes producing

standardized products at very low per unit cost for consumers
who are price sensitive.

- This strategy emphasizes efficiency.

 An organization attempts to design, produce and market a
comparable product more efficiently than its competitors
 Low-cost-position relative to a firm’s peers

 Manage relationships throughout the entire value chain

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 Cont...
 Integrated tactics to attain cost leadership

• Aggressive construction of efficient-scale facilities

• Vigorous pursuit of cost reductions from experience

• Tight cost and overhead control

• Avoidance of marginal customer accounts

• Cost minimization in all activities in the firm’s value

chain, such as R&D, service, sales force, and
advertising

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 c. Focus strategy

 Focus strategy refers an organization concentrates on a specific

regional market, product line, or a specific market segment.

 Narrow product lines, buyer segments, or targeted geographic

markets.

 Attain advantages either through differentiation or cost

leadership.
 Focus is based on the choice of a narrow competitive scope within an
industry.
 Firm selects a segment or group of segments (niche) and tailors its
strategy to serve them.

 Firm achieves competitive advantages by dedicating itself to these

segments exclusively.
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