Business Strategy and Policy 1

Business Policy and Strategy

Lecture 06

Business Strategy and Policy 2

Recap

• Vision and Mission Statement

– “What is our business?”- Mission Statement– “What do we want to become?” Vision Statement

• Examples• Characteristic of Mission Statement

Business Strategy and Policy 3

Today’s Lecture

• Importance of Vision and Mission Statement

• Reason for developing a written Mission Statement

• Components of Mission Statement

Business Strategy and Policy 4

Importance of Vision and Mission Statement

• Mission Statements must be well documented

– Firms with a formalized mission statement have twice the average return on shareholders equity than those firms without a formalized mission statement.

– Research highlighted that there is positive relationship between mission statement and organizational performance.

– Business Week reported that firms using mission statement have a 30 percent higher return on financial measures than those without such statements.

Business Strategy and Policy 5

Reasons for Developing a Written Mission Statement

• To ensure unity of purpose within the organization

• To provide a basis, or standard, for allocating  organizational resources

• To establish a general tone or organizational climate

• To serve as a focal point for individuals to identify organization’s purpose and direction, and to discourage those who cannot from participating further in the organization’s activities

Business Strategy and Policy 6

Reasons for Developing a Written Mission Statement

• To facilitate the translation of objectives into a work  breakdown structure 

• To specify organizational purposes and the translation of these purposes into objectives. It helps in– Assessment and controlling of cost time and

performance parameters.

Business Strategy and Policy 7

Why Written Mission Statement is important?

• Developing a comprehensive mission statement is important because divergent views important among managers can be revealed and resolved through this process.

• Considerable disagreement among an organization’s strategists over vision and mission can cause trouble if not resolved.

• An organization that fails to develop a vision statement loses the opportunity to present itself favorably to existing potential stakeholders.

Business Strategy and Policy 8

Components of Mission Statement

• Customers:  Who are the firm’s customers?• Products or services: What are the firm’s major

products?• Markets: Geographically, where does the firm

compete?• Technology: Is the firm technologically current?• Concern for survival, growth, and profitability: 

Is the firm committed to growth– and financial soundness?

Business Strategy and Policy 9

• Philosophy: – What are the basic beliefs, values, aspirations, and ethical pri

orities of the firm?• Self Concept:– What is the firm’s distinctive competence or major

competitive advantage?• Concern for public image: – Is the firm responsive to social, community, and

environmental concerns?• Concern for employees: – Are employees a valuable asset of the firm?

Business Strategy and Policy 10

Summary

• Importance of Vision and Mission Statement– Business Week reported that firms using mission

statement have a 30 percent higher return on financial measures that those without such statements.

• Reason for developing a written Mission Statement– Considerable disagreement among an organization’s

strategists over vision and mission can cause trouble if not resolved.

Business Strategy and Policy 11

Components of Mission Statement

1. Customers2. Products or services3. Markets4. Technology5. Concern for survival, growth, and profitability6. Philosophy7. Self Concept8. Concern for public image9. Concern for employees

Business Strategy and Policy 12

Next Lecture

• Why Firms do not Plan strategically?• Benefits of planning Strategically