Defining the Business: Vision, Mission and Long-term Objectives

1. Defining the Business: Vision, Mission and Long-term Objectives By D. J. Power

2. Defining the Vision • What is a company vision statement? • A company vision summarizes the organization’s hopes for the future, values and aspirations in the most general terms. A vision statement SHOULD NOT include statements about the strategies used to attain a vision.

3. Defining the mission • What is a company mission? • A company mission is the fundamental purpose that sets a firm apart from other firms of its type and identifies the scope of its operations in product and market terms. It is a broadly framed but enduring statement of a firm’s intent.

4. What is a mission statement? • formal, written document • broad statement of a firm’s purpose, intent and direction. • must specify product/market niche. Customer-market Geographic domain Product-service • may identify principal technology for production/delivery. • may contain the firm’s fundamental concern for survival through growth and profitability; • may contain the firm’s managerial philosophy; • may contain the public image the firm seeks; • may contain characteristics of corporate self-concept.

5. What questions does a mission statement address? • What business or businesses are we in? • What customers do we serve? • What is the purpose of this organization? • Why does the organization exist?

6. What should be the focus of the mission statement? • Market focus rather than product focus • External rather than an internal focus • Future-oriented focus

7. Do all firms need an explicit, written mission statement? • No. But a formal, written mission statement can be a useful strategic tool. • What are the benefits of a formal mission statement? • Creates a shared purpose and unanimity of purpose in the company • Creates shared expectations among stakeholders • Projects a sense of worth, values and intent to stakeholders • Improves resource allocation and use • Improves communications about organization intent and purpose • Focuses and guides the setting of goals and objectives

8. Involving Stakeholders in formulating a mission statement • Stakeholders should be appropriately involved in formulating a formal mission statement or in reviewing an existing mission statement. Why? Because they have a “stake” in the existence of the firm. • Involve in a mission review process: stockholders, customers, employees, creditors, suppliers, relevant government agencies (as appropriate), any relevant unions, and community leaders.

9. A suggested process • Explicitly take the following steps: • Identify relevant stakeholder representatives • Understand the stake holder's “stake” in the firm—legitimate claims • Reconcile claims and prioritize them • Coordinate claims with political and economic realities

10. Criteria for evaluating a business mission statement • Is the content appropriate? • Is it easy to understand? • Is it clearly written? • Is it reasonably short and memorable? • Can we share it with all stakeholders? • Is it acceptable to strategic decision makers? • Does it project a positive image and tone?

11. Examples of mission statement • Coca-Cola • PepsiCo

12. Coca-Cola mission statement • We exist to create value for our share owners on a long-term basis by building a business that enhances the Coca-Cola Company’s trademarks. This also is our ultimate commitment. • As the world’s largest beverage company, we refresh the world. We do this by developing superior soft drinks, both carbonated and non-carbonated, and profitable non-alcoholic beverage systems that create value for our Company, our bottling partners and our customers.

13. In creating value, we succeed or fail based on our ability to perform as stewards ofseveral key assets: • Coca-Cola, the world’s most powerful trademark, and other highly valuable trademarks. • The world’s most effective and pervasive distribution system. • Satisfied customers, who make a good profit selling our products. • Our people, who are ultimately responsible for building this enterprise. • Our abundant resources, which must be intelligently allocated. • Our strong global leadership in the beverage industry in particular and in the business world in general.

14. PepsiCo mission statement • PepsiCo’s mission is to increase the value of our shareholder’s investment. We do this through sales growth, cost controls and wise investment of 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.

15. Identifying Mission Statement Components • Customer-market “To anticipate and meet market needs of farmers, ranchers and rural communities.” (CENEX) • Product-service “AMAX’s principal products are molybdenum, coal, iron ore, copper, lead, zinc, petroleum and natural gas.” • Geographic domain “We are dedicated to the total success of Corning Glass Works as a worldwide competitor.” • Technology “The common technology in these areas relates to discrete particle coatings.” (NASHUA)

16. Identifying components • Concern for survival “the company will conduct its operations prudently, and will provide profits and growth which will assure Hoover’s ultimate success.” (Hoover Universal) • Philosophy “We are committed to improve health care throughout the world.” (Baxter Travenol) • Self-concept “Hoover Universal is a diversified, multi-industry corporation with strong manufacturing capabilities, entrepreneurial policies, and individual business unit autonomy.” • Concern for public image “We are responsible to the communities in which we live and work and to the world community as well.” (Johnson & Johnson)

17. Establishing Long-term Objectives • What is a long-term objective? • specific targets with time frames • help managers assess how well they are doing in reaching more general aims and objectives that deal with long-term profitability, growth and survival. • statements of the results a firm seeks over a specific time period, usually 5 years. • Also called strategic objectives

18. Other key terms • Planning horizon is the time frame for planning strategic activities and for accomplishing strategic long-term objectives.

19. Profitability – To achieve an 8% ROI by 20XX Employee Development – To have employees spend 10% of their time each year in skills development activities by 20XX Productivity – To decrease the cost of producing product A 5% by 20XX Technological Leadership -- By 20XX derive 30% of each divisions revenue from products introduced in previous 4 year period Employee Relations – By 20XX every technical employee should use 15% of working week to pursue a project he or she desires Competitive Position – To increase our relative market share by 5% by 20XX Public and Social Responsibility – To contribute 1% of annual gross revenues to community projects by 20XX PEP TECS What are common categories of long-term objectives?

20. Evaluating Long-term objectives • Acceptable - Is the objective acceptable to managers and KEY stakeholders? • Flexible - Is the objective adaptable to unforeseen changes in the firm’s environment? • Measurable - Does the objective clearly state what will be achieved and when it will be achieved? • Achievable - Is the objective achievable?

21. Motivating - Is the objective’s target high enough to challenge, yet realistic and achievable? • Suitable - Does the objective fit with the mission statement and with other important long-term objectives of the firm? • Understandable - Will managers at all levels understand what senior managers are trying to accomplish and achieve by setting the specific long-term objective? • AFMAMSU