lecture 2 company vision & mission
TRANSCRIPT
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Company Vision & Mission
LECTURE 2
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“If you don’t know where
you are going, any road
will take you there.”
Cheshire Cat to Alice Lewis Carroll, Alice in Wonderland
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“If you articulate a vision
that makes people passionate,
there are so many amazing
things you can do.”
Dr. Sophie Vandebroek
Xerox Corporation
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Table 2.1: Factors to Consider in Deciding on a Company’s Future Direction
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Key Elements of a Strategic Vision
Delineates management’s 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 company’s 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 company’s 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?
Company Mission:
A broadly framed but enduring statement of a firm’s 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 firm’s 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 company’s 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 company’s 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 company’s 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 company’s 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) Mission Statement Components
1. Customer-market 2. Product-service 3. Geographic Domain 4. Technology 5. Concern for Survival 6. Philosophy 7. Self-concept 8. 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 firm’s profitability is the mainstay goal of a business.
Clearest indication of firm’s ability to satisfy principal claims and desires of employees and stockholders
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Primary Company Goals (contd.)
Growth – A firm’s 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 firm’s 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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Deming’s 14 Points:
1. Create constancy of purpose.
2. Adopt the new philosophy.
3. Cease dependence on mass inspection to achieve quality.
4. End the practice of awarding business on price tag alone. Instead, minimize total cost, often accomplished by working with a single supplier.
5. Improve constantly the system of production and service.
6. Institute training on the job.
7. Institute leadership.
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Deming’s 14 Points (cont’d):
8. Drive out fear.
9. Break down barriers between departments.
10. Eliminate slogans, exhortations, and numerical targets.
11. 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 self-improvement.
14. Put everyone in the company to work to accomplish the transformation.
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Newest Trends in Mission Components (contd.)
Statement of company’s vision
A statement that presents a firm’s 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 company’s 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