Strategic Management

Lecture 2 (Part I)

Company Mission & Corporate

Social Responsibility
Company Mission

Refer Pearce II & Robinson Chapter 2

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 Learning Objectives
1. Describe a company mission and explain its values
2. Explain why the mission statement should include the
company’s basic product or service, its primary markets, and
its principal technology
3. Explain which goal of a company is most important: survival,
profitability, or growth
4. Discuss the importance of company philosophy, public image,
and company self-concept to stockholders
5. Give examples of the newest trends in mission statement
components: customer emphasis, quality, and company vision
6. Describe the role of a company’s board of directors

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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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 The Need for an Explicit Mission
The mission statement is a message designed to include the
expectations of all stakeholders regarding company performance
over the long run

In general, the mission statement address the following

questions:

 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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 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

(Refer Ex2.2 for reference)

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Ex. 2.2 Excerpts From Actual Mission Statements

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Ex. 2.2 Excerpts From Actual Mission Statements (contd.)

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 Example:
 Dell Computer’s mission

To be the most successful computer company in

the world at delivering the best customer
experience in markets we serve. In doing so, Dell
will meet customer expectations of highest quality;
leading technology; competitive pricing;
individual and company accountability; best-in-class
service and support; flexible customization capability;
superior corporate citizenship; financial stability.

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Three Essential Components in mission statement:

 Basic Product or Service

 Primary Market
 Principal Technology

 In combination – best describe the

company’s business activity
 If a firm uses a “silver bullet” statement
mission for outsiders to read, it will
include these three components

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Silver bullet mission statement: An example
 “Dayton-Hudson Corporation (Target
Corporation) is a diversified retailing company
whose business is to serve the American
consumer through the retailing of fashion-
oriented quality merchandise.”
Primary Company Economic Goals: Survival, growth, profitability
 Survival
– Concern for expediency, a quick fix or a bargain may displace the
assessment of long term impact.
– A firm that is unable to survive will be incapable of satisfying the aims
of any of its stakeholders.
 Profitability
– A firm’s profitability is the mainstay goal of a business (over the long
term).
- Decisions that focus on short term profitability are likely to overlook
products quality / customers satisfactory.
 Growth
– A firm’s growth is tied closely to its survival and profitability.
Growth in this sense must be broadly defined.
- Other forms of growth: number of market serve, variety of products
offered, technologies used that lead to improvement in competitive
ability, proactive change

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Example:

HP’s Mission Statement on economic goals

 To achieve sufficient profit to finance our

company growth and to provide the resources
we need to achieve other corporate objectives
 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.
 Mission statements should reflect the public’s
expectations, because this makes achievement
of the firm’s goals more likely
 Firms should be concerned with their public
image even when there is no serious public
concern.
E.g. “We are committed to actions to restore
and preserve the environment” (General
Motors)
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 Company Self-Concept

 The firm’s must evaluate its competitive strengths

and weaknesses - i.e. The firm must know itself
 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.

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 Newest Trends in Mission Components
The following are increasingly integral parts in the development or
revisions of mission statement:

1. Customers
 The customer as top priority, e.g. GE, Johnson & Johnson
 Focus on customer satisfaction, by providing toll-free telephone lines to handle
customer complaints.
 Strong customer service initiatives have led some firms to gain competitive
advantages in the marketplace.

2. Quality
 Quality as a priority, particularly in manufacturing
 New philosophy is that quality should be the norm. e.g. Motorola's goal is 60 or
fewer defects per every billion products.
 Various quality awards have been created to increase emphasis in quality. e.g..
SIRIM Quality Award

3.Vision statement
 Express the aspiration of the executive leadership
 The firm’s strategic intent for success
 Some companies might combine mission & vision statement
 When they are separated, vision is often a single sentence
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 Mission vs Vision
 Mission statement
 “What business are we in?”

 Vision statement
 Presents the firm’s strategic intent that focuses on the
energies and resources of the company on achieving
desirable future
- Aspirations, what / who we want to be?
- Short and memorable
 Examples:
“ To become the world’s leading customer company for
automotive products and services.” - Ford Motor
“ To enable people and businesses throughout the world
to realize their full potential” - Microsoft

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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.

 Elected by the stockholders

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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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 Strategic Management
Lecture 2 (Part II)

Company Mission & Corporate

Social Responsibility
Corporate Social Responsibility & Ethics
Refer Pearce II & Robinson (Chapter 3)

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CORPORATE SOCIAL RESPONSIBILITY (CSR)

Definition of CSR
 It is the idea that business has a duty
to serve society in general as well as
the financial interests of
stockholders.

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THE STAKEHOLDER APPROACH TO CORPORATE
SOCIAL RESPONSIBILITY (CSR)

According to the Stakeholder Approach:

 In defining or redefining the company mission,
strategic managers must recognise the
legitimate rights of the firm’s claimants.
 In addition to stockholders and employees,
these include outside stakeholders
(e.g. customers, suppliers, government,
competitors, unions, local communities, and
the general public) affected by the firm’s
actions.
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 Steps to Incorporate Stakeholders
1. Identification of stakeholders
 Who are the stakeholders of a company?
 Does the number and influence of every stakeholder groups same
for every company?
Strategic managers must identify all stakeholder groups and weigh
their relative rights and relative ability to affect the firm’s success.
2. Understanding stakeholders’ specific claims
3. Reconciliation of these claims and assignment of
priorities
Conflicting claims of different stakeholders must be reconciled in a
mission statement
4. Coordination of the claims with other elements of the
company mission
How the firm satisfy its claimants and at the same time optimise its
economic success in the market place?
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Dynamics of Social Responsibility

 Inside vs. Outside Stakeholders

 Duty to serve society plus duty to serve
stockholders
 Flexibility is key
 Firms differ along:
 Competitive Position
 Industry
 Country
 Environmental & ecological pressures

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Ex. 3.2 Inputs to the Development of Company Mission
Examples: (refer Exhibit 3.3 “Who’s Doing Well by
Doing Good”)

Companies that actively involved in CSR

 The Body Shop: pollution-free environment,
recycling & conservation of resources, minimizing
or avoiding the use of animals in drug & cosmetic
testing
 Toyota: The maker of the top-selling Prius hybrid
leads in developing efficient gas-electric vehicles
Example:
Johnson & Johnson Credo / mission statement
 We believe our first responsibility is to the doctors,
nurses and patients, to mothers and fathers and all others
who use our products and services.
 In meeting their needs everything we do must be of high
quality.
 We must constantly strive to reduce our costs in order to
maintain reasonable prices.
 Customers' orders must be serviced promptly and
accurately.
 Our suppliers and distributors must have an opportunity
to make a fair profit.
 We are responsible to our employees, the men and
women who work with us throughout the world.
 Everyone must be considered as an individual.
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Adapted from Exhibit 2.5
Johnson & Johnson Credo (cont.)
 We must respect their dignity and recognize their merit.
 They must have a sense of security in their jobs.
 Compensation must be fair and adequate, and working
conditions clean, orderly and safe.
 We must be mindful of ways to help our employees fulfill
their family responsibilities.
 Employees must feel free to make suggestions and
complaints.
 There must be equal opportunity for employment,
development and advancement for those qualified.
 We must provide competent management, and their actions
must be just and ethical.
 We are responsible to the communities in which we live and
work and to the world community as well.
 We must be good citizens – support good works and
charities and bear our fair share of taxes.
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Adapted from Exhibit 2.5
Johnson & Johnson Credo (cont.)
 We must encourage civic improvements and better
health and education.
 We must maintain in good order the property we are
privileged to use, protecting the environment and
natural resources.
 Our final responsibility is to our stockholders.
 Business must make a sound profit.
 We must experiment with new ideas.
 Research must be carried on, innovative programs
developed and mistakes paid for.
 New equipment must be purchased, new facilities
provided and new products launched.
 Reserves must be created to provide for adverse times.
 When we operate according to these principles,
the stockholders should realize a fair return.
Adapted from Exhibit 2.5
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 Types of Social Responsibility
1. Economic Responsibilities
 The most basic social responsibilities of business
 The duty of managers, as agents of the company to produce
goods and services so that to maximize shareholders’
wealth and repay its creditors
 In discharging its economic responsibility, the company
emerges as socially responsible by providing productive jobs
for its workforce, and tax payments for its local, state, and
federal governments

2. Legal Responsibilities
 Company’s requirements / obligations to comply with the
laws that regulate business activities
 The consumer and environmental movements focused
increased public attention on the need for social
responsibility in business by lobbying for laws that govern
business in the areas of pollution control and consumer
safety

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 Types of Social Responsibility (cont.)
3. Ethical Responsibilities
 The company’s notion of right and proper business
behavior.
 Ethical responsibilities are obligations that transcend legal
requirements
 Some actions that are legal might be considered unethical
 E.g. The manufacture and distribution of cigarettes is legal, but
due to the negative health consequences of smoking, many
consider the continued sale of cigarettes to be unethical

4. Discretionary Responsibilities
 Voluntarily obligations assumed by a business organization.
 These responsibilities include public relations, good
citizenship, and full corporate responsibility.

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 CSR & Profitability

 The dynamic between CSR and profit is

complex. They are not mutually exclusive,
and they are not prerequisites of each other.
 CSR – costs and benefits are both economic
and social
 Economic – easy to quantify
 Social – difficult to quantify

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 CSR Today

 Priority of many businesses today

 Drivers of social responsibility - 3 broad trends :

 Sustainability and Resurgence of

environmentalism
 Increasing Buying Power among Consumers
 Globalization of Business
CSR Today Drivers of social responsibility - 3 broad trends (cont.)
Sustainability and Resurgence of Environmentalism
 Concern for “greening” - The most prevalent forms of
environmentalism are efforts to preserve natural resources and
eliminating environment pollution
 Sustainable business
- take long term approach to minimizing its negative impacts on
the ecology, the society and the economy
- Its performance is judged by the triple bottom line of people,
planet, & profit
- sometime referred to as green business

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CSR Today Drivers of social responsibility - 3 broad trends (cont.)
Sustainability and Resurgence of Environmentalism (cont.)
 Priority of sustainable business
 minimize harm to the environment caused by the
production and consumption of their products

 Carbon footprint – volume of greenhouse gases

emissions from production, use & disposal

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CSR Today Drivers of social responsibility - 3 broad trends (cont.)
Increasing Buyer Power
Consumer
• of the consumer movement
• consumers – more interested to buy from socially
responsible companies
• E.g. Consumer Association – provide information
Investor
•  interest to support socially responsible companies
through their investment
• Social investors may influence co. decision through their
collective public act (i.e. through voting) pressure co. to
change their social behaviour
• Social investors comprise of both individuals & institutions

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CSR Today Drivers of social responsibility - 3 broad trends (cont.)

The Globalisation of Business

 CSR issue become more complex for international

business
 Difficult to achieve consensus on what constitute
socially responsible
 E.g. US firms outsource their manufacturing
activities to the manufacturer in China (lower
wages, lower costs) – US workers and unions
argue that this eliminate job in the US

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 New Corporate Governance Structure
 Restructuring governance structure in American
corporations
 Heightened role of corporate internal auditors
 Auditors now routinely deal directly with top corporate
officials
 CEO information provided directly by the company’s
chief compliance and chief accounting officers

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The New Corporate Governance Structure

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 CSR’s Effect on Mission Statement
• The mission statement embodies what company
believes
 Managers must identify all stakeholder
groups and weigh their relative rights and
abilities to affect the firm’s success

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 The Future of CSR
 CSR is irreversibly part of any corporations
- CSR  reputation  +ve impact on hiring,
motivation, staff retention
 Corporations will face growing demands for social
responsibility contributions far beyond simple cash or
in-kind donations
 Growing concern –
 Aggressive protesters, employees’ views,
shareholders’ judgment and vote
 Meeting CSR obligations vs. shareholders’ expected
returns

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 Management Ethics

The Nature of Ethics in Business:

 Belief that managers will behave in an ethical
manner is central to CSR
 Ethics – the moral principles that reflect
society’s beliefs about the actions of an
individual or a group that are right and wrong
 Major Trends in Codes of Ethics
1. Code of ethics is no longer only found in employee handbook.
The new trend is for them to also be prominently displayed
on corporate websites, annual reports, bulletin boards etc.

2. Companies are adding enforcement measures to their codes.

 Policies  what employees need to do if they see violations
occur
 Create awareness of the consequences of the violations on their
employment, civil & criminal charges
 Require employees to sign ethics statement – read & understand
their obligations
3. Increased attention by companies in improving
employees’ training in understanding their obligations
under the company’s code of ethics.
- ethical decision making
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