BUSINESS POLICY & STRATEGY

Unit I Notes:
Nature & importance of business policy & strategy: Introduction to the strategic management process and related
concepts; Characteristics of corporate, business & functional level strategic management decisions. Company’s vision and
mission: need for a mission statement, criteria for evaluating a mission statement-Goal, Process & Input formulation of
the mission statement-Drucker’s Performance Area, Bennis’s Core Problem; formulation of mission statement.

CONCEPT AND DEFINITION OF BUSINESS POLICY

Business policies are the guidelines formulated by an organization to govern its actions. They
define the limits and the scope within which decisions must be made by the subordinates. It
allows the lower level management to deal with the issues and challenges without consulting
top level management every time for making decisions.

Policies may be defined as the mode of thought and the principles underlying the activities of
an organization or an institution. Policies are general statements of principles which guide the
thinking, decision-making and action in an organization, for achieving the organisational
objectives. Business policy refers to the guidelines given to employees by senior management
for taking decisions in their day-today functioning, so that the objectives of the organisation
are achieved.

Policies are framed by the top level management to serve as a road map for operational
decision making. It is helpful in stressing the rules, principles and values of the organization.
Policies help the management of an organization to determine what is to be done, in a
particular situation. These have to be consistently applied over a long period of time to avoid
discrepancies and overlapping. Policies are designed, by taking opinions and general views of
a number of people in the organization regarding any situation. They are made from the past
experience and basic understanding. In this way, the people who come under the range of such
policies will completely agree upon its implementation.

Examples of Business Policies:

• Ethics: Ethics policies address issues such as honesty, fairness, integrity and respect.
• Human Resources: Policies imposed in the area of human resources address issues such
as hiring and termination, benefits, promotion and salary increase and discipline.
• Customer Service: Customer service policies address issues such as employee attitude
toward customers.

NATURE/FEATURES OF BUSINESS POLICY

An effective business policy has the following Nature/features-

1. Specific: An effective business policy is specific/definite. If it is uncertain, then the

implementation will become difficult.

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 2. Clear: An effective business policy must be unambiguous. It should avoid use of jargons
and connotations. There should be no misunderstandings in following the policy.

3. Reliable/Uniform: An effective business policy is uniform enough so that it can be

efficiently followed by the subordinates.

4. Appropriate: An effective business policy is appropriate to the present organizational goal.

5. Simple: An effective business policy is simple and easily understood by all in the
organization.

6. Inclusive/Comprehensive: In order to have a wide scope, business policy must be

comprehensive.

7. Flexible: A good business policy is flexible in operation/application. This does not imply
that a policy should be altered always, but it should be wide in scope so as to ensure that
the line managers use them in repetitive/routine scenarios.

8. Stable: An effective business policy is stable or else it will lead to indecisiveness and
uncertainty in minds of those who look into it for guidance.

IMPORTANCE OF BUSINESS POLICY

Business policies are important and affect everything from legal liabilities to employee
satisfaction and a positive public image. Policies make sure everyone is on the same page when
it comes to expectations of certain things. A business might have policies pertinent to different
aspects of the company. There may be safety policies, human resources hiring policies and
anti-discrimination policies. There may also be policies that pertain to employees’ dress code,
lunch schedules, time off and holidays.

All of these policies create a positive work environment. It sets the tone of the office dynamic
and the foundation for teamwork. Policies are the key for success of the business. Policies offer
great advantages to the management if they are stated with clarity. It raises the confidence of
the line managers. They make the decisions within a given boundary. The managers act
without the need for consulting the senior managers every time which minimizes the need for
close supervision. It also builds the confidence of the managers.

The importance of business policies are discussed as follows:

1. Control: Policy facilitates effective control on the working of the organization. It indirectly
controls the managers at different levels without directly interfering in their routine
working.

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2. Effective Communication: Generally policies are written and well drafted statements.
Hence there is not a remote chance of confusion or miscommunication. Clearly laid down
policies try to eliminate personal hunch and biasness.

3. Clarity: Policies clarify the viewpoint of the management for the purpose of running a
particular activity / activities.

4. Motivation: Policy enables the line managers to be self-reliant. They take the decision on
their own in the confined border of the policy. This raises their confidence and motivates
them. A well drafted policy provides a pattern within which delegation of authority is
possible.

5. Economical and Efficient: Policy enables the management to carry out its operations
effectively and efficiently. It enhances the working of the organization.

6. Coordination of Efforts: Policies ensure coordination of efforts and activities at different

levels in the organization. Activities and duties are assigned in such a way that all activities
in the organization are integrated effectively.

7. High Morale: A well-crafted policy can raise the overall morale of an enterprise. Policy
enables the managers to understand the intention of the management.

CONCEPT AND DEFINITION OF BUSINESS STRATEGY

The concept of strategy is derived from military principles. In military context, the strategy is a
plan of action to win a war. The literal meaning of Strategy is “In anticipation of opponents
move, designing one’s own way of action”. Strategy refers to a general plan of action for
achieving one’s goals and objectives.

In business terms, there is no definite meaning of strategy and it is used for a number of things
like mobilizing and deploying resources systematically for attaining organizational goals. It is
related to pursuing those activities which move an organization from its current position to
desired future state. It also relates to resources necessary for implementing a plan or following
a course of action.

➢ According to William F. Glueck, Business Strategy is “a unified, comprehensive and

integrated plan design to assure that the basic objectives of the enterprise are
achieved.”

➢ Business Strategy is “the determination of the long-term goals and objectives of an

enterprise and the adoption of the courses of action and the allocation of resources
necessary for carrying out these goals”.

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Strategy is management’s plan for strengthening the organization’s position, pleasing
customers, and achieving performance targets. A strategy is all about integrating organisational
activities and utilising and allocating the scarce resources within the organisational
environment so as to meet the present objectives.

Therefore strategy is a large scale future oriented plan which provides a framework for
managerial decisions. Strategy is an action that managers take to attain one or more of the
organisation’s goals.

FEATURES OF BUSINESS STRATEGY

Following are the features/ Characteristics / Dimensions of strategy:

1. Strategic issues require top-management decisions.

2. Action Oriented: Strategic decisions are action oriented and defines the goals and
objectives of the organization The business strategies are objectives oriented and are
directed towards organizational goal. To formulate strategies the business should know
the objectives that are to be pursued. For example if any business want to achieve growth
then it has to set following objectives.
➢ To increase market share.
➢ To increase customers satisfaction.
➢ To enhance the goodwill of the firm.

3. Strategic decisions are long range in nature but also valid for short range situations. But
long-term direction of the business is a crucial part of strategic decisions. Strategic issues
are likely to have significant impact on the long-term survival and growth of the firm

4. Complex in Nature: Strategic decisions are complex in nature. This is so because they
encompasses mission, long-term direction, scope of the organization, and establishment
of organization environment fit.

5. Dynamic in Nature: Strategy is flexible and dynamic in nature. Strategic decisions involve
a change of major kind since an organization operates in ever-changing environment.

6. Universally Applicable: Strategies are universally applicable and accepted irrespective of

business nature and size. Every business unit designs strategy for its survival and growth.
The presence of strategy keeps business moving in right direction.

7. Future-Oriented: Strategy is future oriented plan and formulated to attain future position
of the organization. Therefore strategy enables management to study the present position
of organization and decides to attain the future course of action to achieve prosperity,
profitability and development & growth of the business.
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8. Involves Risk & Uncertainty: Strategic decisions are uncertain as they deal with the future,
and involve a lot of risk.

9. Influence of Environment: The environmental factors affect the formulation and

implementation of strategy. The business unit by analyzing internal and external
environment can find out its strength and weaknesses as well as opportunities and threats
and can formulate its strategy properly.

IMPORTANCE OF BUSINESS STRATEGY

Once a business is started, the importance of business strategy cannot be ignored. As the
business environment today is becoming increasingly competitive, the importance of business
strategy cannot be ignored. Any leader who is unaware of the importance cannot ensure the
long-term sustainability of their organization.

The importance of business strategy can he highlighted as follows:

1. Clarfiies goals: In the initial phase of a business, a lot of planning is required. While a plan
clarifies the goals, it is the strategy that helps in executing and reaching the vision.

2. Helps in analysing the internal cometencies: When leaders formulate a strategy, it helps
them understand their strengths and weaknesses. This way, they can capitalize on what
they are good at and improve on their weaker aspects.

3. It ensures that every aspect of a business is planned. This means more efficiency and
better and more effective plans. Everyone in the team is aware of what they need to do,
and the capital is allocated properly.

4. Competitive advantage: a well defined buisness strategy can help businesses gain a
competitive advantage over others in the segment. It also makes them unique in the eyes
of their customers.

5. Control: formulating a business policy ensures that leaders have control over the
processes. This means they will also go as planned.

LEVELS OF STRATEGY / LEVELS OF STRATEGIC DECISION MAKING

Strategy can be formulated on three different levels:

• Corporate Level
• Business Unit Level
• Functional or Departmental Level

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1. CORPORATE LEVEL STRATEGY:

The first level of strategy in the business world is corporate strategy. Corporate strategy
deals with the overall firm. It set the direction that the organization has to follow. This
strategy is all about coordination. It is the growth strategy of the firm. Corporate strategies
are established at the highest levels in the organization and are formulated by the top
managers. The corporate level strategy is fundamentally concerned with the selection of
businesses in which the company should compete. It outlines exactly what business the firm
is going to engage in, and how it plans to enter and win in those markets. It includes major
decisions like determinations of business lines, expansion and growth, diversification,
takeover and mergers, new investment decisions and so on. It help an organization to
achieve and maintain success. The basic objective of the corporate strategy is to accept
opportunities and remove threats.

Corporate level strategy is mainly concerned with:

i. Reach - defining the issues like the types of businesses in which the corporation
should be involved, mission and vision of the company, and identifying the overall
goals of the corporation.

ii. New Investment decisions – making decsions regarding growth and expansion of
business, merger /takeover etc.

iii. Managing Activities and Business Integration - Corporate strategy seeks to develop
synergies by sharing and coordinating staff and other resources across business
units, investing financial resources across business units etc. It is also concerned
with integrating all businesses and developing synergy among them

iv. Management Practices - Corporations decide how business units are to be

governed: through direct corporate intervention (centralization) or through
decentralization.

v. Allocation of Resources – Deciding upon how the allocation of resources shall be

done within different business units.

Corporate strategies are thus, concerned with the direction of the firm and with the
management of its product lines and business units. Corporate Level Stretegy is generally
the responsibility of Board of Director, CEO, Administration and Top Management.

2. BUSINESS UNIT LEVEL STRATEGIES

Business Level Strategies are the strategies that are slightly more specific and they usually
relate to the smaller businesses within the larger organization. Business level strategy is
applicable in those organizations, which have different businesses-and each business is
treated as an independent strategic business unit (SBU). For example, Reliance Industries

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 Limited operates in textile fabrics, yarns, fibers, and a variety of petrochemical products.
For each product group, the nature of market in terms of customers, competition, and
marketing channel differs. Therefore, it requires different strategies for its different
product groups. Thus, where SBU concept is applied, each SBU sets its own strategies to
make the best use of its resources (its strategic advantages) given the environment it faces.
This kind of strategy is called business unit level strategy.

This strategy focuses on improving the competitive position of a company’s or business

unit’s products or services within the specific market segments that the company serves.
At the business unit level, the strategic issues are less about the coordination of operating
units and more about developing and sustaining a competitive advantage for the goods
and services that are produced.

At the business level, the strategy formulation phase deals with:

i. Making Market competition strategies: Michael Porter identified three generic

strategies (cost leadership, differentiation, and focus) that can be implemented at the
business unit level to create a competitive advantage and defend against the adverse
effects of the five forces.

ii. Product or service development strategies matching with market requirements,

iii. Strategies for achievement of organizational objectives such as long-term

profitability, sales growth, efficiency, etc.

iv. Anticipating changes in demand and technologies and adjusting the strategy to
accommodate them.

3. FUNCTIONAL LEVEL STRATEGY:

The functional level of the organization is the level of the operating divisions and
departments. This strategy is the strategy for each specific functional unit within a
business. This is the day-to-day strategy that keeps the organization moving in the right
direction. Functional/ Departmenal Level Strategy is the approach a functional area takes
to achieve corporate and business unit objectives and strategies by maximizing resources
productivity.

Functional Level Strategies are generally made by Product managers, geographic and
functional level managers. These strategies are formulated by the functional heads along
with their teams. This strategy mainly focuses on optimum utilisation of resources on day-
today basis. Functional level strategies involve the development and coordination of
resources through which business unit level strategies can be executed efficiently and
effectively.

The functional areas are:

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 • Operational management areas- deals with production, operational processes and
control of the overall activities of the production process.

• Marketing management areas - deals with pricing, selling, distribution, promotion,

designing marketing mix, brand equity, product positioning, marketing research etc.

• HRM areas- deals with recruitment, staffing, organizational structure, performance

appraisal, compensation plan etc.

• Financial management areas - Deals with capital structure, Fund flow an cash flow
management.

Functional units of an organization are involved in higher level strategies by providing input
into the business unit level and corporate level strategy, such as providing information on
resources and capabilities on which the higher level strategies can be based. Once the
higher-level strategy is developed, the functional units translate it into discrete action-
plans that each department or division must accomplish for the strategy to succeed.

STRATEGIC MANAGEMENT
DEFINITION
Strategic management is an art and science of formulating, implementing and evaluating
cross-functional decisions that enable an organization to achieve its objectives. Strategic
management is a set of managerial decisions and actions that determine the long term
performance of a corporation. It includes: environment scanning, strategy formulation,
strategy implementation, strategic evaluation and control. It integrates marketing,
production/operations, R&D, MIS, Finance etc. to achieve organizational success.

• By the term strategic management we mean, the process that helps the organization
to assess their internal and external business environment, form strategic vision, set
objectives, establish direction, formulate and implement strategies that are aligned
towards the achievement of the goals of the organization.

Strategic management aims at gaining sustained competitive advantage, so as to supersede

competitors and attain a dominating position in the entire market. Further, it assesses, guide
and adjusts the enterprise according to the changes in the business environment.

THE STRATEGIC MANAGEMENT PROCESS

Strategic Management Process may simply be defined as the process through which a
company formulates its business strategy. It is also defined as the process by which managers
make a choice of a set of strategies for the organization that will enable it to achieve better
performance. It involves looking at where the agency wants to go, assessing the organisation’s
current situation, and developing and implementing approaches for moving forward.
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Strategic management is a continuous process that appraises the business and industries in
which the organization is involved; appraises its competitors; and fixes goals to compete with
all the present and future competitors and then reassesses each strategy. It is a dynamic
process of designing, implementing, analyzing and controlling strategies, to ascertain the
strategic intent of the company. It begins with the development of mission, goals and
objectives, business portfolio and plans.

Strategy
Setting Environmental Strategy Strategy
Evaluation and
Goals Scanning Formulation Implementation
Control

Fig 1: Strategic Management Process

Strategic management process has the following five steps:

1. Setting Goals (Vision, Mission & Objectives)
2. Environmental Scanning (Situation Analysis)
3. Strategy Formulation
4. Strategy Implementation
5. Strategy Evaluation & Control

1. SETTING GOALS (VISION, MISSION & OBJECTIVES)

Vision statement shows what an organization wants to achieve in future. A mission

statement shows the basic purpose of an organization and communicates and reflects
the vision of the organization.
A mission statement includes following:
1. Purpose: why a particular organization exists, and what it seeks to accomplish.
2. Business: the main methods, products or activities by which the organization
tries to achieve purpose.
3. Values: this refers to those beliefs and principles, which guides an
organization's management as well as its employees as they pursue the
organization's purpose.

After the development of vision and mission statement, the companies need to define
its goals and objectives. Goals may be financial like sales or producing new products etc.

2. SITUATION ANALYSIS OR ENVIRONMENTAL SCANNING:

After development of mission and objectives, the companies need to do the situation
analysis. There are two type of situation analysis:
1. Internal analysis
2. External analysis

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 In internal analysis, companies needs to identify the strengths and weakness and in
external analysis, companies should identify the threats and opportunities. Porter’s five
forces and SWOT provide a platform for conducting situation analysis or environmental
scanning. By the help of situation analysis, an organization can make effective and
achievable decisions. Environmental scanning also helps in listing of critical and most
important issues which demand a specific response from the organization.

3. STRATEGY FORMULATION:
Strategy formulation is the process of deciding best course of action for accomplishing
organizational objectives and hence achieving organizational purpose. After conducting
environment scanning, managers formulate corporate, business and functional
strategies. Companies may formulate effective strategies by the help of group
discussion, formal decision-making techniques and by marketers and management
meetings.

4. STRATEGY IMPLEMENTATION:
After formulating strategies, the next step is to practically implement those strategies.
The successful implementation of strategy is very important to any business
organization as it will define if the organization will be able to achieve the goals set. For
the purpose of strategy implementation, a company needs to organize its resources and
motivate staff to achieve its objectives. Strategy implementation includes designing the
organization’s structure, distributing resources, developing decision making process,
and managing human resources.

It is important to understand if the strategy implemented is in sync with the business

structure. The roles and responsibility of the people in organization should be clearly
spelled out so that there is no confusion on the part of the employees and they work
with a concentrated approach towards the fulfilment of the goals.

5. STRATEGY EVALUATION & CONTROL:

This is the last step of strategic planning process. In this step management and marketer
required to monitor the strategies and make necessary adjustments. Implementation
must be monitored to be successful. Due to constantly changing external and internal
conditions managers must continuously review both environments as new strengths,
weaknesses, opportunities and threats may arise. Management should regularly
measure the performance as well as compare the performance with predefined goals
and objectives and make changes if required. If new circumstances affect the company,
managers must take corrective actions as soon as possible. Internal and external issues
affecting the organization should also be taken into consideration and should be kept in
mind when formulating future strategies.

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 VISION

A Vision serves the purpose of stating what an organization wishes to achieve in the long run.
It is a single statement dream or aspiration for future. Vision provides direction and inspiration
for organizational goal setting. Vision is where you see yourself at the end of the horizon. To
put it simply, vision refers to where an organization wants to be in the future. Vision is generally
a long-term statement and typically generic and grand. Therefore, a vision generally doesn’t
change unless the business is getting into a totally different business.

DEFINITIONS:
➢ According to Kotler “Vision is a description of something (an org, corporate culture,
business, technology, and act) in the future”.
➢ According to Miller and Dress “Vision is category of intentions that are broad, all inclusive
and forward thinking.”

Vision refers to an image or a concept. It is the ability to anticipate possible future events and
developments with imagination and wisdom. Vision in management literature may be defined
as a mental image of a business manager for possible and desirable future of an organization.
It may also be defined as a strong belief of a manager about the specific course of action for the
business organization. It answers the question “where we want to be”.

A vision statement is for the organization and its members, unlike the mission statement, which
is for the customers/clients. It is a symbol and a cause to which a firm wants to bond the
stakeholders. As it is said, people work best when they are working for a cause, than for a goal.
Vision provides them that cause. It is an aspiration for the employees and a milestone of where
to reach. It incorporates a shared understanding about the nature and aim of the organization
and utilizes this understanding to direct and guide the organization towards a better purpose.

Typically, vision statements have common phrases like ‘being the most admired’, ‘being the
market leader’, ‘among the top league’, ‘being known for innovation’, ‘being the largest and
the greatest’, etc. For instance, Microsoft’s vision is to empower people through great
software, any time, any place, and on any device. Wal-Mart’s vision is to become ‘worldwide
leader in retailing’.

Some Examples of Vision Statement are:

TESLA: To accelerate the world’s transition to sustainable energy.
IKEA: To create a better everyday life for the many people.
AMAZON: To be Earth’s most customer-centric company, where customers can find and
discover anything they might want to buy online.
DISNEY: To make people happy.

FEATURES OF A GOOD VISION:

An effective vision statement must have following features-

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 1. It must be unambiguous and clear.
2. Vision is competitive, original, and unique.
3. Vision statements should be shorter so that they are easier to understand and
memorize.
4. It should give the destination where the business want to reach, and not the road-map
of how to reach there.
5. The dreams and aspirations must be rational/realistic.
6. A good vision should be inspiring and exhilarating. It should provide a motivating force,
even in hard times.
7. It must harmonize with organization’s culture and values.
8. It should encourage risk taking and experimentation.
9. In order to realize the vision, it must be deeply instilled in the organization, being
owned and shared by everyone involved in the organization. It should help in creation
of common identity and shared sense of purpose.
10. It should be achievable and at the same time should be challenging and compelling,
stretching others beyond what is comfortable.
11. Vision should be the horizon of 5-10 years. If it is less than that, it becomes tactical. If
it is of a horizon of 20+ years (e.g.), it becomes difficult for the strategy to relate to the
vision.

MISSION

The mission statement of a company is a declaration of what they do every day. It defines the
day-to-day activities of their work. It describes to employees and customers what is being
done right now. Mission statement describes what the organization does (i.e., present
capabilities), who all it serves (i.e., stakeholders) and what makes an organization unique (i.e.,
reason for existence). It's the roadmap for the company's vision statement. It is present-focused
and can change very quickly depending on the circumstances of the business's market. A
mission statement differentiates an organization from others by explaining its broad scope of
activities, its products, and technologies it uses to achieve its goals and objectives. It talks about
an organization’s present (i.e., “about where we are”).

Mission statements always exist at top level of an organization, but may also be made for
various organizational levels. Chief executive plays a significant role in formulation of mission
statement. Once the mission statement is formulated, it serves the organization in long run, but
it may become ambiguous with organizational growth and innovations. In today’s dynamic and
competitive environment, mission may need to be redefined. Mission statement of an
organisation is communicated through annual reports, posters, employee manuals, company
information kits, word of mouth publicity, seminars and workshops, newsletters and
advertisements.

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DEFINITION:
A mission statement is an action-oriented statement that answers the question why the
organization has been established. It describes what the organization does (i.e., present
capabilities), who all it serves (i.e., stakeholders) and what makes an organization unique (i.e.,
reason for existence).

➢ According to Hynger “It is the purpose or reason for organizations existence.” A mission
states the role an organization plays in the society.
➢ According to David F. Harvey “A mission provides the basis of awareness of a sense of
purpose, the competitive environment, degree to which the firm’s mission fits its
capabilities and the opportunity which the government offers.”

Some Examples of Mission Statement are:

TESLA: To create the most compelling car company of the 21st century by driving the
world’s transition to electric vehicles.
IKEA: To create a better everyday life for many people. Our business idea supports this
vision by offering a wide range of well-designed, functional home furnishing
products at prices so low that as many people as possible will be able to afford
them.
NIKE: Create ground-breaking sports innovations, make our products sustainably, build a
creative and diverse global team, and make a positive impact in communities where
we live and work.

NEED FOR A MISSION STATEMENT

A mission statement is a concise and clear declaration of an organization's purpose, values,

and goals. It is an essential tool for organizations, as it provides a framework for decision-
making, strategy development, and goal-setting. Here are some reasons why a mission
statement is important for an organization:

1. Defines purpose: A mission statement helps define an organization's purpose and

provides clarity on why it exists. It gives direction to the organization and helps it stay
focused on its core values and goals.

2. Provides a strategic framework: A mission statement provides a strategic framework that

guides decision-making and helps ensure that all actions and initiatives are aligned with
the organization's purpose and goals

3. Communicates to stakeholders: A mission statement communicates to stakeholders what

an organization stands for and what it aims to achieve. It provides a clear message about
the organization's values, which can help build trust and support among stakeholders

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 4. Guides resource allocation: A mission statement helps an organization allocate resources
effectively, by ensuring that they are used in ways that support the organization's goals
and purpose

5. Encourages alignment: A mission statement encourages alignment across the

organization, by ensuring that all stakeholders are working towards a common purpose
and are aligned with the organization's core values

6. Inspires commitment: A well-crafted mission statement can inspire commitment and

engagement among stakeholders, by communicating a clear and compelling vision for the
future

In summary, a mission statement is important for an organization because it defines its

purpose, provides a strategic framework, communicates to stakeholders, guides resource
allocation, encourages alignment, and inspires commitment. It is an essential tool for effective
strategic planning and decision-making.

CRITERIA FOR EVALUATING A MISSION STATEMENT

A mission statement tells employees, customers and other stakeholders how a business will
achieve the company's vision. It provides a measuring tool for new ventures and a way to
approach day-to-day business activities. Following criteria should be met while making a
mission statement:

1. Informative and Outcome-oriented: The mission statement should clearly specifies what
business the organization is in. Mission statements should explain the primary outcomes
the organization is working to achieve. A mission statement should convey the overall goal
of organization, giving insight into the idea that guides each project and decision. It should
communicate the essence of what the organization does without being overly specific.

2. Simple Clear and Concise: When it comes to mission statements, too much detail can
dilute the overall meaning. It should be in as few words as possible. Too much detail will
make it vague. The language used should be very clear and understandable. It should
be precise enough, i.e., it should be neither too broad nor too narrow.

3. Memorable and Unique: A mission statement can help guide the actions of employees and
decision makers but not if it is impossible to remember. It should be unique and distinctive
to leave an impact in everyone’s mind. It should not be same as the mission of a competing
organization.

4. Achievable: Mission must be feasible and attainable. It should be possible to achieve it.
Although it can be tempting to write a grand mission statement, it is usually better to
create one that is achievable. A strong mission statement gives staff something concrete
to work on and a larger goal to work toward.

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5. Credible and Inspiring: It should be credible, i.e., all stakeholders should be able to believe
it. It should be inspiring for the management, staff and society at large. The mission
statement should be worded so as to serve as an energy source and rallying point for the
organization.

FORMULATION OF MISSION STATEMENT

A mission statement is a clear and concise statement that defines the fundamental purpose of
an organization, its goals, and the values that guide its actions. It serves as a critical component
of any business strategy. A mission statement helps to define an organization's purpose and
direction. It provides clarity and focus, helping organizations to stay aligned with their primary
objectives and avoid distractions or detours that could pull them off course. By articulating the
fundamental purpose of the organization, a mission statement helps to define its reason for
being, and provides a sense of meaning and direction for employees, customers, investors,
and other stakeholders.

GOAL, PROCESS & INPUT FORMULATION OF THE MISSION STATEMENT

Formulating a mission statement involves three key components: Goal formulation, process
formulation, and input formulation. Before a mission statement could be framed, it must be
ensured that these three components are formulated.

Here's how each component contributes to the overall process of mission statement
formulation:

1. Goal formulation:
The first step in formulating a mission statement is to define the organization's goals.
This involves identifying the desired outcomes that the organization seeks to achieve.
Some questions that can guide this process include:
❖ What is the organization's purpose?
❖ What are its key objectives?
❖ What outcomes does it seek to achieve?
❖ What values are important to the organization?

2. Process formulation:
The next step is to define the processes and strategies that the organization will use to
achieve its goals. This involves identifying the key activities and initiatives that will be
used to achieve the desired outcomes.
Some questions that can guide this process include:
❖ What strategies and tactics will be used to achieve the organization's goals?
❖ What resources and capabilities will be needed to implement these strategies?

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 ❖ What metrics will be used to measure progress and success?

3. Input formulation:
The final step is to identify the key inputs that will be required to support the
organization's processes and strategies. This involves identifying the resources,
capabilities, and competencies that the organization will need to achieve its goals.
Some questions that can guide this process include:
❖ What resources and capabilities are required to implement the organization's
strategies?
❖ What human capital, financial capital, and technology will be required?
❖ What partnerships and collaborations will be necessary to support the
organization's goals?

By combining these three components, organizations can develop a mission statement that
reflects their goals, processes, and inputs. A well-crafted mission statement can provide a clear
sense of direction and purpose, guide decision-making and strategy development, and inspire
commitment and engagement among stakeholders.

PROCESS OF FORMULATION OF THE MISSION STATEMENT

The formulation of a mission statement is a critical process in strategic planning that outlines
the organization's purpose, values, and goals. The mission statement provides direction and
guides decision-making within the organization. Below are some key steps in formulating a
mission statement:

1. Define the organization's purpose: The first step is to define the organization's purpose
or reason for existing. This should be a clear and concise statement that communicates
what the organization does and why it exists.

2. Identify the organization's values: Next, identify the organization's values. These are the
guiding principles that the organization stands for and that influence its decision-making
and actions

3. Establish the organization's goals: Establish the organization's short-term and long-term
goals, which should be aligned with its purpose and values.

4. Consider the external environment: Consider the external environment in which the
organization operates, including market trends, competition, and regulatory factors. This
will help ensure that the mission statement is relevant and responsive to the
organization's operating environment

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5. Involve stakeholders: Involve stakeholders in the formulation process, including
employees, customers, suppliers, and investors. This will ensure that the mission
statement is reflective of the perspectives and priorities of those who are invested in the
organization

6. Draft the mission statement: Based on the above steps, draft a mission statement that
accurately reflects the organization's purpose, values, and goals. The statement should be
clear, concise, and memorable

7. Refine the mission statement: Review and refine the mission statement, incorporating
feedback from stakeholders as needed. Ensure that the statement is easily understood by
everyone in the organization and aligns with their understanding of the organization's
purpose and values.

8. Communicate the mission statement: Once the mission statement has been finalized,
communicate it clearly and consistently throughout the organization. Ensure that all
stakeholders understand and can align their actions with the statement.

Formulating a mission statement involves defining the organization's purpose, identifying its
values, establishing its goals, considering the external environment, involving stakeholders,
drafting and refining the statement, and communicating it effectively. By following these
steps, organizations can develop a clear and compelling mission statement that guides their
decision-making and actions

DRUCKER’S PERFORMANCE AREA:

PRETER DRUCKER’S VIEWS ON FORMULATING MISSION STATEMENT

Peter Drucker was a management consultant and author who made significant contributions
to the field of management. Peter Drucker was a leader in management philosophy and
effectiveness. As a writer, management consultant, and social ecologist, he played an
influential role in shaping key concepts around business, innovation, decision making,
leadership, productivity, time management, and personal effectiveness.

Drucker believed that a company's mission statement should address specific performance
areas that are critical to the success of the organization. He identified five performance areas
that a mission statement should address:

1. Customer: A company's mission statement should define its target customers and how it
intends to satisfy their needs. It should answer questions such as, "Who are our
customers?", "What do they need?", and "How can we meet those needs better than our
competitors?”

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2. Market: A company's mission statement should also define its target market and its
position within that market. It should answer questions such as, "What is our market?",
"What is our market share?", and "How can we grow our market share?”

3. Technology: A company's mission statement should address the technology it uses to

produce its products or services. It should answer questions such as, "What technologies
do we use?", "What are the advantages of these technologies?", and "How can we
improve our technology?”

4. Concern for survival, growth, and profitability: A company's mission statement should
address its concerns for survival, growth, and profitability. It should answer questions such
as, "What are our goals for survival?", "How do we plan to grow our business?", and "What
are our financial objectives?”

5. Philosophy and Self-concept: A company's mission statement should address its values
and beliefs, as well as its self-concept. It should answer questions such as, "What are our
values and beliefs?", "What is our identity?", and "What makes us unique?”

Drucker's performance areas provide a framework for developing a comprehensive mission

statement that addresses critical aspects of a company's operations and performance. By
addressing these performance areas, a company can create a clear and compelling mission
statement that guides its decision-making and actions.

BENNIS’S CORE PROBLEM:

WARREN BENNIS’S VIEWS ON MISSION STATEMENT FORMULATION

Warren Bennis was a leadership expert and author who also made significant contributions to
the field of management. Bennis believed that one of the core problems in mission formulation
was the lack of clarity and focus. He identified three specific areas that could lead to this
problem:

1. Lack of understanding of the organization's purpose: Bennis believed that a lack of clarity
about the organization's purpose could lead to a vague or unfocused mission statement.
He argued that leaders needed to have a clear understanding of why the organization
exists and what its goals are before they could develop an effective mission statement.

2. Failure to involve stakeholders in the mission formulation process: Bennis believed that
mission formulation should not be the sole responsibility of top management. Instead, he
argued that it should be a collaborative effort that involves stakeholders at all levels of the
organization. By involving stakeholders in the process, the resulting mission statement
would be more relevant and meaningful to everyone in the organization.

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3. Failure to communicate the mission effectively: Bennis believed that even a well-
formulated mission statement would be ineffective if it was not communicated effectively
to all stakeholders. He argued that leaders needed to communicate the mission clearly,
consistently, and frequently to ensure that everyone in the organization understood it and
could align their actions with it.

Bennis's core problem in mission formulation is the lack of clarity and focus. This can result
from a failure to understand the organization's purpose, a failure to involve stakeholders in
the mission formulation process, and a failure to communicate the mission effectively. By
addressing these issues, organizations can develop a clear and compelling mission statement
that guides their decision-making and actions.

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