CHAPTER 2: Mission and Goals

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CHAPTER 2 Mission and Goals

• I. Defining the Business
• A. A Single Business Company
• The Steel Industry
• B. A Diversified Company
• R. J. Reynolds

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Mission and Goals

• Defining the Business (Continued) A Single
  Business Enterprise
• Defining the Business involves asking
• 1. What is our Business?
• 2. What will it be?
• 3. What should it be?
• A Business should take a consumer-oriented
  rather than a product- oriented approach to
  defining the business.

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Mission and Goals

• Defining the Business A consumer-oriented
  approach for a Single Business Enterprise
• 1. Who is being satisfied (what consumer
  groups)?
• 2. What is being satisfied (what customer
  needs)?
• 3. How are customer needs being satisfied (by
• what technologies)?

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Mission and Goals

• Defining the Business for a Diversified
  Enterprise
• A diversified company faces special problems
  when trying to define its business because it
  actually operates several businesses. The
  corporate business is often one of managing a
  collection of businesses. Therefore, at a
  diversified enterprise defining the business must
  be addressed at the business and corporate level.

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Mission and Goals

• At the Corporate Level
• The corporate business definition should focus
  on how the corporate level adds value to the
  constituent businesses of the company. The
  mission should identify the contribution that the
  corporate level makes to the efficient operation
  of business units. It should identify how those
  business units are better off as part of the
  corporation than as freestanding entities.

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Mission and Goals

• III. Vision and Major Goals
• A. An organizations vision and major goals
  spell out formally what the organization is
  trying to achieve they give direction to the
  corporate mission statement and help guide the
  formulation of strategy.
• B. The vision of an organization can often be
  viewed as an articulation of its strategic
  intent.
• C. Beyond articulating their vision, many
  companies also state other major goals in their
  mission statement. These goals often articulate
  with more precision how a company intends to go
  about attaining its strategic intent.

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Mission and Goals

• III. Vision and Major Goals (Continued)
• D. Maximizing stockholders wealth should be the
  overriding corporate goal toward which all others
  are oriented.

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Mission and Goals

• II. Vision and Major Goals (Continued)
• B. Maximizing Stockholder Wealth
• C. The Short-Term Problem
• This problem occurs when firms focus too
  narrowly on ROI only. This problem should not
  occur when shareholder wealth is viewed in its
  proper perspective.
• D. Secondary Goals
• These would include a) market share
  b)innovation
• c) productivity d) physical and financial
  resources
• e) manager performance f) worker performance
• g) social and ethical responsibility

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Mission and Goals

• III. Corporate Philosophy
• The Corporate Philosophy includes the basic
  beliefs, values, aspirations, and philosophical
  priorities that the strategic decision makers are
  committed to and that guide their management of
  the company. See the example of Johnson and
  Johnson on page 44.

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Mission and Goals

• IV. Corporate Stakeholders
• Corporate stakeholders are individuals or groups
  that have some claim on the firm. The major
  stakeholders are the owner (shareholders).
  Others include employees and officers,
  customers, suppliers, governments, unions,
  competitors, local communities, and the general
  public.
• A. Stakeholders and the Mission Statement
• By committing itself to satisfying the claims of
  key stakeholder groups in its mission statement,
  the company is sending a message to those groups
  that its strategies will be formulated with their
  claims in mind.

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Mission and Goals

• B. Stakeholder Impact Analysis
• 1. Identify key stakeholders
• 2. Identify their interests and concerns
• 3. Identify what claims they are likely to make
  on
• the organization
• 4. Identify the most important stakeholders for
  the
• organization
• 5. Identify the resultant strategic challenges
  in satisfying the claims of the stakeholders

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Mission and Goals

• V. Corporate Governance and Strategy
• A. Management vs. Stockholder Goals
• On-the-job consumption is another name for the
  agency problem that is found in finance. Here
  management tries to enhance their status with
  jets, offices, expensive trips.
• B. Stockholder Meetings
• Annual meetings provide a forum for owners and
  management to communicate and elect board members
  as well as review most recent historic results.

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Corporate Governance (Continued)

• C. The Role of the Board of Directors
• The Board of Directors look after the
  stockholders interests in relation to the
  direction the CEO takes the company. If the
  boards sense is that corporate strategies are
  not in the best interest of shareholders, it can
  apply sanctions against management nominations or
  submit their own nominations. If this happens,
  it is usually the signaling of the end for the
  CEO. The board of directors are directly elected
  by stockholders and can legally accountable for
  the actions of the firm. The board has the
  authority to hire, fire and compensate company
  employees, including the CEO.

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Corporate Governance (Continued)

• D. Stock Compensation Plans
• These plans are designed to align the interests
  of managers with those stockholders. Under them,
  executives receive a major proportion of their
  income from stockholdings in the company. Thus
  it is in the best interest of such executives to
  promote strategies that maximize stockholder
  wealth since these strategies maximize their own
  wealth too.

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Mission and Goals

• VI. Strategy and Ethics
• A. The Purpose of Ethics
• The purpose of ethics is to give people the tools
  for dealing with moral complexity for identifying
  and thinking through the moral implications of
  strategic decisions
• D. Corporate Social Responsibility
• This concept is based on the argument that when
  companies evaluate decisions from an ethical
  perspective, there should be a presumption in
  favor of adopting courses of action that enhance
  the welfare of society at large.

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Mission and Goals StatementThe Coca-Cola Company

• Coca Cola is in the refreshment business and not
  the soft drink business. On the basis of this
  defined Mission, Coke makes a number of
  statements about their business
• 1. Coke sells a product that has universal
  appeal and accessibility and also meets the
  recurring human need for refreshment.
• - Coke is a product with physical attributes
  that the human palate enjoys, no matter what
  the culture or demographic status. Also
  important is the universal
• accessibility of Coke.

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Mission and Goals StatementThe Coca-Cola Company

• 2. Coca-Cola has almost limitless Growth
  opportunities around the world. Currently, every
  human being on the face of this planet has a
  minimal need for 64 liquid ounces to stay alive.
  Coke consumption represents only 2 of the ounces
  per day. Coke in 1995 accounted for 80 of the
  soft drink industrys growth in the United
  States. Why, because their mission is that of
  providing refreshment and not just a beverage.
  As a result of this mission definition, Coke,
  since 1980, has increased shareholder wealth by
  89 billion, the equivalent of 24 per year. In
  1995 alone, Coke added an additional 27 billion
  in wealth to shareholders equity.

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Mission and Goals StatementThe Coca-Cola Company

• When Coke asks the question, Whats our most
  underdeveloped market? The answer is not
  expressed in terms of geographics or
  demographics, the answer is expressed as THE
  HUMAN BODY. Every day every one of the 5.7
  billion people on this planet must consume
  roughly 64 ounces of fluid to stay alive. Coke
  currently accounts for less than 2 of those
  ounces.
• Currently, Coke has 47 of the worldwide market
  in soft drink sales. But they no longer measure
  themselves in such a narrow way. Instead, they
  focus on expanding their share of every human
  beings fluid intake. In some cases that may mean
  taking on other international soft drink
  companies, but in other cases, indigenous
  beverages are their biggest contenders. Only tap
  water is their rival.

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Mission and Goals StatementsThe Coca-Cola
Company

• As a result of this mission statement, Coke sees
  unlimited growth opportunities. When asked the
  question if their comes a point when you cant
  expand further, Chairman Roberto Goizueta said,
  No. As long as people continue to consume
  approximately 64 ounces of fluid per day, our
  growth opportunities will be virtually
  unlimited.
• In addition, 60 of the worlds population lives
  in markets where the average person consumes less
  than 10, 8-ounce servings of Coke products per
  year. Coke is just beginning to scratch the
  surface of their potential. In Korea, sales of
  Coke surpass that of tea. In Brazil, Coke
  outsells the leading coffee manufacturer.