IMPORTANCE OF VISION AND MISSION STATEMENTS



IMPORTANCE OF VISION AND MISSION STATEMENTS
BY
SMART LEARNING WAY

One of the first things that any observer of management thought and practice asks is whether a particular organization has a vision and mission statement. In addition, one of the first things that one learns in a business school is the importance of vision and mission statements.

This article is intended to elucidate on the reasons why vision and mission statements are important and the benefits that such statements provide to the organizations. It has been found in studies that organizations that have lucid, coherent, and meaningful vision and mission statements return more than double the numbers in shareholder benefits when compared to the organizations that do not have vision and mission statements. Indeed, the importance of vision and mission statements is such that it is the first thing that is discussed in management textbooks on strategy.

Some of the benefits of having a vision and mission statement are discussed below:

Above everything else, vision and mission statements provide unanimity of purpose to organizations and imbue the employees with a sense of belonging and identity. Indeed, vision and mission statements are embodiment of organizational identity and carry the organizations creed and motto. For this purpose, they are also called as statements of creed.

Vision and mission statements spell out the context in which the organization operates and provides the employees with a tone that is to be followed in the organizational climate. Since they define the reason for existence of the organization, they are indicators of the direction in which the organization must move to actualize the goals in the vision and mission statements.

The vision and mission statements serve as focal points for individuals to identify themselves with the organizational processes and to give them a sense of direction while at the same time deterring those who do not wish to follow them from participating in the organization’s activities.

The vision and mission statements help to translate the objectives of the organization into work structures and to assign tasks to the elements in the organization that are responsible for actualizing them in practice.

To specify the core structure on which the organizational edifice stands and to help in the translation of objectives into actionable cost, performance, and time related measures.

Finally, vision and mission statements provide a philosophy of existence to the employees, which is very crucial because as humans, we need meaning from the work to do and the vision and mission statements provide the necessary meaning for working in a particular organization.

As can be seen from the above, articulate, coherent, and meaningful vision and mission statements go a long way in setting the base performance and actionable parameters and embody the spirit of the organization. In other words, vision and mission statements are as important as the various identities that individuals have in their everyday lives.

It is for this reason that organizations spend a lot of time in defining their vision and mission statements and ensure that they come up with the statements that provide meaning instead of being mere sentences that are devoid of any meaning.

Environmental Scanning - Internal & External Analysis of Environment

Organizational environment consists of both external and internal factors. Environment must be scanned so as to determine development and forecasts of factors that will influence organizational success. Environmental scanning refers to possession and utilization of information about occasions, patterns, trends, and relationships within an organization’s internal and external environment.

It helps the managers to decide the future path of the organization. Scanning must identify the threats and opportunities existing in the environment. While strategy formulation, an organization must take advantage of the opportunities and minimize the threats. A threat for one organization may be an opportunity for another.

Internal analysis of the environment is the first step of environment scanning. Organizations should observe the internal organizational environment. This includes employee interaction with other employees, employee interaction with management, manager interaction with other managers, and management interaction with shareholders, access to natural resources, brand awareness, organizational structure, main staff, operational potential, etc. Also, discussions, interviews, and surveys can be used to assess the internal environment. Analysis of internal environment helps in identifying strengths and weaknesses of an organization.

As business becomes more competitive, and there are rapid changes in the external environment, information from external environment adds crucial elements to the effectiveness of long-term plans. As environment is dynamic, it becomes essential to identify competitors’ moves and actions. Organizations have also to update the core competencies and internal environment as per external environment. Environmental factors are infinite, hence, organization should be agile and vigile to accept and adjust to the environmental changes. For instance - Monitoring might indicate that an original forecast of the prices of the raw materials that are involved in the product are no more credible, which could imply the requirement for more focused scanning, forecasting and analysis to create a more trustworthy prediction about the input costs. In a similar manner, there can be changes in factors such as competitor’s activities, technology, market tastes and preferences.
While in external analysis, three correlated environment should be studied and analyzed —


  •         immediate / industry environment
  •        national environment   
  •     broader socio-economic environment / macro-environment

Examining the industry environment needs an appraisal of the competitive structure of the organization’s industry, including the competitive position of a particular organization and it’s main rivals. Also, an assessment of the nature, stage, dynamics and history of the industry is essential. It also implies evaluating the effect of globalization on competition within the industry. 

Analyzing the national environment needs an appraisal of whether the national framework helps in achieving competitive advantage in the globalized environment. Analysis of macro-environment includes exploring macro-economic, social, government, legal, technological and international factors that may influence the environment. The analysis of organization’s external environment reveals opportunities and threats for an organization.

Strategic managers must not only recognize the present state of the environment and their industry but also be able to predict its future positions.

Porter’s Five Forces Model of Competition

Michael Porter (Harvard Business School Management Researcher) designed various vital frameworks for developing an organization’s strategy. One of the most renowned among managers making strategic decisions is the five competitive forces model that determines industry structure. 

According to Porter, the nature of competition in any industry is personified in the following five forces:
·         Threat of new potential entrants

·       
Threat of substitute product/services
·         Bargaining power of suppliers
·         Bargaining power of buyers
·         Rivalry among current competitors


The five forces mentioned above are very significant from point of view of strategy formulation. The potential of these forces differs from industry to industry. These forces jointly determine the profitability of industry because they shape the prices which can be charged, the costs which can be borne, and the investment required to compete in the industry. Before making strategic decisions, the managers should use the five forces framework to determine the competitive structure of industry.

Let’s discuss the five factors of Porter’s model in detail:

Risk of entry by potential competitors: Potential competitors refer to the firms which are not currently competing in the industry but have the potential to do so if given a choice. Entry of new players increases the industry capacity, begins a competition for market share and lowers the current costs. The threat of entry by potential competitors is partially a function of extent of barriers to entry. The various barriers to entry are-
·     
           Economies of scale
·         Brand loyalty
·         Government Regulation
·         Customer Switching Costs
·         Absolute Cost Advantage
·         Ease in distribution
·         Strong Capital base

Rivalry among current competitors: Rivalry refers to the competitive struggle for market share between firms in an industry. Extreme rivalry among established firms poses a strong threat to profitability. The strength of rivalry among established firms within an industry is a function of following factors:
 
·         Extent of exit barriers
·         Amount of fixed cost
·         Competitive structure of industry
·         Presence of global customers
·         Absence of switching costs
·         Growth Rate of industry
·         Demand conditions

 Bargaining Power of Buyers: Buyers refer to the customers who finally consume the product or the firms who distribute the industry’s product to the final consumers. Bargaining power of buyers refer to the potential of buyers to bargain down the prices charged by the firms in the industry or to increase the firms cost in the industry by demanding better quality and service of product. Strong buyers can extract profits out of an industry by lowering the prices and increasing the costs. They purchase in large quantities. They have full information about the product and the market. They emphasize upon quality products. They pose credible threat of backward integration. In this way, they are regarded as a threat.

Bargaining Power of Suppliers: Suppliers refer to the firms that provide inputs to the industry. Bargaining power of the suppliers refer to the potential of the suppliers to increase the prices of inputs( labour, raw materials, services, etc) or the costs of industry in other ways. Strong suppliers can extract profits out of an industry by increasing costs of firms in the industry. Suppliers products have a few substitutes. Strong suppliers’ products are unique. They have high switching cost. Their product is an important input to buyer’s product. They pose credible threat of forward integration. Buyers are not significant to strong suppliers. In this way, they are regarded as a threat.

Threat of Substitute products: Substitute products refer to the products having ability of satisfying customers needs effectively. Substitutes pose a ceiling (upper limit) on the potential returns of an industry by putting a setting a limit on the price that firms can charge for their product in an industry. Lesser the number of close substitutes a product has, greater is the opportunity for the firms in industry to raise their product prices and earn greater profits (other things being equal). 

The power of Porter’s five forces varies from industry to industry. Whatever be the industry, these five forces influence the profitability as they affect the prices, the costs, and the capital investment essential for survival and competition in industry. This five forces model also help in making strategic decisions as it is used by the managers to determine industry’s competitive structure.

Porter ignored, however, a sixth significant factor- complementary. This term refers to the reliance that develops between the companies whose products work is in combination with each other. Strong complementors might have a strong positive effect on the industry. Also, the five forces model overlooks the role of innovation as well as the significance of individual firm differences. It presents a stagnant view of competition.


BIBLIOGRAPHY

John A. Pearce II , Richard B Robinson , JR., Amita Mital “Strategic Management” 10th Addition Tata Mc Graw Hill Education Pvt.Ltd New Delhi.





online marketing, marketing jobs, business marketing, plan marketing, marketing management, what is marketing, marketing strategy, marketing manager, marketing digital, marketing social, online marketing products, online marketing efamous, b2b online marketing, b2b socialmediagroup, poster myprinting, druckerpatronen markt24, internet marketing, jobs online marketing, online marketing business, online marketing manager, jobs in marketing, sales marketing jobs, sales and marketing, online marketing jobs, online marketing, marketing jobs london, sports marketing, sports marketing jobs, digital marketing jobs, digital marketing, small business marketing, business and marketing, business marketing management, business marketing plan, business marketing jobs, business marketing online, business marketing ideas, marketing ideas, marketing degree, business marketing degree online marketing, marketing jobs, business marketing, plan marketing, marketing management, what is marketing, marketing strategy, marketing manager, marketing digital, marketing social, online marketing products, online marketing efamous, b2b online marketing, b2b socialmediagroup, poster myprinting, druckerpatronen markt24, internet marketing, jobs online marketing, online marketing business, online marketing manager, jobs in marketing, sales marketing jobs, sales and marketing, online marketing jobs, online marketing, marketing jobs london, sports marketing, sports marketing jobs, digital marketing jobs, digital marketing, small business marketing, business and marketing, business marketing management, business marketing plan, business marketing jobs, business marketing online, business marketing ideas, marketing ideas, marketing degree, business marketing degree