Date Posted: 11/3/2012 5:14:17 PM
Posted By: sashoo Membership Level: Silver Total Points: 382
In defining what a business mission is, we need to understand the two essential ingredients that are inclined towards mission statements: they are enduring or specific to the individual or organization. Two fundamental questions that need to be addressed are ‘What business are we in?’ and ‘What business do we want to be in?’ The answers define the scope and activities of the company. The business mission explains the reason for its existence. As such it may include a statement of market, needs and technology. The market reflects the customer groups being served; needs refer to the customer needs being satisfied, and technology describes the process by which a customer need can be satisfied, or a function performed.This inclusion of market and needs ensures that a business definition is market focused rather than product based. Thus the purpose of a company such as IBM is not to manufacture computers but to solve customers’ information problems. The reason for ensuring that a business definition is market focused is that products are transient but basic needs such as transportation, entertainment and eating are lasting. Thus Levitt argued that a business should be viewed as a customer-satisfying process not a goods-producing process. By adopting a customer perspective, new opportunities are more likely to be seen. In IBM’s case this has led to it taking advantage of opportunities in consultancy and services within the information technology sector, and has limited its capacity to manufacture computers by selling its personal computer division to Lenovo.While this advice has merit in advocating avoidance of a narrow business definition, management must be wary of a definition that is too wide. Levitt suggested that railroad companies would have survive had they defined their business as transportation and moved into the airline business. But this ignores the limits of the business competence of the railroads. Did they possess the necessary skills and resources to run an airline? Clearly a key constraint on a business definition can be the competences, both actual and potential) of management, and the resources at their disposal. Conversely, competences can act as the motivator for widening a business mission. Asda (Associated Dairies) redefined its business mission as a producer and distributor of milk to a retailer of fast-moving consumer goods partly on the basis of its distribution skills, which it rightly believed could be extended to products beyond milk.A second influence on business mission is environmental change. Change provides opportunities and threats that influence mission definition. Asda saw that changes in retail practice from corner shops to high-volume supermarkets presented an opportunity that could be exploited by its skills. Its move redefined business.The final determinants of business mission are the background of the company and the personalities of its senior management. Businesses that have established themselves in the marketplace over many years, and that have a clear position in the minds of the customer, may ignore opportunities that are at variance with that position. The personalities and beliefs of the people who run businesses also shape the business mission. This last factor emphasizes the judgmental nature of business definition. There is no right or wrong business mission in abstract. The mission should be based on the vision that top management and its subordinates have of the future of the business. This vision is a coherent and powerful statement of what the business should aim to become.Four characteristics are associated with an effective mission statement. First, it should be based on a solid understanding of the business, and the vision to foresee how the forces acting on its operations will change in the future. A major factor in the success of Perrier was the understanding that its business was natural beverages (rather than water or soft drinks). This subtle distinction was missed by major competitors such as Nestle, with grave marketing consequences. The vision of the future plays a major role in delivering a business mission.
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