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Multinational Organizations Organizations that conduct business operations across national borders are called international firms or multinational corporations. the strategic-management process is conceptually the same for multinational firms as for purely domestic firms; however, the process is more complex for international firms as a result of more variables and relationships. the social, cultural, demographic, environmental, political, governmental, legal, technological, and competitive opportunities and threats that face a multinational corporation are almost limitless, and the number and complexity of these factors increase dramatically with the number of products produced and the number of geographic areas served. More time and effort are required to identify and evaluate external trends and events in multinational corporations than in domestic corporations. geographic distance, cultural and national differences, and variations in business practices often make communication between domestic headquarters and overseas operations difficult. Strategy implementation can be more difficult because different cultures have different norms, values, and work ethics. For example, in 2013 Home Depot closed all seven of its remaining big-box stores in china after years of losses. that firm joins a growing list of retailers who stumbled in china by failing to consider local culture and customs. Historically cheap labor, coupled with apartment-based living in china, were two reasons why Home Depot, which entered china in 2006, never gained traction in that country. Mattel and Best Buy are other firms that faltered in china. Yum Brands, which owns Kentucky Fried chicken and Pizza Hut, obtains almost 50 percent of its revenues from china, but the company’s same-store sales in china dropped 4 percent in the fourth quarter of 2012, resulting primarily from thousands of new fast-food restaurants opening in china every year. Even variables such as unemployment rates vary greatly across countries as indicated in table 2.3. note that Spain has the highest and austria the lowest unemployment rate among the European countries listed. Unemployment rates are a good indicator of consumers’ disposable income for purchasing all kinds of things, and the rates are a good indicator of a country’s overall financial soundness and attractiveness for doing business. In late 2012, France lost its triple-a rating by Moody’s Investors Service after the S&P Ratings Services delivered a stinging critique of President Francois Hollande’s attempts to turn the French economy around. Hollande is trying to shift 20 billion euros from payroll taxes to taxes on consumers, and he is pushing for 25 billion of new taxes to cut the country’s deficit to 3 percent of gDP in 2013 from the expected 4.5 percent.
Multinational corporations (Mncs) face unique and diverse risks, such as expropriation of assets, currency losses through exchange rate fluctuations, unfavorable foreign court interpretations of contracts and agreements, social/political disturbances, import/export restrictions, tariffs, and trade barriers. Strategists in Mncs are often confronted with the need to be globally competitive and nationally responsive at the same time. With the rise in world commerce, government and regulatory bodies are more closely monitoring foreign business practices. the U.S. Foreign corrupt Practices act, for example, monitors business practices in many areas. Before entering international markets, firms should scan relevant journals and patent reports, seek the advice of academic and research organizations, participate in international trade fairs, form partnerships, and conduct extensive research to broaden their contacts and diminish the risk of doing business in new markets. Firms can also offset some risks of doing business internationally by obtaining insurance from the U.S. government’s Overseas Private Investment corporation (OPIc). advantages and Disadvantages of International Operations Firms have numerous reasons for formulating and implementing strategies that initiate, continue, or expand involvement in business operations across national borders. Perhaps the greatest advantage is that firms can gain new customers for their products and services, thus increasing revenues. growth in revenues and profits is a common organizational objective and often an expectation of shareholders because it is a measure of organizational success. Potential advantages to initiating, continuing, or expanding international operations are as follows:
- Firms can gain new customers for their products.
- Foreign operations can absorb excess capacity, reduce unit costs, and spread economic risks over a wider number of markets.
- Foreign operations can allow firms to establish low-cost production facilities in locations close to raw materials or cheap labor.
- competitors in foreign markets may not exist, or competition may be less intense than in domestic markets.
- Foreign operations may result in reduced tariffs, lower taxes, and favorable political treatment.
Few companies can afford to ignore the presence of international competition. Firms that seem insulated and comfortable today may be vulnerable tomorrow; for example, foreign banks do not yet compete or operate in most of the USa, but this too is changing. the U.S. economy is becoming much less american. a world economy and monetary system are emerging. corporations in every corner of the globe are taking advantage of the opportunity to obtain customers globally. Markets are shifting rapidly and in many cases converging in tastes, trends, and prices. Innovative transport systems are accelerating the transfer of technology. Shifts in the nature and location of production systems, especially to china and India, are reducing the response time to changing market conditions. china has more than 1.3 billion residents and a dramatically growing middle class anxious to buy goods and services. Business in Brazil is booming, with that country having more than a 7 percent annual growth in gDP. the capital of Brazil, Rio de Janeiro, is making massive preparations for the 2016 Summer Olympics, including a $5 billion investment program to extend the subway system, improve railroads, and construct new highways. two firms in Rio that are growing exponentially are Petrobras, the world’s fourth-largest oil producer, and Vale, the world’s largest iron-ore mining company. Rio de Janeiro is Brazil’s second largest manufacturing center in the country, but its scenic beauty and elaborate port facilities are world renowned. More and more countries around the world are welcoming foreign investment and capital. as a result, labor markets have steadily become more international. East asian countries are market leaders in labor-intensive industries, Brazil offers abundant natural resources and rapidly developing markets, and germany offers skilled labor and technology. the drive to improve the efficiency of global business operations is leading to greater functional specialization. this is not limited to a search for the familiar low- cost labor in Latin america or asia. Other considerations include the cost of energy, availability of resources, inflation rates, tax rates, and the nature of trade regulations. Many countries became more protectionist during the recent global economic recession. Protectionism refers to countries imposing tariffs, taxes, and regulations on firms outside the country to favor their own companies and people. Most economists argue that protectionism harms the world economy because it inhibits trade among countries and invites retaliation. advancements in telecommunications are drawing countries, cultures, and organizations worldwide closer together. Foreign revenue as a percentage of total company revenues already exceeds 50 percent in hundreds of U.S. firms, including ExxonMobil, gillette, Dow chemical, citicorp, colgate-Palmolive, and texaco.
a primary reason why most domestic firms do business globally is that growth in demand for goods and services outside the USa is considerably higher than inside. For example, the domestic food industry is growing just 3 percent per year, so Kraft Foods, the second largest food company in the world behind nestlé, is focusing on foreign acquisitions. Shareholders and investors expect sustained growth in revenues from firms; satisfactory growth for many firms can only be achieved by capitalizing on demand outside the USa. Joint ventures and partnerships between domestic and foreign firms are becoming the rule rather than the exception! Fully 95 percent of the world’s population lives outside the USa, and this group is growing 70 percent faster than the U.S. population. the lineup of competitors in virtually all industries is global. general Motors, Ford, and chrysler compete with toyota and Hyundai. general Electric and Westinghouse battle Siemens and Mitsubishi. caterpillar and John Deere compete with Komatsu. goodyear battles Michelin, Bridgestone/Firestone, and Pirelli. Boeing competes with airbus. Only a few U.S. industries—such as furniture, printing, retailing, con- sumer packaged goods, and retail banking—are not yet greatly challenged by foreign com- petitors. But many products and components in these industries too are now manufactured in foreign countries. International operations can be as simple as exporting a product to a single foreign country or as complex as operating manufacturing, distribution, and marketing facilities in many countries. communication Differences across countries americans increasingly interact with managers in other countries, so it is important to understand foreign business cultures. americans often come across as intrusive, manipulative, and garrulous; this impression may reduce their effectiveness in communication. Forbes provided the following cultural hints from charis Intercultural training:
- Italians, germans, and French generally do not soften up executives with praise before they criticize. americans do soften up folks, and this practice seems manipulative to Europeans.
- Israelis are accustomed to fast-paced meetings and have little patience for U.S. informality and small talk.
permeate organizations! to help create an ethics culture, citicorp developed a business ethics board game that is played by thousands of employees worldwide. called “the Word Ethic,” this game asks players busi- ness ethics questions, such as how do you deal with a customer who offers you football tickets in exchange for a new, backdated IRa? Diana Robertson at the Wharton School of Business believes the game is effective because it is interactive. Many organizations have developed a code-of-conduct manual outlining ethical expectations and giving examples of situations that commonly arise in their businesses. One reason strategists’ salaries are high is that they must take the moral risks of the firm. Strategists are responsible for developing, communicating, and enforcing the code of business ethics for their organizations. although primary responsibility for ensuring ethical behavior rests with a firm’s strategists, an integral part of the responsibility of all managers is to provide ethics leadership by constant example and demonstration. Managers hold positions that enable them to influence and educate many people. this makes managers responsible for developing and implementing ethical decision making. gellerman and Drucker, respectively, offer some good advice for managers: all managers risk giving too much because of what their companies demand from them. But the same superiors, who keep pressing you to do more, or to do it better, or faster, or less expensively, will turn on you should you cross that fuzzy line between right and wrong. they will blame you for exceeding instructions or for ignoring their warnings. the smartest managers already know that the best answer to the question “How far is too far?” is don’t try to find out. a man (or woman) might know too little, perform poorly, lack judgment and abil- ity, and yet not do too much damage as a manager. But if that person lacks character and integrity—no matter how knowledgeable, how brilliant, how successful—he destroys. He destroys people, the most valuable resource of the enterprise. He destroys spirit. and he destroys performance. this is particularly true of the people at the head of an enterprise because the spirit of an organization is created from the top. If an organization is great in spirit, it is because the spirit of its top people is great. If it decays, it does so because the top rots. as the proverb has it, “trees die from the top.” no one should ever become a strategist unless he or she is willing to have his or her character serve as the model for subordinates. no society anywhere in the world can compete long or successfully with people stealing from one another or not trusting one another, with every bit of information requiring notarized confirmation, with every disagreement ending up in litigation, or with government having to regulate businesses to keep them honest. Being unethical is a
recipe for headaches, inefficiency, and waste. History has proven that the greater the trust and confidence of people in the ethics of an institution or society, the greater its economic strength. Business relationships are built mostly on mutual trust and reputation. Short-term decisions based on greed and questionable ethics will preclude the necessary self-respect to gain the trust of others. More and more firms believe that ethics training and an ethics culture create strategic advantage. Max Killan said: “If business is not based on ethical grounds, it is of no benefit to society, and will, like all other unethical combinations, pass into oblivion.” Social Responsibility Fortune annually lists the most admired and least admired companies globally on social responsibility. Fortune’s 2012 top three most admired socially responsible companies are gDF Suez, Marquard & Bahls, and RWE. the top three least admired companies are china Railway group, china Railway construction, and china State construction Engineering.13 chinese firms dominate the least admired list. Walmart was socially responsible in the wake of the earthquake and tsunami that devastated Japan in 2011. Following the catastrophe, Walmart quickly mobilized a local relief effort to deliver supplies such as water and flashlights to survivors. Walmart has a history of helping immensely in times of crisis—the retailer was also able to get supplies to people who needed them following Hurricane Katrina. Some strategists agree with Ralph nader, who proclaims that organizations have tremendous social obligations. nader points out, for example, that ExxonMobil has more assets than most countries, and because of this, such firms have an obligation to help society cure its many ills. Other people, however, agree with the economist Milton Friedman, who asserts that organiza- tions have no obligation to do any more for society than is legally required. Friedman may contend that it is irresponsible for a firm to give monies to charity. Do you agree more with nader or Friedman? Surely we can all agree that the first social responsibility of any business must be to make enough profit to cover the costs of the future because if this is not achieved, no other social responsibility can be met. Indeed, no social need can be met by the firm if the firm fails. Strategists should examine social problems in terms of potential costs and benefits to the firm and focus on social issues that could benefit the firm most. For example, should a firm avoid laying off employees so as to protect the employees’ livelihood, when that decision may force the firm to liquidate?
of keeping women at home, are Japan’s two key remedies for sustaining its workforce in factories and busi- nesses. this prescription for dealing with problems associated with an aging society should be considered by many countries around the world. the Japanese government is phasing in a shift from age 60 to age 65 as the date when a person may begin receiving a pension, and premiums paid by Japanese employees are rising while payouts are falling. Unlike the USa, Japan has no law against discrimination based on age. Worker productivity increases in Japan are not able to offset declines in number of workers, thus resulting in a decline in overall economic production. Like many countries, Japan does not view immigration as a good way to solve this problem. Japan’s shrinking workforce has become such a concern that the government just recently allowed an unspecified number of Indonesian and Filipino nurses and caregivers to work in Japan for two years. the number of working-age Long-term Objectives Long-term objectives represent the results expected from pursuing certain strategies. Strategies represent the actions to be taken to accomplish long-term objectives. the time frame for objec- tives and strategies should be consistent, usually from two to five years. The Nature of Long-Term Objectives Objectives should be quantitative, measurable, realistic, understandable, challenging, hierarchi- cal, obtainable, and congruent among organizational units. Each objective should also be associ- ated with a timeline. Objectives are commonly stated in terms such as growth in assets, growth in sales, profitability, market share, degree and nature of diversification, degree and nature of vertical integration, earnings per share, and social responsibility. clearly established objectives offer many benefits. they provide direction, allow synergy, aid in evaluation, establish priori- ties, reduce uncertainty, minimize conflicts, stimulate exertion, and aid in both the allocation of resources and the design of jobs. Objectives provide a basis for consistent decision making by managers whose values and attitudes differ. Objectives serve as standards by which individuals, groups, departments, divisions, and entire organizations can be evaluated. Long-term objectives are needed at the corporate, divisional, and functional levels of an organization. they are an important measure of managerial performance. Many practitioners and academicians attribute a significant part of U.S. industry’s competitive decline to the short- term, rather than long-term, strategy orientation of managers in the USa. arthur D. Little argues that bonuses or merit pay for managers today must be
based to a greater extent on long-term objectives and strategies. an example framework for relating objectives to performance evalua- tion is provided in table 4-1. a particular organization could tailor these guidelines to meet its own needs, but incentives should be attached to both long-term and annual objectives. Without long-term objectives, an organization would drift aimlessly toward some unknown end. It is hard to imagine an organization or individual being successful without clear objectives. You probably have worked hard the last few years striving to achieve an objective to graduate with a business degree. Success only rarely occurs by accident; rather, it is the result of hard work directed toward achieving certain objectives. table 4-2 reveals the desired characteristics of objectives, while table 4- summarizes the benefits of having clear objectives. Financial versus Strategic Objectives two types of objectives are especially common in organizations: financial and strategic objec- tives. Financial objectives include those associated with growth in revenues, growth in earn- ings, higher dividends, larger profit margins, greater return on investment, higher earnings per share, a rising stock price, improved cash flow, and so on; whereas strategic objectives include things such as a larger market share, quicker on-time delivery than rivals, shorter design-to-mar- ket times than rivals, lower costs than rivals, higher product quality than rivals, wider geographic coverage than rivals, achieving technological leadership, consistently getting new or improved products to market ahead of rivals, and so on. although financial objectives are especially important in firms, oftentimes there is a trade- off between financial and strategic objectives such that crucial decisions have to be made. For example, a firm can do certain things to maximize short-term financial objectives that would harm long-term strategic objectives. to improve financial position in the short run through higher prices may, for example, jeopardize long-term market share. the dangers associated with trading off long-term strategic objectives with near-term bottom-line performance are especially severe if competitors relentlessly pursue increased market share at the expense of short-term profitability. and there are other trade-offs between financial and strategic objectives, related to riskiness of actions, concern for business ethics, need to preserve the natural environment, and social responsibility issues. Both financial and strategic objectives should include both annual and long-term performance targets. Ultimately, the best way to sustain competitive advantage over the long run is to relentlessly pursue strategic objectives that strengthen a firm’s business position over rivals. Financial objectives can best be met by focusing
Levels of Strategies With Persons Most Responsible human resource manager (HRM), chief marketing officer (cMO), and so on at the functional level; and the plant manager, regional sales manager, and so on at the operational level. In small firms, the persons primarily responsible for having effective strategies at the various levels include the business owner or president at the company level and then the same range of persons at the lower two levels, as with a large firm. It is important that all managers at all levels participate and understand the firm’s strate- gic plan to help ensure coordination, facilitation, and commitment while avoiding inconsis- tency, inefficiency, and miscommunication. Plant managers, for example, need to understand and be supportive of the overall strategic plan (game plan), whereas the president and the cEO need to be knowledgeable of strategies being employed in various sales territories and manufacturing plants. Backward Integration In March 2013, Starbucks purchased its first coffee farm—a 600 acre property in costa Rica. this backward integration strategy was utilized primarily to develop new coffee varieties and to test methods to combat a fungal disease known as coffee rust that plagues the industry. Both manufacturers and retailers purchase needed materials from suppliers. Backward integration is a strategy of seeking ownership or increased control of a firm’s suppliers. this strategy can be especially appropriate when a firm’s current suppliers are unreliable, too costly, or cannot meet the firm’s needs. campbell Soup recently acquired one of its primary suppliers, Bolthouse Farms, head- quartered in Bakersfield, california, for $1.55 billion in an effort to move more aggressively into fresher foods rather than relying so heavily on canned foods. canned foods, including campbell’s famous soups, are full of preservatives so they will last a long time on shelves, but for an increasing number of consumers, freshness trumps longevity. Starbucks in early 2014 will open its first company-owned factory to make soluble products such as its VIa Ready Brew and the coffee base for Frappuccinos and many of the company’s ready-to-drink beverages. these products are currently made in colombia, South america, and in Switzerland by third-party manufacturers. Starbucks says this backward integration strategy will enable the company to save on transportation and ensure better qual- ity. the new Starbucks plant is being built in augusta, georgia. In addition, Starbucks recently began producing and selling a single- cup coffee brewing machine that will brew coffee, lattes, and espresso in one machine. Some analysts are concerned that consumers may now make their own Starbucks drink
at home for one dollar, rather than going to a Starbucks and buying that drink for four dollars. Priceline.com Inc., recently acquired Kayak Software for $1.8 billion, representing a 29 percent premium over Kayak’s closing stock price. Priceline wanted Kayak because that company makes money by referring customers to online travel agencies such as Priceline and rival Expedia. Kayak operated websites and mobile applications for travelers to compare prices for airline, hotel, and rental-car bookings. Some industries in the USa, such as the automotive and aluminum industries, are reducing their historical pursuit of backward integration. Instead of owning their suppliers, companies negotiate with several outside suppliers. Ford and chrysler buy more than half of their component parts from outside suppliers such as tRW, Eaton, general Electric (gE), and Johnson controls. De-integration makes sense in industries that have global sources of supply. companies today shop around, play one seller against another, and go with the best deal. global competition is also spurring firms to reduce their number of suppliers and to demand higher levels of service and quality from those they keep. although traditionally rely- ing on many suppliers to ensure uninterrupted supplies and low prices, U.S. firms now are following the lead of Japanese firms, which have far fewer suppliers and closer, long-term relationships with those few. “Keeping track of so many suppliers is onerous,” says Mark Shimelonis, formerly of Xerox. Seven guidelines when backward integration may be an especially effective strategy are:
- When an organization’s present suppliers are especially expensive, unreliable, or incapable of meeting the firm’s needs for parts, components, assemblies, or raw materials.
- When the number of suppliers is small and the number of competitors is large.
- When an organization competes in an industry that is growing rapidly; this is a factor because integrative-type strategies (forward, backward, and horizontal) reduce an organization’s ability to diversify in a declining industry.
- When an organization has both capital and human resources to manage the new business of supplying its own raw materials.
into the market share of the truck sales leader F-150. chrysler’s new ads feature gruff- voiced actor Sam Elliott promoting Ram trucks over the chevrolet Silverado and the gMc Sierra trucks. Market Development Market development involves introducing present products or services into new geographic areas. India is a target for numerous firms to expand geographically. For example, coca-cola company and its bottling partners are investing $5 billion in India between 2013 and 2020 because that country has 1.2 billion people who on average only consume 12 eight-ounce bottles of coke a year compared with 240 in Brazil and 90 bottles globally. Pepsico is also expanding aggressively into India (the cEO of Pepsico is Indra nooyi who was born in India). the Swedish furniture company, IKEa group, is investing $1.9 billion in India to open 25 new stores between 2013 and 2018. Seattle- based Starbucks corp. opened its first store in India in late 2012. Product Development Product development is a strategy that seeks increased sales by improving or modifying pres- ent products or services. Product development usually entails large research and development expenditures. Walt Disney company is quickly developing a Disney Baby line of products and services that it expects to become a powerful baby brand for customers ages zero to two. Bob chapek, president of Disney consumer Products, recently said: “this gives Disney the opportu- nity to reach out to moms when magical moments begin; there is no more special occasion than the birth of a baby.” the company plans to create Disney Baby sections in its 200-plus Disney Stores in the USa. Disney Baby online will sell everything from $14 Disney cuddly Bobysuits to $69 Peeking Pooh Premiere crib Bumpers. Defensive Strategies In addition to integrative, intensive, and diversification strategies, organizations also could pur- sue retrenchment, divestiture, or liquidation. Retrenchment Retrenchment occurs when an organization regroups through cost and asset reduction to reverse declining sales and profits. Sometimes called a turnaround or reorganizational strat- egy, retrenchment is designed to fortify an organization’s basic distinctive competence. During retrenchment, strategists work with limited resources and face pressure from shareholders, employees, and the media. Retrenchment can entail selling
off land and buildings to raise needed cash, pruning product lines, closing marginal businesses, closing obsolete factories, automating processes, reducing the number of employees, and instituting expense control systems. Divestiture Selling a division or part of an organization is called divestiture. Divestiture often is used to raise capital for further strategic acquisitions or investments. Divestiture can be part of an overall retrenchment strategy to rid an organization of businesses that are unprofitable, that require too much capital, or that do not fit well with the firm’s other activities. Divestiture has also become a popular strategy for firms to focus on their core businesses and become less diversified. For example, United technologies recently sold two divisions of its Hamilton Sundstrand pump and air compressor subsidiary to help pay for the company’s $16.5 billion acquisition of goodrich corp. Owner of the atlanta Braves baseball team, Liberty Media corp., recently divested its Starz television network, but retains its large investments in Sirius XM Radio, Live nation Entertainment, and Barnes & noble. Liquidation Selling all of a company’s assets, in parts, for their tangible worth is called liquidation. Liquidation is a recognition of defeat and consequently can be an emotionally difficult strat- egy. However, it may be better to cease operating than to continue losing large sums of money. For example, the new York city–based discount retailer of designer clothing, Daffy’s, recently liquidated, closing all its 19 stores and selling all its inventory. a family-run business based in Secaucus, new Jersey and founded in 1961, Daffy’s decided it could not compete with t.J. Maxx and Marshalls, which had expanded aggressively into new York city. all 1,300 employees of Daffy’s received severance pay of 60 days worth of work.
VISION AND MISSION ANALYSIS
What Do We Want to Become? It is especially important for managers and executives in any organization to agree on the basic vision that the firm strives to achieve in the long term. a vision statement should answer the basic question, “What do we want to become?” a clear vision provides the foundation for developing a comprehensive mission statement. Many organizations have both a vision and mission statement, but the vision statement should be established first and foremost. the vision statement should be short, preferably one
managers and employees have in their hearts and minds about their own futures. Shared vision creates a commonality of interests that can lift workers out of the monotony of daily work and put them into a new world of opportunity and challenge. The Process of Developing Vision and Mission Statements as indicated in the strategic-management model, clear vision and mission statements are needed before alternative strategies can be formulated and implemented. as many managers as possible should be involved in the process of developing these statements because, through involvement, people become committed to an organization. a widely used approach to developing a vision and mission statement is first to select several articles about these statements and ask all managers to read these as background information. then ask managers themselves to prepare a vision and mission statement for the organization. a facilitator or committee of top managers should then merge these statements into a single document and distribute the draft statements to all managers. a request for modifications, additions, and deletions is needed next, along with a meeting to revise the document. to the extent that all managers have input into and support the final documents, organizations can more easily obtain managers’ support for other strategy formulation, implementation, and evaluation activities. thus, the process of developing a vision and mission statement represents a great opportunity for strategists to obtain needed support from all managers in the firm. Importance (Benefits) of Vision and Mission Statements the importance (benefits) of vision and mission statements to effective strategic management is well documented in the literature, although research results are mixed. Rarick and Vitton found that firms with a formalized mission statement have twice the average return on shareholders’ equity than those firms without a formalized mission statement have; Bart and Baetz found a positive relationship between mission statements and organizational performance; BusinessWeek reports that firms using mission statements have a 30 percent higher return on certain financial measures than those without such statements; however, some studies have found that having a mission statement does not directly contribute positively to financial performance.3 the extent of manager and employee involvement in developing vision and mission statements can make a difference in business success. this chapter provides guidelines for developing these important documents. In actual practice, wide variations exist in the nature, composition, and use of both vision and mission statements. King and cleland recommend that organizations carefully develop a written mission statement in order to reap the following benefits:
- to make sure all employees/managers understand the firm’s purpose or reason for being.
- to provide a basis for prioritization of key internal and external factors utilized to formu- late feasible strategies.
- to provide a basis for the allocation of resources.
- to provide a basis for organizing work, departments, activities, and segments around a common purpose. characteristics of a Mission Statement A Declaration of Attitude a mission statement is more than a statement of specific details; it is a declaration of attitude and outlook. It usually is broad in scope for at least two major reasons. First, a good mission statement allows for the generation and consideration of a range of feasible alternative objectives and strategies without unduly stifling management creativity. Excess specificity would limit the potential of creative growth for the organization. However, an overly general statement that does not exclude any strategy alternatives could be dysfunctional. apple computer’s mission state- ment, for example, should not open the possibility for diversification into pesticides—or Ford Motor company’s into food processing. Second, a mission statement needs to be broad to reconcile differences effectively among, and appeal to, an organization’s diverse stakeholders, the individuals and groups of individuals who have a special stake or claim on the company. thus, a mission statement should be reconcilatory. Stakeholders include employees, managers, stockholders, boards of directors, customers, suppliers, distributors, creditors, governments (local, state, federal, and foreign), unions, competitors, environmental groups, and the general public. Stakeholders affect and are affected by an organization’s strategies, yet the claims and concerns of diverse constituen- cies vary and often conflict. For example, the general public is especially interested in social responsibility, whereas stockholders are more interested in profitability. claims on any business literally may number in the thousands, and they often include clean air, jobs, taxes, investment opportunities, career opportunities, equal employment opportunities, employee benefits, salaries, wages, clean water, and community services. all stakeholders’ claims on an organization cannot be pursued with equal emphasis. a good mission statement indicates the relative attention that an organization will devote to meeting the claims of various stakeholders.
