CH 1 To 3 SM

Bahir Dar University
College of Business and Economics

MBA Program
Strategic Management
(MBA 741)
Compiled by :Woldetsadik K. (Assist. Prof.)

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Strategic Management (MBA 741)
Chapter One
The Nature of
Strategic Management

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Strategic Management Defined
• Art and science of formulating, implementing,

and evaluating cross-functional decisions that
enable an organization to achieve its
objectives.

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Terminology
“Strategic Management”
Synonymous with
“Strategic Planning”
• Strategic management
Used more often in academia
• Strategic planning
Used more often in the business world

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Cont…
• Strategic management
Refers to:
 Strategy formulation
 Strategy implementation
 Strategy evaluation
• Strategic planning
Refers to:
 Strategy formulation
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1. The Nature of Strategic Management
1.1. Defn: Strategy is a term coined in Athens, around 508-7 B.C.
Strategos (Stratos-the army & Agein-to lead) which means the art of
leading the army.
Strategy (oxford)- a skillful plan that is intended to achieve a
particular purpose. It is potential actions to be undertaken to achieve
long-term objectives.
1912-Harvard Business School began offering the course in
“Business policy”.
1960’s-began to be used for business purpose, but prior to this years,
used mainly for military purpose. E.g. Xenophon-a commander
should be all rounded, “Trusting vs Suspicious, alert vs deceptive)…
Strategic Management: Glueck (1984): SM is a stream of decisions
and actions which leads to the development of an effective
strategy(ies) to help achieve corporate objectives.
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1.2. Stages of Strategic Management
• According to J. David Hunger and Thomas L. Wheelen, there are four stages of strategic
management . Figure 1.1 Strategic Management Model

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Strategic Management Process
STRATEGY FORMULATION
STRATEGY IMPLEMENTATION
STRATEGY EVALUATION

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Strategy Formulation
STRATEGY FORMULATION
Vision & Mission
Opportunities & Threats
Strengths & Weaknesses
Long-Term Objectives
Alternative Strategies
Strategy Selection

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Strategy Implementation
Annual Objectives
Policies
Motivate Employees
Resource Allocation

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Strategy Evaluation
Review
External & Internal
Measure Performance
Corrective Action

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1.3.KEY TERMS IN STRATEGIC MANAGEMENT
1. Competitive Advantage: anything that a firm does especially
well compared to rival firms/ a advantage that a firm has over its
competitors , allowing it to generate greater sales or margins
&/or retain more customers than its competitors
2. Strategists: are individuals who are most responsible for the
success or failure of an organization. Job titles: CEO, president,
and owner, chair of the board, executive director, dean or
entrepreneur
3. Vision & Mission statements: vision statement answers the
question “What do we want to become?” and mission
statements are “enduring statements of purpose that
distinguish one business from other similar firms. It is a
constant reminder to its employees of “why the organization
exists”.
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4. External opportunities and threats:
Opportunities are potential areas for growth and higher
performance. E.g. prevalence of new customers and
new geographic markets.
Threats: are challenges confronting the organization,
external in nature. E.g. bad press coverage, shifts in
consumer behavior, substitute products, new
regulations....etc.
5. Internal strengths and weaknesses: are an
organizational controllable activities. Strengths: are
those things that you do well, the high value or
performance points and it can be tangible (efficient
distribution channels, very high quality products,
excellent financial condition) or intangible (employees’
commitment...etc).
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Weaknesses are those things that prevent you from doing what you
really need to do. E.g. Bad leadership, unskilled workforce, insufficient
resources, poor product quality, slow distribution and delivery
channels, outdated technologies, lack of planning,
6. Long term objectives Vs 7. Annual Objectives: Objectives are the
end results of planned activity.
Long term Annual objectives (short-term

objectives milestones)
Time frame >1 year into the future Immediate, 1 year
Focus Future position Specific accomplishment
Specificity Broadly stated Very specific
Measurement Broad (e.g. 20% mkt Absolute term e.g. 15%↑ in sales next
share) year.
Importance Strategy formulation Strategy implementation
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Qualities of objectives: Suitable, Achievable, Acceptable,
Measurable, Motivating, Understandable, Flexible.
8. Strategies: are potential actions and the means by which long-
term objectives will be achieved. E.g. geographic expansion,
diversification, acquisition, pdt dev.t, market penetration,
retrenchment, divestiture, liquidation, and joint
ventures…..etc.
9. Policies: are the means (guidelines, rules) by which annual
objectives will be achieved. E.g. smoking on the workplace Vs
its health impact!

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1.4. Benefits of Strategic Management

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1.4. Benefits of Strategic Management
• Proactive vs. Reactive

Initiate and influence activities
 Helps shape firm’s own future
• Principal Benefit
Formulate better strategies
 Systematic, logical, and rational approach
• Communication
Key to successful strategic management

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• Financial: Enhance profitability, superior long-term financial
performance. E.g. attracting funds from 3rd parties..... significant
improvement in sales, profitability, and productivity
Cont….
More profitable and successful
Improvements in sales, profitability, and
productivity
High-Performing Firms
 Systematic planning
Fluctuations in external and internal
environments

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• Non financial: through empowering
managers and employees’, it unifies the
organization (create sense of organizational
identity which enhances the awareness of
external threats, improved understanding of
competitors strengths, increased employee
productivity, reduce resistance to change,
clearer understanding of performance-
reward r/ps.

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Cont….
• Non-financial Benefits
Enhanced awareness of external threats
Understanding of competitors’ strategies
Increased employee productivity
Reduced resistance to change
Clear performance-reward relationships
Order and discipline to the firm
View change as opportunity
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Why Some Firms Do No Strategic
Planning
• Poor reward structures
• Fire-fighting
• Waste of time
• Too expensive
• Laziness
• Content with success

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Cont….
• Fear of failure
• Overconfidence
• Prior bad experience
• Self-interest
• Fear of the unknown
• Suspicion

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1.5. Business Ethics and Strategic Management
Business ethics is defined as ‘principles of conduct’ within
organizations that guide decision making and behavior.
Good business ethics are a pre-requisite for good strategic
management. Issues of business ethics are product safety, employee
health, sexual harassment, AIDS in work place, smoking waste
disposal, takeover tactics, conflicts of interest , employee privacy,
security of company records, layoffs etc.

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Business Ethics & Strategic Planning
Principles of conduct within organizations that guide
decision making and behavior
• Good business ethics is a prerequisite for good

strategic management
• Good ethics is just good business!!!

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Cont….
• Strategists responsible for high ethical
principles
• All strategic processes have ethical
ramifications
• Formal codes of ethics are in place for
many businesses
• Internet privacy emerging as ethical issue
of immense proportions
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Cont….
Business actions always unethical include:
• Misleading advertising
• Misleading labeling
• Environmental harm
• Poor product or service safety
• Padding expense accounts
• Insider trading
• Dumping flawed products on foreign markets

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Chapter two
Strategies in Action
2. Types of Strategies:
2.1. Integration (Concentration) Strategies
A). Vertical Integration: expanding the firm’s range of
activities backward into its sources of supply &/or forward
toward to end users. It can aim at FULL integration (100%
participation in industry value chain) or PARTIAL
integration (building position in selected stages of the
industry’s value chain).
Types of Vertical Integration:
1. Backward Integration: gaining control (ownership)
over suppliers (vendors) who supplies parts, components,
assemblies or raw materials.
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When to apply this strategy:
 Firm seeks investing on facilities to produce certain
component parts (when it has both capital and HR to
manage it).
 Stiff competition in highly growing market.
 Advantages of STABLE PRICES are particularly
high.
 Profit margins of current suppliers is high.
 Company needs to acquire a needed resource
quickly.
 No. of suppliers is small and no. of competitors is
large.
 Expensive/unreliable/incapable suppliers are there.
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2. Forward Integration: gaining control over distributers or
retailers. It is when a manufacturer opens retail stores to sell its
products directly to consumers.
When to apply Fwd Integration:
 Firm wants to boost sales and market share/reduce costly
inventory piles up/ and under-utilization of distributers capacity.
 Limited availability of quality distributers.
 Co. has both the capital and HR to manage it.
 Advantages of STABLE PRODUCTION are particularly high.
 Current distributers have high profit margins.
 Co’s present distributers are especially
expensive/unreliable/incapable of meeting the needs of the
firm’s.
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B. Horizontal Integration: Seeking ownership or increased control over
competitors. It can be achieved via international expansion. E.g.
acquisitions, mergers, takeovers,….
When to apply Horizontal Integration:
 Increased economies of scale provide major competitive advantage.
 Firm has both capital & human talent needed to manage the expanded
organization.
 Monopoly prevails by an organization.
 Competitors are weakening due to a lack of managerial expertise or a
need for particular resources that an orgn possesses.
• e.g. X co. acquires Y where both are huge drug companies.

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2.2. Intensive Strategies
Market penetration, market development, and product
development are sometimes referred to as intensive strategies
because they require intensive efforts to improve a firm's
competitive position with existing products.
A. Market Penetration: strategy seeks to increase market share
for present products or services in present markets through
greater marketing efforts. E.g. increasing the number of sales
persons, increasing advertising expenditures, offering
extensive sales promotion items, increasing publicity efforts.
Guidelines to apply it:
 Unsaturated current market exist
 Increased usage rates
 Decreasing competitors market share while total industry sales
increases.
 Increased economies of scale provide major competitive
advantages.

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B. Market Development: introducing present products
or services into new geographic area.
Six guidelines when Market Development is effective:
• New channels of distribution that are reliable,
inexpensive, and good quality
• Firm is very successful at what it does
• Untapped or unsaturated markets
• Capital and human resources necessary to manage
expanded operations
• Excess production capacity
• Basic industry rapidly becoming global

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C) Product Development: Seeking increased sales by
improving present products or services or developing
new ones. It usually entails large research and
development expenditures. E.g. book publisher began
producing audio books.
Guidelines for Product Development
 Products in maturity stage of life cycle
 Competes in industry characterized by rapid
technological developments
 Major competitors offer better-quality products at
comparable prices
 Compete in high-growth industry
 Strong research and development capabilities.

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2.3. Diversification Strategies
There are TWO general types of diversification strategies:
concentric and conglomerate diversification.
a) Concentric Diversification: It is adding new, but related,
products or services. It’s an effective strategy when:
• Competes in no- or slow-growth industry
• Adding new & related products increases sales of current
products
• New & related products offered at competitive prices
• Current products are in decline stage of the product life cycle
• Strong management team
e.g. Firm X produces cell phones and diversify its deliver
wireless Internet services
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b) Conglomerate Diversification: Adding new, unrelated
products or services. It’s a significant departure from
existing product line. E.g. Mining company produces
furniture. Four guidelines when conglomerate
diversification may be an effective strategy are provided
below:
• Declining annual sales and profits
• Capital and managerial talent to compete successfully in a
new industry
• Financial synergy between the acquired and acquiring
firms
• Exiting markets for present products are saturated.

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2.4. Defensive Strategies
Defensive strategies are strategies to be undertaken to hinder
a given company or firm from failure which might
emanate from the prevalence of weak competitive
position due to poor performance or weak sales…etc. It
includes retrenchment, divestiture (sell-out), or
liquidation (bankruptcy).
a. Retrenchment: occurs when an organization regroups
through cost and asset reduction to reverse declining
sales and profits. Sometimes called a turnaround or
reorganization strategy. It aims at improving
performance.

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• Retrenchment can entail selling off land and buildings to raise
needed cash, pruning (cutting) product lines, closing marginal
businesses, closing obsolete factories, automating processes,
reducing the number of employees, and instituting expense control
systems. E.g. Tokyo-based Sony Corp. is cutting 8,000 jobs and
closing 6 of its 57 factories by March 2010 as prices of televisions fall
and consumer spending in general declines.
Guidelines for Retrenchment
• Firm has distinctive competencies but failed to meet its objectives and
goals consistently over time.
• Firm is one of the weaker competitors.
• Inefficiency, low profitability, poor employee morale and pressure
from stockholders to improve performance.
• When an organization’s strategic managers have failed.
• When internal reorganization is needed for growth purpose.

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b. Divestment (sell-out): sell-out is selling the whole
company to other firm while employees keep on their jobs
(for smaller companies) and divestment is a partial sell-
out of a division with low growth potential to the highest
bidders. Those buyers (bidders) can be MBO
(management-by-out), i.e. managers are buyers or Spinoff
where buyers are other independent companies or
investors. E.g. The British airport firm BAA Ltd. divested
three UK airports.
Divestment has become a very popular strategy as firms try
to focus on their core strengths, lessening their level of
diversification.

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5 Guidelines for Divestment
• When firm has pursued retrenchment but failed
to attain needed improvements.
• When a division needs more resources than the
firm can provide.
• When a division is responsible for the firm’s
overall poor performance.
• When a division is a misfit with the organization.
• When a large amount of cash is needed and
cannot be obtained from other sources.

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c. Liquidation (Bankruptcy)
• Bankruptcy is giving-up of management of the firm to the
courts in return for some settlement of the companies
obligations. Top management hopes that once the court
decides the claims on the company, the company will be
stronger and better able to compete in a more attractive
industry.
• Liquidation is selling all of a company's assets, in parts,
for their tangible worth. It’s a termination of the firm.
Management body sale all saleable assets to pay debt and
distribute to shareholders.

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3 Guidelines for Liquidation strategy to
be effective:
• When both retrenchment and divestiture
have been pursued unsuccessfully
• If the only alternative is bankruptcy,
liquidation is an orderly alternative.
• When stockholders can minimize their
losses by selling the firm’s assets

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Joint Venture and Combination Strategies
Joint Venture: is a popular strategy that occurs when two
or more companies form a temporary partnership or
consortium for the purpose of capitalizing on some
opportunity. Often, the two or more sponsoring firms
form a separate organization and have shared equity
ownership in the new entity. Other types of cooperative
arrangements include:
• Research and development partnerships
• Cross-distribution agreements
• Cross-licensing agreements
• Cross-manufacturing agreements
• Joint-bidding consortia
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Guidelines for Joint Ventures
• Combination of privately held and publicly held can be
synergistically combined.
• Domestic forms joint venture with foreign firm, can
obtain local management to reduce certain risks.
• Distinctive competencies of two or more firms are
complementary.
• Overwhelming resources and risks where project is
potentially very profitable.
• Two or more smaller firms have trouble competing with
larger firm.
• A need exists to introduce a new technology quickly.

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2.5. Michael Porter's Generic (business level) Strategies:
Business strategy is a strategy designed to gain competitive
advantage by exploiting core competencies in specific
product market for the purpose of providing value to
customers.
• It’s a strategy or actions firm’s take to gain competitive
advantages in a single market or industry. According to
Porter, strategies allow organizations to gain competitive
advantage from five different bases: cost leadership,
differentiation, focus (Focused cost lp and Focused
differentiation) and Integrated Cost L/ship /
Differentiation. Porter calls these bases generic strategies.

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Porter’s Five Business-level Strategies
Competitive Advantage
Cost Uniqueness
Broad Target Cost L/Ship Differentiation
Competitive Scope Integrated Cost L/ship

/ Differentiation
Narrow Target Focused Cost Focused

L/ship Differentiation
45

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A) Cost leadership strategy
A cost leadership strategy is an integrated set of actions
designed to produce or deliver goods or services at the
lowest cost relative to competitors, with features that are
acceptable to customers.
• Lowest competitive price
• Features acceptable to many customers
• Relatively standardised products
Cost saving actions required by this strategy:
• Building efficient scale facilities.
• Tightly controlling production & overhead costs.
• Simplifying production processes & building
efficient manufacturing facilities.
• Minimising costs of sales, R&D & service.
• Monitoring costs of activities provided by outsiders46
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Competitive risks of the cost-leadership strategy
• Processes used to produce & distribute goods or
services may become obsolete due to
competitors’ innovations.
• Focus on cost reductions may occur at expense
of customers’ perceptions of differentiation
encouraging them to purchase competitors’
products & services
• Competitors, using their own core competencies,
may learn to successfully imitate the cost
leader’s strategy

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B. Differentiation strategy
A differentiation strategy is an integrated set of actions
designed to produce goods or services that customers
perceive as being different in ways that are important to
them
• The firm produces non-standardized products for customers
who value differentiated features more than they value low
cost
• The ability to sell goods or services at a premium price
(price that substantially exceeds the cost of creating its
differentiated features) allows the firm to outperform rivals
& earn above-average returns.
Advantages:
 Can defend against new entrants (Potential entrant)
because:
• Entrants’ new products must surpass proven products
• Entrants’ new products must be at least equal to
performance of proven products, but offered at lower 48
prices
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Can mitigate bargaining power of suppliers &
buyers:
Can mitigate suppliers’ power by:
• Absorbing price increases due to higher margins
• Passing along higher supplier prices because buyers
are loyal to differentiated brand
Can mitigate buyers’ power by: Well differentiated
products reducing customer sensitivity to price increases
Reduce fear of product substitutes
• Well positioned relative to substitutes because:
• Brand loyalty to a differentiated product tends to
reduce customers’ testing of new products or switching
brands
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Risks associated with the differentiation strategy include:
1. A customer group’s decision that the differences
between the differentiated product and the cost leader’s
goods or services are no longer worth a premium price
(CHANGE OF MIND BY CUSTOMERS).
2. The inability of a differentiated product to create the
type of value for which customers are willing to pay a
premium price.
3. The ability of competitors to provide customers with
products that have features similar to those of the
differentiated product, but at a lower cost, and
4. The threat of counterfeiting, whereby firms produce a
cheap “knockoff” of a differentiated good or service.
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C) Focus strategy
A focus strategy is an integrated set of actions designed to
produce or deliver goods or services that serve the
needs of a particular competitive segment
Examples of specific market segments that can be targeted
by a focus strategy:
• Particular buyer group (e.g. youths or senior citizens)
• Different segment of a product line (e.g. professional
craftsmen versus do-it-yourselves)
• Different geographic markets
To implement a focus strategy, the firm must be able to
complete various primary and support value chain
activities in a competitively superior manner, in order
51
to develop & sustain a competitive advantage and earn
above-average returns.
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• Competitor firms may overlook small niches
• The firm lacks resources needed to compete in the
broader market, but serves a narrow segment more
effectively than industry-wide competitors
• Types of focused strategies:
• Focused cost leadership strategy
• Focused differentiation strategy
Competitive risks of focus strategies
• The focuser firm may be ‘out focused’ by its
competitors.
• A firm competing on an industry-wide basis decides to
pursue the niche market of the focuser firm.
• Customer preferences in the niche market may change to
more closely resemble those of the broader market. 52
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D) Integrated cost leadership / differentiation
strategy
• A firm that successfully uses the integrated cost
leadership / differentiation strategy should be in
a better position to:
• Adapt quickly to environmental changes
• Learn new skills and technologies more quickly
• Effectively leverage its core competencies while
competing against its rivals
• A commitment to strategic flexibility is
necessary for successful use of this strategy.

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Competitive risks of the integrated cost
leadership/differentiation strategy
• Often involves compromises
• Becoming neither the lowest cost nor the most
differentiated firm
• Becoming ‘stuck in the middle
• Lacking the strong commitment and expertise that
accompanies firms following either a cost leadership
or a differentiation strategy
• Earning below-average returns
• Competing at a disadvantage
• The integrated strategy is an appropriate choice for
firms possessing the core competencies to produce
somewhat differentiated products at relatively low
prices

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CHAPTER THREE
THE BUSINESS MISSION AND VISION
3.1. Vision Statement (What do we want to become?)
• Vision is aspirations or the desired future state.
• It is what the firm would ultimately like to be become. It
articulates the position that a firm would like to attain in
the distant future.
• Vision is “big picture” thinking with passion that helps
people feel what they are supposed to be doing in the
organization.
• It is an image or description of the business as you aspire
it to become in the future.
• Hickman and Silva (1984): “It is a mental trip from what
is well-known to what is much stranger, the creation of
the future from an assemblage of real facts, hopes,
dreams, risks and opportunities ”.
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Vision statement : articulates the ideal description of an
organization and gives shape to its intended future.
• In other words, a vision statement points the firm in the
direction of where it would eventually like to be in the
years to come.
• Effective vision statements are clear, concise, catchy and
memorable, futuristic, positive, inspiring and
challenging, not a fantasy or a wild dream (It is a
dream in action).
• However, an effective vision must stretch and challenges
people as well.

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Benefits of having a Vision Statement
• Good visions are inspiring and exhilarating.
• Visions represent a discontinuity, a step function and jump
ahead so that the company knows what it is to be.
• Good visions help in the creation of a common identity and
shared sense of purpose.
• Good visions are competitive, original and unique. They make
sense in the marketplace.
• Good visions foster risk-taking and experimentation.
Vision Statement Examples:
1. “To be the world leader in transportation products and
related services.” (General Motors)
2. “Our vision is to be the world’s best quick service
restaurant.” (McDonald’s)
3. “To make the automobile accessible to every American.”
(Ford Motor Company’s vision when established by Henry
Ford)
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3.2. Defining the Company Mission
• The company mission is defined as the fundamental, unique
purpose that sets a business apart from other firms of its type and
identifies the scope of its operations in product and market terms.
• An organization’s mission is the purpose or reason for the
organization’s existence.
• Many companies prefer the term business purpose to mission
statement, but the two phrases are essentially conceptually
identical and are used interchangeably.
• The Mission is a broadly framed but enduring statement of
company intent.
• Mission statement is an enduring statement of purpose that
distinguishes one organization from other similar enterprises; the
mission statement is a declaration of an organization’s reason for
being.

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• An enduring statement of purpose that distinguishes one
organization from other similar enterprises.
• It is a declaration of an organization’s “reason for being”.
• Mission Statements are also called Creed statement/Statement of
purpose/A statement “defining our business”.
3.3. Characteristics of a Mission Statement
• It should be feasible: It should be realistic and achievable.
• It should be precise: not be too narrow or broad
• It should be clear: it should be clear enough to lead to action.
• It should be motivating
• It should be distinctive: a mission statement which
indiscriminate is likely to have little impact.
• It should indicate major components of strategy:
• It should indicate how objectives are to be accomplished:

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3.4. Vision versus Mission
Some people like to consider vision and mission as two
different concepts, some prefer, on the other hand, to
combine these ideas into a single mission statement.
• Mission describes what the organization is now;
vision describes what the organization would like to
become.
• While a mission statement tells why your business
exists, a vision statement tells you where you are
going. It paints a compelling word picture of a
desired future state.
• Mission gives day-to-day relevance to work.
• Vision inspires stretching beyond what may seem
possible.
• Visions, like dreams, will change as they are fulfilled.
Mission occasionally changes to become congruent
with a new vision.
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Missions Visions
A mission statement • A strategic vision
focuses on current concerns a firm’s future
business activities‐‐“who business path ‐‐“where we
we are and what we do” are going”
Current product and Markets to be pursued
service offerings
Customer needs being Future technology
served product‐customer focus
being served
Technological and Kind of company that
business capabilities management is trying to
create
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3.5. IMPORTANCE OF VISION AND MISSION STATEMENTS
• To ensure unanimity of purpose within the organization
• To provide a basis, or standard, for allocating organizational
resources
• To establish a general tone or organizational climate
• To serve as a focal point for individuals to identify with the
organization’s purpose and direction, and to deter those who
cannot from participating further in the organization’s
activities
• To facilitate the translation of objectives into a work structure
involving the assignment of tasks to responsible elements
within the organization
• To specify organizational purposes and the translation of these
purposes into objectives in such a way that cost, time, and
performance parameters can be assessed and controlled
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3.6. Mission Statement Components
A mission statement is the most visible and public part of the
strategic management process. Components and corresponding
questions that a mission statement should answer include:
1. Customers: Who are the firm’s customers?
2. Products or services: What are the firm’s major products?
3. Markets: Geographically, where does the firm compete?
4. Technology: Is the firm technologically current?
5. Concern for survival, growth, and profitability: Is the firm
committed to growth and financial soundness?
6. Philosophy: What are the basic beliefs, values, aspirations, and
ethical priorities of the firm?
7. Self -concept: What is the firm’s distinctive competence or
major competitive advantage?
8. Concern for public image: Is the firm responsive to social,
community, and environmental concerns?
9. Concern for employees: Are employees a valuable asset of the
firm?
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Products/
Customers Services Markets
Technology
Mission
Employees
Elements
Survival
Growth
Public Profit
Image Self-Concept Philosophy

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Basic Product; Primary Market and Principal Technology
• Three components of a mission statement are indispensable:
Specification of the basic product, primary market, and
principal technology for production or delivery.
• The three components are discussed under one heading
because only in combination do they describe the business
activity of the company.
• Often a company’s most referenced public statement of
selected products and markets is presented in “silver bullet”
form in the mission statement.
• Such a statement serves as an abstract of a company
direction and is particularly helpful to outsiders who value
condensed overviews.
Technology: For businesses that rely heavily on technology, the
mission statement should include a description of the
essential technology the company does or plans to employ. If
nothing else, this directs purchasing agents toward the
appropriate vendors for goods and services.
1/4/2020 65
Company Goals : Survival, Growth and Profitability
• Three economic goals guide the strategic direction of almost every
viable business organization.
• Whether or not explicitly stated, a company mission statement
reflects the firm’s intention to secure its survival through sustained
growth and profitability.
• Unless a firm is able to survive, it will be incapable of satisfying
any of its stakeholders’ aims.
 Company Philosophy
• The statement of a company philosophy, often called a company
creed, usually accompanies or appears as part of the mission.
• It reflects or explicitly states basic beliefs, values, aspirations, and
philosophical priorities.
• In turn, strategic decision makers are committed to emphasizing
these in managing the firm.
• Fortunately, company philosophies vary little from one firm to
another. Compiled by :Woldetsadik K. (Assist. Prof.)
1/4/2020 66
• Thus, owners and managers implicitly accept a general,
unwritten, yet pervasive code of behavior.
• Through these code, actions in a business setting are governed
and largely self regulated.
• Unfortunately, statements of philosophy are so similar and are
so full of platitudes that they look and read more like public
relations statements than the commitment to values they are
meant to be.
 Public Image
• Particularly for the growing firm involved in a redefinition of
its company mission, public image is important.
• Both present and potential customers attribute certain qualities
to a particular business.
• On the other hand, a negative public image often prompts
firms to re-emphasize the beneficial aspects reflected in their
mission.
1/4/2020 67
Company Self-Concept
• A major determinant of any company’s continued success
is the extent to which it can relate functionally to the
external environment.
• Finding its place in a competitive situation requires the
firm to realistically evaluate its own strengths and
weaknesses as a competitor.
• This idea, that the firm must know itself-is the essence of
the company’s self concept.
Employees: Are employees a valuable asset of the firm?
Every company has a policy regarding its relationship
with employees. A mission statement provides an
opportunity to describe that policy in brief so
employees know the essentials of where they stand.
1/4/2020 68
• Examples of a mission statement
1. To organize the world’s information and make it
universally accessible and useful (Google)
2. We shall build good ships here-at a profit if we can-at a
loss if we must-but always good ships. (Newport News
Shipbuilding, unchanged since its founding in 1886)
Pepsico “We aspire to make PepsiCo the world’s premier
consumer products company, focused on convenient
foods and beverages. We seek to produce healthy
financial rewards for investors as we provide
opportunities for growth and enrichment to our
employees, our business partners and the communities in
which we operate. And in everything we do, we strive to
act with honesty, Compiled
openness, fairness and integrity.”
by :Woldetsadik K. (Assist. Prof.)
1/4/2020 69
Guidelines to write Good Mission Statement
The characteristics of good mission statements are that they are
brief, distinctive and wide in scope; they are ‘short in numbers
and long in rhetoric’ in that they identify the purpose of the
organization without too many limitations.
Specifically it should be:
1. Broad in scope; do not include monetary amounts, numbers
percentages, ratios or objectives
2. Less than 250 words in length
3. Identify the utility of the products of the firm
4. Include nine components: customers, products, markets,
technology, concern for survival/growth/profit, philosophy,
self concept, concern for public image, concern for employees.
5. Reconciliatory enduring.
1/4/2020 70
1.Vision of DBU
• Aspires to be the best university in Ethiopia by 2020
2.Mission of DBU
– Producing efficient graduate by offering quality based and
research assisted higher education
– Undertaking a problem solving research work, which focuses on
national need and benefiting the community with the outcome
– Offering government and community focus training, consultancy
service, transferring technology and undertaking innovation
3.Values: are the beliefs and moral principles that lie behind the
company’s culture. It gives meaning to the norms and behavior
standards in the company and act as the ‘right brain’ of the orgn.
 Shared vision/Quality service/Attention to cross-cutting
issues/Diversity/ Professionalism/Effectiveness/Equality/Democracy

1/4/2020 71

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Bahir Dar University

College of Business and Economics

Compiled by :Woldetsadik K. (Assist. Prof.)

Compiled by :Woldetsadik K. (Assist. Prof.)

• Art and science of formulating, implementing,

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Vision & Mission

Opportunities & Threats

Strengths & Weaknesses

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Long term Annual objectives (short-term

Time frame >1 year into the future Immediate, 1 year

Focus Future position Specific accomplishment

Specificity Broadly stated Very specific

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• Proactive vs. Reactive

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• Good business ethics is a prerequisite for good

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Broad Target Cost L/Ship Differentiation

Competitive Scope Integrated Cost L/ship

Narrow Target Focused Cost Focused

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