Chapter 3: The purposes of a business

Question 1

What is the mission of a company?

Answer 1

An organisation’s mission is ‘the most generalised type of objective [which] can be thought of as an expression of its raison d’être’. (Johnson & Scholes).

 A mission statement is the written communication of an organisation’s mission to internal and external stakeholders.
 The mission statement is usually a brief statement set out in general terms which doesn’t include a timescale or commercial terms.

Question 2

What are the features of a successful mission statement?

Answer 2

The Ashridge College model suggests that a successful mission
statement should contain the following elements:
 Purpose – Why does the organisation exist and what does it aim to achieve for its stakeholders?
 Strategy – What resources, competencies or generic strategy give the company a competitive advantage?
 Policies – What standards and behavioural patterns are adopted within the organisation?
 Values – What beliefs do the managers and employees share?

Question 3

What are advantages of mission statements?

Answer 3

• Help resolve stakeholder conflict
• Set the direction of the organisation and so help formulate strategy
• Help communicate the values and direction of the organisation to stakeholders

Question 4

What are some criticisms of mission statements?

Answer 4

• Often full of meaningless terms like ‘the best’, which gave staff little idea of what to aim at
• Often ignored by managers
• Often considered to just be a public relations exercise

Question 5

What is the difference between mission, objectives, strategy and actions plans and budget?

Answer 5

Rational approach to strategy: Mission is the start point of strategy formulation.

Mission: General direction
Objectives: Specific goals (should be aligned to mission)
Strategies: Long term plans to achieve objectives
Action plans and budget: Short term plans to implement strategy

Question 6

What should objectives be?

Answer 6

Objectives should be SMART:
– Specific – clear statement, easy to understand
– Measurable – to enable control and communication down the organisation
– Attainable – it is pointless setting unachievable objectives
– Relevant – appropriate to the mission and stakeholders
– Timed – have a time period for achievement.

Question 7

What are the primary and secondary objectives of profit making entities?

Answer 7

Primary Objective: Maximise Shareholder Wealth

Secondary Objectives:
 Customer satisfaction
 Social responsibility
 Innovation
 Meaningful employment

Question 8

What are the primary and secondary objectives of not-for-profit making entities?

Answer 8

Primary Objective: Maximise the benefit to target stakeholder

Secondary Objectives:
 Investing in staff
 Minimal impact on the local environment
 Economy, efficiency,
effectiveness

Question 9

What are some issues with the objectives of Not-For-Profit organisations?

Answer 9

 NFPs often have multiple objectives to consider – e.g. a state primary school seeking to educate children, improve attendance, turn out ‘rounded’ members of society, provide a challenging environment for teachers and staff etc…
 They may experience difficulty in measuring these objectives as success is typically non-financial – e.g. pass rates, attendance rates, child happiness, staff
satisfaction etc…
 Stakeholder conflicts may be more difficult to resolve as NFPs typically have a wide range of influential stakeholders – e.g. teachers, children, parents, governors, government, Local Education Authorities etc…
 Financial constraints may limit the amount that they can achieve. – e.g. school aiming to operate within internal budgetary constraints. Consider also:
– hospitals seek to offer the best possible care to as many patients as
possible, subject to budgetary restrictions imposed upon them
– councils organise services such as refuse collection, while trying to
achieve value for money with residents’ council tax
– charities may try to alleviate suffering subject to funds raised.

Question 10

What are stakeholders?

Answer 10

Stakeholders are any individual or group with an interest in what the
organisation does.
In order to formulate its mission and objectives an organisation may
need to analyse or prioritise its stakeholders – this can be done with stakeholder mapping.

Question 11

What is Mendelow’s power-interest stakeholder matrix?

Answer 11

Mendelow’s power-interest stakeholder matrix to be used to analyse stakeholders
and to identify an appropriate response.

Mendelow’s matrix categorises stakeholders into four main types:

Level of interest: Low, Power: Low = Minimal effort can be directed

Level of interest: High, Power: Low = Keep informed

Level of interest: Low, Power: High = Keep satisfied

Level of interest: High, Power: High = Key players need participation