The purposes of a business

Question 1

Mission statements

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

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

Advantages claimed for 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

Criticisms of mission statements

Answer 4

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

Question 5

Role of mission

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

Setting objectives
 Objectives should be

Answer 6

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

Profit making entities vs Not-For-Profit entities (NFP):Profit making entities

Answer 7

Primary objective
 Maximise shareholder
wealth
Secondary objectives
 Customer satisfaction
 Social responsibility
 Innovation
 Meaningful employment

Question 8

Profit making entities vs Not-For-Profit entities (NFP):Not-For-Profit 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

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

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

Stakeholder mapping

Answer 11

Mendelow’s power-interest stakeholder matrix to be used to analyse stakeholders
and to identify an appropriate response.
Low power low interest: Minimal effort
can be directed
Low power hig interst: Keep informed
#High power low interest: Keep satisfied
High power high interest: Key playrs need participation