VISION AND MISSION STATEMENT & COMPETEIVE ADVANTAGE?

Vision

is a statement that expresses organization’s ultimate objectives.

Understanding the tool

It is very important for any organization to have clear and attainable long-term vision; the statement that guides every chief executive, manager or employee in achieving the same organizational objective. A vision statement asks ‘What does our business want to become?’ and usually is a one sentence, inspirational, clear and memorable statement that expresses company’s desired long-term position. It motivates employees to make extra effort and usually results in higher performance. Because money rewards only partly motivates employees, it is important to use other tools such as vision statement to increase their motivation.
The statement also indicates what resources, competencies and skills will be needed to achieve the future objective. This way it guides decision-making and resource allocation more effectively.

Vision is closely related with a term ‘strategic intent’ – a desired leadership position that is currently unachievable due to the lack of resources and capabilities.

Difference between vision and mission statements

Vision and mission statements are often developed and used together for the same purpose. This confuses many people into thinking that vision and mission could be used interchangeably, when actually they can’t.

Differences between vision and mission

Vision	Mission
Purpose
Tells what an organization aims to achieve.	States what a company is currently doing.
Answers the question
What do we want to become?	What do we do?
Includes
Objectives Values	Customers Products/Services Markets Technology Concern for survival Philosophy Self-Concept Concern for public image Concern for employees
Future or present time?
Talks about the future	Talks about the present
To whom it is developed?
Employees of the company	Employees, customers, suppliers, distributors, partners and communities
Which one is created first?
Developed first	Developed only when vision is available
How often does it change?
Rarely changes because it takes years to achieve most of the objectives	Product-oriented missions change every time when a company decides to venture into a new product market.

There are clear differences between the two statements that should not be neglected.

Benefits

Not all the visions are equally good. Some of them are very generic or focus on financial objectives and as a result, poorly motivates employees. But if a company puts enough efforts in creating vision statement, it results into following benefits:

• Motivates and inspires employees
• Provides one purpose to work for
• Sets the stretch goals (goals that are impossible to achieve with current resources and capabilities)
• Guides managers in effectively allocating resources

Writing the statement

Creating a vision is an important first step in strategic management process. We identified these steps and guidelines to help you write an effective statement.
Step 1. Gather a team of managers, employees and shareholders. Vision is the statement that must be understood by employees of all levels. As many people as possible should be involved in the process because involvement leads to stronger commitment to company’s vision. After choosing the people that will be involved you should also distribute several articles to them about what is organization’s vision and ask everyone to read them as a background.
Step 2. Ask everyone to write their own version of vision. The next step is to ask everyone to write his or her own version of the statement and submit it to the responsible team. After receiving the statements, the team should try to combine draft vision out of all the submissions. This is also a great opportunity to resolve any conflicting views about firm’s ultimate objective.
Step 3. Revise the statement and present the final version. The draft statement should be distributed to the members again for their last revision. Upon receiving the feedback, the final version of the vision should be created and presented to every employee.

Don’t forget that a vision should be a one sentence clear, inspirational and memorable statement.

Vision statement examples

The best way to learn creating a vision is to look at the currently available good and bad examples.

Good visions

Chevron: To be the global energy company most admired for its people, partnership and performance.

Feeding America: A hunger-free America

Habitat for Humanity: A world where everyone has a decent place to live.

Microsoft: A computer on every desk and in every home

Save the Children: Our vision is a world in which every child attains the right to survival, protection, development and participation.

Bad visions

General Motors: To design, build and sell the world’s best vehicles. (Best in what? GM should have specified their objective)

Ikea: At Ikea our vision is to create a better everyday life for the many people. (This is impossible to achieve)

Samsung: Inspire the World, Create the Future. (The statement is too vague and doesn’t set any objectives)

Toyota: Toyota will lead the way to the future of mobility, enriching lives around the world with the safest and most responsible ways of moving people. Through our commitment to quality, constant innovation and respect for the planet, we aim to exceed expectations and be rewarded with a smile. We will meet our challenging goals by engaging the talent and passion of people, who believe there is always a better way. (It is too long and sounds more like a mission than a true vision)

Mission statement

is a description of what an organization actually does – what its business is – and why it does it.

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Understanding the tool

Often called the “credo”, “philosophy”, “core values” or “our aspirations”, organization’s mission is the statement that defines its core purpose or reason for being. ^[2] It tells who a company is and what it does. According to P. Drucker, often called the father of modern management, a mission is the primary guidance in creating plans, strategies or making daily decisions. It is an important communication tool that conveys information about organization’s products, services, targeted customers, geographic markets, philosophies, values and plans for future growth to all of its stakeholders. In other words, every major reason why company exists must be reflected in its mission, so any employee, supplier, customer or community would understand the driving force behind organization’s operations.
There are two types of statements:^[1]

• Customer-oriented missions. Customer-oriented missions define organization’s purpose in terms of meeting customer needs or providing solutions for them. They provide more flexibility than product-oriented missions and can be easily adapted to changing environment. For example, Nokia’s statement “connecting people” is customer-oriented. It does not focus on mobile phones or smartphones only. It provides a solution to customer needs and could easily have worked 50 years ago, and will continue to work in the future. It also gives more strategic flexibility for the company. In Nokia’s case, it may start providing VoIP software to allow calls to be made over the internet and its mission would still be valid.
• Product-oriented missions. Product-oriented missions focus on what products or services to serve rather than what solutions to provide for customers. These statements provide less flexibility for the company because most products have short life cycle and offer limited market expansion. The company that defines its business as “providing best health insurance products” may struggle to grow to other insurance product categories.

For a mission to be effective it must include the following 9 components:^[2]

1. Customers. Who are your customers? How do you benefit them?
2. Products or services. What are the main products or services that you offer? Their uniqueness?
3. Markets. In which geographical markets do you operate?
4. Technology. What is the firm’s basic technology?
5. Concern for survival. Is the firm committed to growth and financial soundness?
6. Philosophy. What are the basic beliefs, values and philosophies that guide an organization?
7. Self-concept. What are the firm’s strengths, competencies or competitive advantages?
8. Concern for public image. Is the firm socially responsible and environmentally friendly?
9. Concern for employees. How does a company treat its employees?

Why creating a mission is important?

Many studies have been conducted to find out if having and communicating mission statement helps an organization to achieve higher performance.^[3] The results were mixed. Some studies found positive relationship between written statements and higher organizational performance, while other studies found none or even negative relationship. One of the reasons might be that most of the companies create mission statement only because it’s fashionable to do so and little effort is made to actually communicate that mission to its stakeholders. David^[2] argues that if an organization constantly revises its mission and treats it as a living document, it achieves higher performance than its competitors. Nonetheless, all of the authors agree that mission brings the following benefits^[3][4]:

• Informs organization’s stakeholders about its plans and goals;
• Unifies employees’ efforts in pursuing company goals;
• Serves as an effective public relations tool;
• Provides basis for allocating resources;
• Guides strategic or daily decision making;
• Shows that a company is proactive.

Writing a mission

Creating a mission statement is an important first step in clearly identifying your business’ reason for being. It’s hard to do it right. Therefore, we identified these steps and guidelines to help you write an effective statement.
Step 1. Gather a team of managers, employees and shareholders. Mission is the statement that must be understood by employees of all levels. Involving more people will let you find out how each of them sees an organization and its core purpose. In addition, employees will support organization’s mission more if they will be involved in the process of creating it.
Step 2. Answer all 9 questions for effective mission. Many practitioners and academics agree that a comprehensive statement must include all 9 components. Only then creating a mission can benefit a company. At this stage, try to honestly answer all the questions and identify your customers, markets, values etc. It may take a lot of time but it’s worth it.
Step 3. Find the best combination. Collect the answers from everyone and try to combine one mission statement out of them. During this step, you can make sure that everyone understands company’s reason for being and there are no conflicting views left.
Following guidelines (all taken from various studies) should also be helpful in writing an effective mission statement:

• ‘Public image’, ‘concern for employees’, ‘philosophy’ and ‘customers’ are the most important components of a mission;
• ‘Citizenship’, ‘teamwork’, ‘excellence’ and ‘integrity’ are the values used most often by the companies with effective missions;
• Influential statements include words such as: ‘communities’, ‘customers’, ‘employees’, ‘ethics’, ‘global’ and ‘quality/value’;^[4]
• Statement should be customer-oriented;
• Use less than 250 words;
• Be inspiring and enduring.

NOTE! Every mission must be communicated to organization’s stakeholders to have any positive impact.
It must be constantly revised and adjusted to meet any changing situation.

Mission statement examples

The best way to learn creating an influential mission is to look at the existing examples. In the following table, we provide 3 mission statement examples and examine them using the previous guidelines.

FedEx mission

"FedEx Corporation will produce superior financial returns for its shareowners(5) by providing high value-added(7) logistics, transportation and related information services(2) through focused operating companies. Customer(1) requirements will be met in the highest quality manner appropriate to each market segment served(3). FedEx Corporation will strive to develop mutually rewarding relationships with its employees(9), partners and suppliers. Safety will be the first consideration in all operations(9). Corporate activities will be conducted to the highest ethical and professional standards.(6)"

FedEx mission lacks the answers about technologies (4) and social responsibilities (8), which is one of the key characteristics that have to be in successful statement. It also lacks all the values pointed out in the guidelines that are used by successful companies in their statements. It is also product-oriented.

Intel mission

"Delight our customers(1), employees(9), and shareholders(5) by relentlessly delivering the platform and technology(2,4) advancements that become essential to the way we work and live."

Intel’s mission is poor because it lacks 4 components: markets(3), philosophy(6), self-concept(7) and public image(8). It is customer-oriented but does not use any of the top 4 values and is too short.

Toyota mission

Toyota will lead the way to the future of mobility, enriching lives around the world(3) with the safest and most responsible(6) ways of moving people(1). Through our commitment to quality, constant innovation(4,7) and respect for the planet(8), we aim to exceed expectations and be rewarded with a smile. We will meet challenging goals (5) by engaging the talent and passion of people(9), who believe there is always a better way.(6)

Toyota has only missed to mention its products. Their mission is customer-oriented, inspiring and enduring but it doesn’t clearly mention its customers or social responsibilities.

Competitive advantage

means superior performance relative to other competitors in the same industry or superior performance relative to the industry average.

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What is competitive advantage?

There is no one answer about what is competitive advantage or one way to measure it, and for the right reason. Nearly everything can be considered as competitive edge, e.g. higher profit margin, greater return on assets, valuable resource such as brand reputation or unique competence in producing jet engines. Every company must have at least one advantage to successfully compete in the market. If a company can’t identify one or just doesn’t possess it, competitors soon outperform it and force the business to leave the market.
There are many ways to achieve the advantage but only two basic types of it: cost or differentiation advantage. A company that is able to achieve superiority in cost or differentiation is able to offer consumers the products at lower costs or with higher degree of differentiation and most importantly, is able to compete with its rivals.

An organization that is capable of outperforming its competitors over a long period of time has sustainable competitive advantage.

The following diagram illustrates the basic competitive advantage model, which is explained below in the article:

How a company can achieve it?

An organization can achieve an edge over its competitors in the following two ways:

• Through external changes. When PEST factors change, many opportunities can appear that, if seized upon, could provide many benefits for an organization. A company can also gain an upper hand over its competitors when its capable to respond to external changes faster than other organizations.
• By developing them inside the company. A firm can achieve cost or differentiation advantage when it develops VRIO resources, unique competences or through innovative processes and products.

External Changes

Changes in PEST factors. PEST stands for political, economic, socio-cultural and technological factors that affect firm’s external environment. When these factors change many opportunities arise that can be exploited by an organization to achieve superiority over its rivals. For example, new superior machinery, which is manufactured and sold only in South Korea, would result in lower production costs for Korean companies and they would gain cost advantage against competitors in a global environment. Changes in consumer demand, such as trend for eating more healthy food, can be used to gain at least temporary differentiation advantage if a company would opt to sell mainly healthy food products while competitors wouldn’t. For example, Subway and KFC.
If opportunities appear due to changes in external environment why not all companies are able to profit from that? It’s simple, companies have different resources, competences and capabilities and are differently affected by industry or macro environment changes.
Company’s ability to respond fast to changes. The advantage can also be gained when a company is the first one to exploit the external change. Otherwise, if a company is slow to respond to changes it may never benefit from the arising opportunities.

Internal Environment

VRIO resources. A company that possesses VRIO (valuable, rare, hard to imitate and organized) resources has an edge over its competitors due to superiority of such resources. If one company has gained VRIO resource, no other company can acquire it (at least temporarily). The following resources have VRIO attributes:

• Intellectual property (patents, copyrights, trademarks)
• Brand equity
• Culture
• Know-how
• Reputation

Unique competences. Competence is an ability to perform tasks successfully and is a cluster of related skills, knowledge, capabilities and processes. A company that has developed a competence in producing miniaturized electronics would get at least temporary advantage as other companies would find it very hard to replicate the processes, skills, knowledge and capabilities needed for that competence.
Innovative capabilities. Most often, a company gains superiority through innovation. Innovative products, processes or new business models provide strong competitive edge due to the first mover advantage. For example, Apple’s introduction of tablets or its business model combining mp3 device and iTunes online music store.

Two basic types

M. Porter has identified 2 basic types of competitive advantage: cost and differentiation advantage.
Cost advantage. Porter argued that a company could achieve superior performance by producing similar quality products or services but at lower costs. In this case, company sells products at the same price as competitors but reaps higher profit margins because of lower production costs. The company that tries to achieve cost advantage is pursuing cost leadership strategy. Higher profit margins lead to further price reductions, more investments in process innovation and ultimately greater value for customers.
Differentiation advantage. Differentiation advantage is achieved by offering unique products and services and charging premium price for that. Differentiation strategy is used in this situation and company positions itself more on branding, advertising, design, quality and new product development rather than efficiency, outsourcing or process innovation. Customers are willing to pay higher price only for unique features and the best quality.
The cost leadership and differentiation strategies are not the only strategies used to gain competitive advantage. Innovation strategy is used to develop new or better products, processes or business models that grant competitive edge over competitors.