Lecture 2 Mission CSR

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Company Mission

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Refer Pearce II & Robinson (Chapter 2)

Lecture 2

Company M ission & Corporate

Social Responsibil i ty


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Learning Objectives

1. Describe a company mission and explain its values2. Explain why the mission statement should include

the companys basic product or service, its primarymarkets, and its principal technology

3. Explain which goal of a company is most important:

survival, profitability, or growth4. Discuss the importance of company philosophy,public image, and company self-concept tostockholders

5. Give examples of the newest trends in mission

statement components: customer emphasis,quality, and company vision6. Describe the role of a companys board of directors

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Company Mission:

A broadly framed but enduringstatement of a firms intent. It is the

unique purpose that sets a company

apart from others of its type andidentifies the scope of its operations in

product, market, and technology terms.

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WHAT IS A COMPANY MISSION?


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The Need for an Explicit Mission

In general, the mission statement address the followingquestions:

Why is this firm in business?

What are our economic goals?

What is our operating philosophy in terms of quality,company image, and self-concept?

What are our core competencies and competitiveadvantages?

What customers do and can we serve? How do we view our responsibilities to stockholders,

employees, communities, environment, social issues, andcompetitors?

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The typical business begins with the beliefs,desires, and aspirations of a single

entrepreneur

These beliefs are usually the basis for thecompanys mission

As the business grows or is forced to alter its

product, market, or technology, redefining thecompany mission may be necessary

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FORMULATING A MISSION


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Mission Statement Components

1. Customer-market

2. Product-service

3. Geographic Domain4. Technology

5. Concern for Survival

6. Philosophy7. Self-concept

8. Concern for Public Image

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Ex. 2.2 Excerpts From Actual Mission Statements

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Ex. 2.2Excerpts From Actual Mission Statements (contd.)

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Example:

Dell Computers mission

To be the most successful computer company in theworld at delivering the best customer experience inmarkets we serve. In doing so, Dell will meet customerexpectations ofhighest quality; leading technology;

competitive pricing; individual and companyaccountability; best-in-class service and support;flexible customization capability; superior corporatecitizenship; financial stability.

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Three Essential Components in mission

statement:

Basic Product or Service

Primary Market

Principal Technology

In combination best describe the

companys business activity

If a firm uses a silver bullet statementmission for outsiders to read, it will

include these three components

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Silver bullet mission statement: An example

Dayton-Hudson Corporation is a diversified

retailing company whose business is to serve

the American consumer through the retailing

offashion-oriented quality merchandise.


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HPs Mission Statement on economic goals

To achieve sufficient profit to finance our

company growth and to provide the resources

we need to achieve other corporate

objectives.


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Company Philosophy

Company philosophy is often calledcompany creed.

Usually accompanies or appears within

the mission statement Reflects the basic beliefs, values,

aspirations, and philosophical priorities

to which strategic decision makers arecommitted in managing the company

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Public Image

Both present and potential customers

attribute certain qualities to particularbusinesses.

Mission statements should reflect the publics

expectations, because this makes

achievement of the firms goals more likely

Firms should be concerned with their public

image even when there is no serious public

concern.E.g. We are committed to actions to restore

and preserve the environment (General

Motors)15


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Company Self-Concept

A major determinant of a firms success is the extent to

which the firm can relate functionally to its external

environment.

The ability of firms to survive in a dynamic and highly

competitive environment would be severely limited if theydid not understand their impacton others or of others on

them.

Ordinarily, descriptions of the company self-concept per se

do notappear in mission statements.

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Example: Intel Corporations mission statement on self-

concept

Management is self-critical. The leaders must

be capable of recognizing and accepting their

mistakes and learning from them.

A highly communication, open management is

part of the style.

Management must be ethical.

Intel is a results-oriented company.

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Newest Trends in Mission ComponentsThe following are increasingly integral parts in the development of

missions:

1. Customers as a priority Focus on customer satisfaction

Strong customer service initiatives have led some firms to gain

competitive advantages in the marketplace.

2. Quality as a priority

New philosophy is that quality should be the norm.

3. Inspirational vision statement

Express the aspiration of the executive leadership

The firms strategic intent for success

Often a single sentence

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**Mission vs. Vision Mission statement

What business are we in?

Vision statement

Presents the firms strategic intent that focuses on the energies

and resources of the company on achieving desirable future

- Aspirations, what / who we want to be

Example: To become the largest, most respected and widely

recognized cutlery company in the world Cutco Corporation

- Short and memorable

Example:

We bring good things to life General Electric Corporation

Other example:

Ford Motor: To become the worlds leading customer company

for automotive products and services.19


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Boards of Directors

The board of directors is the group of

stockholder representatives and strategic

managers responsible for overseeing the

creation and accomplishment of thecompany mission.

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Major Board Responsibilities:

Establish and update mission Elect top officers & CEO

Establish compensation for top officers

Determine amount & timing of dividends

Set broad company policy

Set objectives and authorize managers to

implement long-term strategy Mandate companys legal and ethics compliance

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Refer Pearce II & Robinson (Chapter 3)

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Corporate Social Responsibility

Lecture 2

Company M ission & Corporate

Social Responsibil i ty


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Gap, Inc.

Headquarters

Gap has received negative news coverage regarding

sweatshop labor exploitation

Retailers rely on foreign factories to keep their priceslow.

Protest groups are calling for boycotts: Gap is losing$$

What Would You Do?

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THE STAKEHOLDER APPROACH TO CORPORATE

SOCIAL RESPONSIBILITY (CSR)

Definition of CSR

It is the idea that business has a duty toserve society in general as well as the

financial interests of stockholders.

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Dynamics of Social Responsibility

Inside vs. Outside Stakeholders

Duty to serve societyplus duty to servestockholders

Flexibility is key Firms differ along:

Competitive Position

Industry

Country Environmental Pressures

Ecological Pressures

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Ex. 3.2 Inputs to the Development of Company Mission


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Example:

Johnson & Johnson Credo / mission statement

Our Credo

We believe our first responsibility is to the doctors, nursesand patients, to mothers and fathers and all others who use

our products and services. In meeting their needs everything we do must be of highquality. We must constantly strive to reduce our costs in order tomaintain reasonable prices.

Customers' orders must be serviced promptly andaccurately. Our suppliers and distributors must have an opportunityto make a fair profit.

27Adapted from Exhibit 2.5


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Johnson & Johnson Credo (cont.)

We are responsible to our employees, the men and women

who work with us throughout the world. Everyone must be considered as an individual. We must respect their dignity and recognize their merit. They must have a sense of security in their jobs. Compensation must be fair and adequate, and workingconditions clean, orderly and safe. We must be mindful of ways to help our employees fulfilltheir family responsibilities. Employees must feel free to make suggestions and complaints. There must be equal opportunity for employment,development and advancement for those qualified. We must provide competent management, and their actionsmust be just and ethical.



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We are responsible to the communities in which

we live and work and to the world community as

well.

We must be good citizens support good worksand charities and bear our fair share of taxes.

We must encourage civic improvements and better

health and education.

We must maintain in good order the property weare privileged to use, protecting the environment and

natural resources.



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Our final responsibility is to our stockholders. Business must make a sound profit. We must experiment with new ideas. Research must be carried on, innovative programs

developed and mistakes paid for.

New equipment must be purchased, new facilitiesprovided and new products launched. Reserves must be created to provide for adverse

times. When we operate according to these principles,

the stockholders should realize a fair return.



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Examples: (refer Exhibit 3.3 for more examples)

Companies that actively involved in CSR

The Body shop & Johnson & Johnson:

pollution-free environment, recycling &

conservation of resources, minimizing or

avoiding the use of animals in drug & cosmetictesting.

Toyota: The maker of the top-selling Prius

hybrid leads in developing efficient gas-electricvehicles

T f S i l R ibilit


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Types of Social Responsibility

1. Economic Responsibilities

The most basic social responsibilities of business

The duty of managers, as agents of the company

to produce goods and services so that to maximize

shareholders wealth and repay its creditors In discharging its economic responsibility, the

company emerges as socially responsible by

providing productive jobs for its workforce, and

tax payments for its local, state, and federalgovernments

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T pes of Social Responsibilit


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2. Legal Responsibilities

Companys requirements / obligations to comply

with the laws that regulate business activities

The consumer and environmental movements

focused increased public attention on the needfor social responsibility in business by lobbying

for laws that govern business in the areas of

pollution control and consumer safety

e.g. intentionally sell defect products to

customer and charge at high

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3. Ethical Responsibilities

The companys notion of right and proper businessbehavior.

Society expected but not required corporate behavior

Some actions that are legal might be considered unethical

E.g. The manufacture and distribution of cigarettes is legal,but due to the negative health consequences of smoking,

many consider the continued sale of cigarettes to be

unethical

4. Discretionary Responsibilities

Voluntarily obligations assumed by a business organization.

These responsibilities include public relations, good

citizenship, and full corporate responsibility. 34


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CSR & Profitability

The dynamic between CSR and success (profit)is complex. They are not mutually exclusive, and

they are not prerequisites of each other.

Corporate social responsibility (CSR), is the idea

that business has a duty to serve society ingeneral as well as the financial interests of

stockholders.

CSR costs and benefits are both economicand social

Economic easy to quantify

Social difficult to quantify

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Factors Complicating a Cost-Benefit Analysis of CSR:

1. Some CSR activities incur no dollar costs at all.

2. In fact, the benefits from philanthropy can be huge. often tax deductable.

3. Socially responsible practices may create savings,

and, as a result, increase profits.4. Proponents argues that CSR costs are more than

offset in the long run by an improved company image

and increased community goodwill.

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New Corporate Governance Structure

Restructuring governance structure in Americancorporations

Heightened role of corporate internal auditors

Auditors now routinely deal directly with topcorporate officials

CEO information provided directly by the companys

chief compliance and chief accounting officers

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The New Corporate Governance Structure

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The mission statement embodies what company

believes

Managers must identify all stakeholder

groups and weigh their relative rights and

abilities to affect the firms success

Companys approach to CSR:

Proactive / Reactive

CSRs Effect on Mission Statement


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Social Audit

A social audit is an attempt to measure acompanys actual social performance

against its social objectives.

Careful, accurate monitoring and evaluationof a companys CSR actions are important

not only because the company wants to be

sure it is implementing CSR policy as

planned, but also because CSR actions by

their nature are open to intense public

scrutiny.

Th Li it f CSR St t i


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The Limits of CSR Strategies Some companies have embedded social responsibility and

sustainability commitments deeply in their core strategies.

- Unrealistically challenge operational performance

Larger companies must move beyond the easy options of

charitable donations but also steer clear of overreaching

commitments.- Overlook business goals

CSR strategies can also run afoul of the skeptics the speed

of information on the Internet makes this an issue with

serious ramifications.

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The Future of CSR

CSR is firmly and irreversibly part of any corperations Corporations will face growing demands for social

responsibility contributions far beyond simple cash or

in-kind donations

Growing concern

Aggressive protesters, employees views, shareholders

judgment and vote

Meeting CSR obligations vs. shareholders expectedreturns

Documents

Lecture 2 Mission CSR