Influences on the mission of a business

A mission answers "why do we exist?" It is qualitative, enduring, and — done properly — it constrains what the business is willing to do to make money.

Influences on it: the values and history of the founder · the ownership structure (a co-operative and a private-equity-owned plc will not write the same mission) · the industry and the nature of the product · the expectations of key stakeholders · and the culture that has grown up inside the firm.

Its value: it gives employees a sense of purpose and a decision rule when no policy covers the situation; it differentiates the firm to customers; it guides recruitment and helps align values; and it constrains strategy in a useful way — a mission built on environmental stewardship rules out the cheapest supplier, and that is the point.

Be sceptical, though. A mission statement is worthless if behaviour contradicts it. Investors and employees judge the mission by the decisions, not the wall poster. A firm whose mission is "our people are our greatest asset" and whose labour turnover is 40% has no mission — it has marketing copy.

Corporate objectives, strategy and tactics

• Corporate objectives are the SMART, business-wide targets derived from the mission: growth, profitability, market standing, diversification, survival, social/environmental targets. Everything functional (marketing, operations, HR, finance objectives) must cascade from them.
• Strategy is the long-term plan for achieving them: it commits major resources, it is decided by senior management, and it is difficult and expensive to reverse.
• Tactics are short-term, lower-level, cheaper and easily reversed: a two-week promotion, a temporary shift pattern.

Strategic decisions cascade into functional ones. If the corporate strategy is differentiation through quality, then marketing must price at a premium, operations must invest in quality assurance, HR must move towards soft HRM and training, and finance must accept a longer payback. If any one function refuses to change, the strategy fails — and this is a favourite Paper 3 question.

Match each term to its precise meaning

Tap an item on the left, then its partner on the right.

Strategy or tactic?

Influences on corporate objectives

• Ownership — a family Ltd optimises across decades; a plc facing activist investors is judged every quarter.
• The pressure for short-termism — quarterly reporting, share-price-linked executive pay, and the threat of takeover all push boards to maximise reported profit now. The costs land later: cut R&D, defer maintenance, slash training and marketing, and this year's profit rises beautifully while the firm's future is quietly dismantled. Strategic drift (3.10.4) frequently begins here.
• The internal environment — the firm's resources, capabilities, culture, finances and current performance.
• The external environment — the economy, competition, regulation, technology, social change.

Your turn — the target

Your turn — actual growth

Your turn — market share

Index numbers

An index number rebases a series so that changes are easy to compare. Pick a base year, set it to 100, and express every other year relative to it.

They are used constantly in business data: the Consumer Prices Index, share-price indices, productivity indices. Their value is that they strip out the units and let you compare things of wildly different absolute size — a £48m firm and a £4.8bn firm can both be plotted on one chart.

Your turn — index number

The pressure for short-termism

SWOT analysis

SWOT summarises the strategic position on two dimensions: internal vs external, and helpful vs harmful.

The single most common student error is putting an external factor in the internal boxes. "A recession" is not a weakness; it is a threat. "Our high gearing" is not a threat; it is a weakness — and the difference matters, because a firm can fix a weakness and can only respond to a threat.

SWOT: internal or external?

Tap a factor, then tap the SWOT box it belongs in.

Place the factor

The value — and the limits — of SWOT

Value: it is quick and cheap; it forces managers to look outwards as well as inwards; it summarises a mass of analysis (from ratio analysis, PESTLE and Porter) into one page a board can actually discuss; and, done properly, it points directly at strategy — match strengths to opportunities, and convert or defend against weaknesses and threats.

Limits — and these are where the evaluation marks live:

• It is a snapshot, immediately out of date in a fast-moving market.
• It produces a list, not a priority. Twenty unranked bullet points are not a strategy. A serious SWOT ranks each item by impact and likelihood.
• It is subjective — managers systematically over-rate their own strengths, and rarely list the weakness they are personally responsible for.
• The same fact can appear in two boxes: a large, loyal ageing customer base is a strength and a threat.
• It tells you nothing about what to do. It is an input to strategic choice, not a substitute for it.

Do it properly: a SWOT is only as good as the analysis feeding it — ratio analysis (3.7.2) for the internal boxes, PESTLE and Porter (3.7.4–3.7.7) for the external ones. A SWOT built on opinion is just a list of opinions in a nicer layout.

Using SWOT badly

Thinking like an examiner

• Test the alignment. Mission → corporate objectives → strategy → functional objectives. Where the chain breaks is usually where the case-study business is failing.
• Name short-termism when you see it. Rising profit that comes from cutting R&D, training, marketing or maintenance is capability being sold for cash. Say so.
• Rank, don't list. Whether it is SWOT, stakeholders or objectives, the AO4 marks come from saying which factor matters most, and why.
• Ownership explains a lot. When a case study's decisions look irrational, ask who owns the firm and what they are rewarded for.

The big ideas to know

Press Finish to see your score.