Strategic Business Fundamentals: Mission Statements and Competitive Analysis

The Necessity of a Firm's Mission Statement

Firms require a clear mission statement for several critical reasons, as it defines the organization's purpose and trajectory. A well-defined mission statement:

• Helps to determine the direction for the company.
• Displays the future vision of the company.
• Provides the basis for organizational alignment.
• Offers a structure for decision making.
• Helps to frame strategy and facilitates helpful changes.
• Assists in both strategy implementation and evaluation.

Understanding Porter's Five Forces Model

Porter's Five Forces Model is a crucial framework for analyzing industry competition and developing robust business strategy. The five forces are:

1. Rivalry Among Competing Firms

   This force usually takes the form of jockeying for position using various tactics, such as price competition, advertising battles, and product introductions.

2. Threat of Substitute Products

   This refers to the availability of a product that the consumer can purchase instead of the industry’s primary product.

3. Threat of New Entrants

   This refers to the threat new competitors pose to existing competitors within an industry.

4. Determinants of Supplier Power

   This refers to the pressure suppliers can exert on businesses by raising prices, lowering quality, or reducing the availability of their products.

5. Determinants of Buyer Power

   This refers to the pressure consumers can exert on businesses to demand higher quality products, better customer service, and lower prices.

Applying Porter's Model to Reveal Competition and Increase Profit

Firms can utilize Porter's Five Forces model in three systematic steps to reveal competitive dynamics and determine strategies conducive to earning attractive profits:

1. Identify Specific Competitive Pressures

   Identify the specific competitive pressures associated with each of the five forces operating within the industry.

2. Evaluate the Strength of Pressures

   Evaluate how strong the pressures of each of the five forces are (referencing the forces discussed previously).

3. Determine Profit Conduciveness

   Determine whether the industry position, based on the collective strength of the five competitive forces, is conducive to earning attractive profits or not. Future strategy is then decided based on this determination.

Reasons Why Some Firms Avoid Strategic Planning

Several factors contribute to why some firms neglect strategic planning, often hindering long-term growth and stability. Key reasons include:

• Lack of Experience and Structure

  Firms may suffer from a lack of experience in planning, coupled with poor organizational structure and management, making the planning process seem daunting or ineffective.

• Focus on Immediate Survival

  Companies that are struggling or striving for immediate survival often feel they have no time to focus on long-term planning, prioritizing daily operational demands instead.

• Complacency and Overconfidence

  A firm may feel it is already successful, leading to overconfidence and a lack of awareness regarding the utilities of formal planning.

• Perceived Effort and Past Negative Experiences

  Management may wish to avoid the perceived time-consuming exercise of planning, often influenced by negative experiences from the past.