Relationship between Mission Statement and Scope of Business: Evidence from Finland

ABSTRACTThe purpose of this study is to investigate the connection of a business' mission statement to its corporate strategy. The literature review presents the concepts of the core competence, the mission statement, focus strategy and competitive advantage. The findings of the literature review indicate that these concepts have consistent contextual linkages and can be placed in the perspectives of the balanced scorecard. The case study reveals the complexities and details that illustrate the role of the mission statement, focus strategy and competitive advantage. Empirical evidence is presented from Neste Oy which aimed for growth with new products and customers, but failed to diversify. The results of this study are useful for those who are involved in the strategy process, want to define a mission statement and succeed with diversification.JEL: L1, N7KEYWORDS: Strategic Management, Core Competence, Mission Statement, Diversification, Competitive AdvantageINTRODUCTIONResearchers have studied the effect of the mission statement on company performance (Sidhu, 2003). Recent analyses of mission statements provide contradictory evidence that mission statements enhance company performance; the contribution of the mission statement remains elusive (Desmidt, Prinzie and Decramer, 2011, and Williams, Morrell and Mullane, 2014). The empirical estimation of the relationship between the mission statement and company performance is not always relevant to make conclusions, because the mission statement is only a single element of management and the empirical estimation cannot reveal all factors in company performance.The mission statement describes and communicates the purpose of an organization (Baetz and Bart, 1996, and Keeling, 2013). Strategic thinking and strategic planning are driven by the organizational mission and members of the organizational culture are guided by the organization's values to achieve the outcome described by the vision (Minzberg, 1994, and Senge, 1990). The mission has been studied in the literature of strategic management (Atrill, Omran and Pointon, 2005, and Green and Medlin, 2003), but strategic management is among many other management tools such as quality assurance, process management and knowledge management, which improve company performance.The purpose of this study is to investigate the role of the mission statement in the strategy process in order to capture its corresponding richness and complexity. Core competence is a driver of the mission statement which determines the scope of the company strategy. When a company considers growing by diversification it should take advantage of core competencies, focus strategy and opportunities described by the mission statement to achieve competitive advantage. The empirical evidence of diversification failures is sought from the case study.The study presents empirical evidence about Neste Oy, an oil refinery and petrochemical company. The company was successful in its core business, but unsuccessful in diversified activities that did not create synergies with the core competencies. The empirical evidence supports the argument that the definition of the mission is important in the strategy process and the company focus should meet the scope described by the mission. The mission provides the context within which the strategies should be defined.Neste Oy was established as a petrol company to ensure the availability of refined fuels after the World War II in 1948. The refineries were built and the requisite technologies were put into operation. Neste Oy held a strong position in the market, because it was state-owned, supported by the government and had a legal import monopoly until market deregulation in the 1990s. The monopoly, political decisions and bilateral trade with the Soviet Union protected the company against market forces. Finally the deregulation of energy markets brought the company to a competitive situation. …