Question Tag: Vision Statement

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  • 10 Marks

BMIS – March 2024 – L1 – Q2a – Introduction to business strategy

Explain five benefits of developing vision and mission statements for world-class organizations.

World class organisations invest financial and non-financial resources in developing vision and mission statements because they believe that such investment will yield numerous benefits.

Required: Explain FIVE (5) of such benefits. (10 marks)

Benefits of Vision and Mission Statements

  • Unanimity of purpose. They ensure unanimity of purpose within the organisation because all functional activities strive to achieve the same stated intention.
  • Bases for strategic planning. They provide bases the for all other strategic planning activities including internal and external assessment, establishing objectives, developing strategies and choosing among alternative strategies for the organisation.
  • Higher organisational performance. They help achieve higher organisational performance. This is because the organisation will implement strategies to achieve the intentions set in both statements.
  • Focal point. They serve as a focal point for individuals to identify with the organisation’s purpose and direction and to deter those who cannot comply from participating further in the organisation’s activities.
  • Translating objectives into work structure. They facilitate the translation of objectives into a work structure involving the assignment of tasks to responsible elements within the organisation.
  • Specifying organisational purposes. They specify organisational purposes and then to translate these purposes into objectives in such a way that cost, time, and performance parameters can be assessed and controlled.
  • 20 Marks

BMIS – April 2022 – L1 – Q2 – Finance, R&D and marketing strategies | The external environment

Discuss the benefits of penetration pricing, the difference between mission and vision statements, and economic factors influencing facility location in Ghana.

Vagen Ltd, a German automobile manufacturer, has completed building an assembly facility in Ghana to manufacture and sell vehicles in Ghana and in other African countries. For the company to gain a foothold in the African market, it carefully applied the penetration pricing strategy and developed clear mission and vision statements to facilitate successful operations in this new market.

Required:
a) Identify FIVE (5) benefits the company would derive from the penetration pricing strategy. (5 marks)
b) Explain the difference between the company’s mission and vision statements. (5 marks)
c) Explain FIVE (5) economic factors that might have influenced the management of the company to locate the assembly facility in Ghana. (10 marks)

a) Benefits of the Penetration Pricing Strategy:

  1. Increased Sales Volume: The adoption of the penetration pricing strategy would result in increased sales volume for the company. Charging lower prices for vehicles would motivate the target market to purchase more vehicles.
  2. Competitive Advantage: Penetration pricing enables the company to gain a competitive edge by attracting a large customer base quickly, which can help establish the brand in the market.
  3. Market Entry Barrier: By setting lower prices, the company can create entry barriers for potential competitors, discouraging them from entering the market.
  4. Economies of Scale: The increased production volume due to higher sales can lead to economies of scale, reducing the cost per unit and increasing profitability.
  5. Customer Loyalty: Penetration pricing can help build customer loyalty as buyers appreciate the affordability and may continue to purchase from the company even after prices rise.
    (5 points @ 1 mark each = 5 marks)

b) Mission and Vision Statements:

  • Mission Statement: The mission statement of a company describes its basic purpose of existence. It is a broadly framed but enduring statement that reflects the company’s core purpose, including the type of products or services it seeks to offer, the markets it aims to enter, and its approach to pricing.
  • Vision Statement: The vision statement, on the other hand, refers to the company’s strategic intent that guides how it allocates its energies and resources to achieve a desirable future. The vision statement outlines where the company aspires to be in the future, serving as a long-term goal.

Difference: The mission statement indicates what the company stands for currently, while the vision statement outlines where it desires to be in the future.
(5 marks)

c) Economic Factors for Locating Facility in Ghana:

  1. General Economic Stability: Ghana’s stable and growing economy compared to other countries in the sub-region might have influenced the company to establish its facility in Ghana.
  2. Income Levels: Increasing income levels in Ghana compared to other African countries may have motivated the company to locate its assembly plant in Ghana, as higher incomes lead to greater purchasing power.
  3. Inflation Rates: The relatively stable inflation rate in Ghana could have been a factor in the decision, as it provides a more predictable economic environment for long-term investment.
  4. Purchasing Power: Rising purchasing power in Ghana implies that more consumers can afford vehicles, making it an attractive market for the company’s products.
  5. Interest Rates: Declining interest rates on loans in Ghana could make it easier for consumers to finance vehicle purchases, encouraging the company to establish its facility in the country.
  6. Consumption Patterns: Changing consumption patterns, with a shift towards the purchase of new vehicles, might have influenced the decision to build the facility in Ghana.
  7. Favorable Trade Policies: Ghana’s favorable trade policies, including tax incentives for foreign investors, might have contributed to the decision to locate the facility in the country.
  8. Infrastructure Development: The availability of infrastructure such as roads, ports, and electricity may have been a significant factor in the decision to set up the assembly facility in Ghana.

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