GUSSIE PERRY LTD
Introduction
Gussie Perry Ltd (GPL) is a long-established divisionalised company with its origins in shipping. The company has been in existence for nearly 120 years and has developed a reputation for reliability and quality service.
The shipping activities in which Gussie Perry Ltd (GPL) is engaged in comprise four divisions – cruise, ferry, container and bulk shipping. The cruise division is engaged entirely in the carriage of passengers and the ferry division carries passengers and vehicles. The vehicles carried by the ferries range from motor cars to articulated trucks and buses. The container and bulk shipping divisions are engaged in the carriage of freight only.
Organisational goals
The company has stated over recent years that it aims to:
1. Increase its international business to achieve long-term profitability.
2. Provide the necessary capital investment to support its international operations.
3. Train and develop the company’s employees.
Environmental and Safety policy
Environmental protection is now a key aspect of corporate social responsibility. Pressure on Gussie Perry Ltd (GPL) for better environmental performance is coming from many quarters. The company recently implemented an environmental and safety policy, which is monitored through an audit system, in an effort to ensure that its policies are being executed. It is the aim of the company to have operational standards which match with the best industry’s standard. Training of management, staff and specialist auditors is seen as a priority within the organisation’s environmental and safety policy. This has become a major concern for the company, because of customer anxiety about the safety of the ferries.
Financial results
In the last financial year, earnings per share was GH¢2.12 producing a dividend cover of 1.15 times. The dividend per share paid by Gussie Perry Ltd (GPL) has remained at the same level for five years. Comparative values for divisional revenue and operating profit are shown in table 1.
During the year, general inflationary levels in the shipping industry was 14% per annum. The company’s cost of capital is 25%.
Extract from the Chairman’s statement for the financial year
In his statement, Mr. Aaron Yeboah, the Chairman of Gussie Perry Ltd (GPL), commenting on revenue and profit before the inflation adjustment, said the company achieved encouraging results, particularly in the cruise division. The company had taken delivery of a new cruise liner, at a cost of GH¢1,200,000 and has two more on order. Aaron believed that this was an expanding market and considered the company to be in a good position to take advantage of the opportunity. With regard to the ferry division, Aaron expected continued growth, although there was an expectation of potential new entrants due to increased cargo volumes. This contrasted with his view of the declining performance of the container and bulk shipping divisions as shown in table 1.
Market information
Gussie Perry Ltd (GPL) commissioned a marketing research into its cruise and ferry operations. The results of this research indicated that, in recent years, within the cruise liner industry, there has been a change in customer appeal. Traditionally, the main customer base had comprised of traders. In the last five years, the cruise division has experienced an increase in its clientele especially holiday makers. This stemmed from the promotion of domestic tourism.
Furthermore, the research showed a 15% increase in marine transport but Gussie Perry Ltd’s market share actually reduced by 4%. The report indicates that the probability of the cruise market continuing to grow was bright. However, there were uncertainties about the future potential of the container and bulk shipping divisions.
Required:
The Chairman of the company has recently attended a short course on strategic planning. He was particularly interested in the relevance of mission statements to the strategic management process. Explain in FOUR ways how a mission statement is relevant in strategic management. (8 marks)
View Solution
- Aaron Yeboahs’ recent exposure to mission statements as part of the strategic management process provides a useful opportunity to evaluate their relevance and value to a small company such as GUSSIE PERRY. In some ways, Aaron is a ‘walking mission statement’. He epitomises the values, behaviour, strategy and purpose of why GUSSIE PERRY exists. Mission statements in defining the reasons why the firm exists, what it aims to achieve, how it aims to achieve its purpose and who it is in business for, can act as a powerful motivating force for the company. In strategic terms it may clarify the markets that the firm intends to serve, the products and services provided for those markets and the way they will be reached. In so doing it may define the boundaries of the organisation chosen by the top management.
- It may also specify the technologies to be used (perhaps important for GUSSIE PERRY and the competencies it will use to compete in its chosen markets. It is therefore a combination of ‘hard’ tangible drivers of the business and the ‘softer’ values and behaviours, which will enable the mission of the business to be achieved.
- Ideally, it should have relevance and resonance with all types and levels of employees. It expresses values and beliefs and in so doing will shape and influence the policies and standards adopted by the firm. They can profoundly influence the attitudes and behaviour of key stakeholder groups both inside and outside the firm and achieve a consistency of purpose for the stakeholders.
- By their very nature mission statements typically come at the beginning of the rational planning process and thereby facilitate consistent strategic decisions. However some commentators have argued that you discover rather than invent your mission.
- Aaron may now be in a position to develop a much more meaningful mission statement reflecting the origins of the company, his preferences, and the environmental conditions influencing the company together with its resources and associated competencies and capabilities.
- As the organisation grows and develops so its need for a formal mission statement may increase, enabling the direction of the company to be understood and for more detailed goal setting and planning to be done against a consistent framework.
- Its ability to communicate what the firm stands for both to stakeholders inside and outside the firm should not be underestimated. As such, development of an effective mission statement will take time and reflect changing conditions faced by the firm.
- Mission statements by their very nature are broad in their scope and intended to positively influence the many stakeholders linked to the company. Effective statements should be brief, adaptable to changing circumstances and clearly show the distinctiveness of the firm and its mission. Ineffective statements will convince nobody, have little or no impact on, or relevance to, what the firm does. They may be merely statements of good aspirations and intentions, and used for public relations purposes to justify actions already taken. Once created, good statements should be re-visited at regular intervals to ensure they are relevant to the environment the firm is operating in.
(Any 4 points)