Defines the organization and its reason for being.

1. Differentiates it from other similar organizations.
2. Serves as a point of focus, for example for long-term planning and resource allocation.

Major problems:

1. Too narrow (efficient, not effective); stifles organizational flexibility and change, organization becomes out of touch with environment.
2. Too broad; incomplete; no (or vague) boundaries (neither efficient nor effective); organization wastes resources and energy pursuing too many perceived opportunities; lack of cohesive direction; no lasting competitive advantage built.

Minimum components of an effective mission statement:

1. Define products/services. Needs to be clear and define boundaries.
2. Define customers. Could be primary, secondary.
3. Define markets (usually geographic, but could be technology, distribution method, etc.).
4. Define philosophy. What makes us different in the long-run.

The four items should not conflict with one another, but should be consistent.

Example 1 - (This example is narrow and specific.)

    XYZ is a four-year residential co-educational liberal arts college primarily serving traditional age students from the Northeastern United States. We believe that the close campus atmosphere created by serving only residential students of the same age group allows us to develop these individuals to their fullest potential.

Example 2 - (This example is considerably broader and less specific. Fails to define market.)

    ABC provides a variety of educational experiences, both degree and non-degree, to student groups underserved by traditional institutions. Courses are offered in a wide variety of formats at multiple locations in order to create an environment of convenience and flexibility for students.