1.3 Organisational objectives

Question 1

Aims

Answer 1

Aims are the long-term goals of a business, often expressed in the firm’s MISSION statement. They are a general statement of a firm’s purpose or intentions and tend ti be qualitative in nature.

Question 2

Ansoff matrix

Answer 2

The Ansoff matrix (1957) in an analytical tool to devise various product and growth strategies, depending on whether businesses want to market new or existing products in either new or existing markets

Question 3

Corporate social responsibility (CSR)

Answer 3

CSR is the conscientious consideration of ethical and environmental practices related to business activity. A business that adopts CSR acts morally towars its various stakehokder groups and wellbeing of society as a whole

Question 4

Ethical code of practice

Answer 4

Ethical code of practice is the documented beliefs and philosophies of an organisation

Question 5

Ethics

Answer 5

Ethics are the moral principles that guide decision-making and strategy. Morals are concerned with what is considered to be right or wrong, from society’s perspective

Question 6

Mission statement (5p)

Answer 6

1. Declaration of an organisation’s overall purpose. It form the foundation for setting the objectives of a business
2. Mission: having a clear purpose.
3. Shows underlyung purpose of organisation’s existence and core values
4. Tends to be qualitative rather than quantitative objectives
5. Provides direction, unifies workers and supports corporate culture

Question 7

Objectives

Answer 7

Objectives are the relatively short term targets of an organization. They are often expressed as SMART objectives.

Question 8

SMART objectives

Answer 8

SMART objectives are targets that are specific, measurable,

achievable, realistic and time constrained.

Question 9

Strategies

Answer 9

Strategies are plans of action that businesses use to achieve their targets, i.e. the long-term plans of the whole organisation

Question 10

SWOT-analysis

Answer 10

SWOT analysis is an analytical tool used to assess the internal
strengths and weaknesses and the external opportunities and
threats of a business decision, issue or problem.

Question 11

Tactics

Answer 11

Short term plans of action that firms use to achieve their objectives

Question 12

Vision statement (3p)

Answer 12

1. Organisation’s long-term aspirations, i.e. where it ultimately wants to be.
2. Vision: image of ideal situation in the future.
3. Visualisation of what succes would look like.

Question 13

Differences between vision and mission statements

Answer 13

Mission

1. Realistically attainable
2. Deals with ‘what us our business’
3. Focused on medium to long term
4. Updated more frequently than vision

Vision

1. Often unattainable; asymptote you work towards i.e. ‘perfection’
2. Addresses ‘what do we want to become’
3. Focused on the very long-term
4. Updated less frequently than Mission statement

Question 14

Difficulties of mission and vision statements (3p)

Answer 14

1. ‘Public stunts’: many argue that company’s main purpose is to make profits
2. Difficult to make a ‘universal’ statement for the whole company and stakeholders.
3. Thus it can be time consuming

Question 15

Aims vs Objectives AO3

5 + 5

Answer 15

Aims

1. What the business wants to achieve
2. Not necessarily time-bound
3. Vague or abstract goal
4. What a business wants to happen
5. Set by senior leaders

Objectives

1. What the business has to do to achieve the aims
2. Time-bound
3. Specific and measurable target
4. What a business needs to happen
5. Set by managers or their subordinates

Question 16

Aims and Objectives AO3

3 importances

Answer 16

• To measure and control
They help to control a firm’s plans as they set the boundaries for business activity. They provide the basis for measuring and
controlling the performance of the business as a whole.

• To motivate
They can help to inspire managers and employees to reach a common goal, thus helping to unify and motivate the workforce. They also encourage managers to think strategically and plan for the long term.

To direct
They provide an agreed clear focus (or sense of purpose) for all individuals and
departments of an organization. They are the foundation for decision-making and are used to devise business strategies.

Question 17

3 levels of strategies

Answer 17

• Operational strategies
are the day-to-day methods used to
improve the efficiency of an organization. These are aimed at trying to achieve the tactical objectives of a business,
e.g. a restaurant might investigate howto reduce customer waiting time without compromising the quality of its
service.

• Generic strategies
are those that affect the business as a
whole. Porter’s Generic Strategies (see Unit 1.7) looks at ways in which a business can gain a competitive advantage in order to meet its goals.

• Corporate strategies
are targeted at the long term goals
of a business, i.e. they are used to achieve the strategic objectives of an organization. For example, a firm might aim for market dominance through mergers and takeovers of rivals in the industry.

Question 18

Ensure that you understand the link between aims,

objectives, strategies and tactics:

Answer 18

• Aims state what an organization wants, e.g. to become
the market leader of a product.
• Objectives state what an organization needs to achieve
in order to get what it wants, e.g. increased market
share.
• Strategies are the actions that facilitate an organization
to meet its goals, e.g. expanding into new markets.
• Tactics are short-term actions used to achieve an
organization’s tactical objectives, e.g. survival.

Question 19

The need for organizations to change objectives and innovate in response
to changes in internal and external environments
AO3

7 Internal factors (those within the
control of the organization)

Answer 19

1. Corporate culture (the accepted norms and customs of a business)
   Firms with a flexible and adaptable
   organizational culture are more likely to have innovative objectives over time.
2. Type and size of organization (see 1.2)
   Any change in the legal structure of a business is likely to cause a change in its objectives. With a separation of ownership and control, such as in public limited companies, various stakeholder objectives need to be considered,
   including managerial objectives (e.g. higher bonuses) and shareholder objectives (e.g. higher profits).
3. Private versus public sector organizations
   Unlike most private sector firms, public sector organizations do not strive for profit maximisation but to provide a service to
   the general public.
4. Age of the business
   Newly established firms tend to have
   break-even and survival as their key objectives. Established firms might strive for growth and higher market share.
5. Finance
   The amount of available finance will determine the scale of a firm’s objectives. For example, a huge sum of money is needed if the objective is to expand into overseas markets.
6. Risk profile
   If managers and owners have a relatively high willingness and ability to take risks, then more ambitious objectives are likely to be set, such as the pursuit of new
   innovations.
7. Crisis management
   Businesses may face internal crises
   such as unexpectedly high rates of staff absenteeism and staff turnover, falling productivity and motivation problems, liquidity problems (see 3.7), or issues
   about quality standards.

Question 20

The need for organizations to change OBJECTIVES and innovate in response
to changes in internal and external environments
AO3

4 External factors {those beyond the control of the organization)

Answer 20

1. State of the economy
   The state of the economy (see 1.5) can change organizational objectives, e.g. booms (when national income and employment are high) provide opportunities whereas slumps (when unemployment is high and consumption is low) cause threats.
2. Government constraints
   Some government rules and regulations (see 1.5) can limit what a business might
   strive to achieve. For example, environmental protection laws can limit the ability of firms to maximise profit due
   to the higher costs of compliance.

3. The presence and power of pressure groups 
Pressure groups (see 1.4) can force a business to review its approach to ethics through their lobbying. Pressure groups may harm a firm's image if it is not adopting a socially responsible approach to conducting business.

4. New technologies
   New technologies and innovations can create many new business opportunities, thus change organizational objectives. Innovative firms such as Samsung were able to exploit digital technologies to dominate the smartphone and smart TV industries. The use of e-commerce (see 4.8) has also revolutionised how most businesses operate.

Question 21

The reasons why organizations set ethical objectives and the impact of
implementing them
AO3

3 attitudes toward the role of CSR

Answer 21

1. The self-interest (non-compliance) attitude
   The role of businesses is to generate profits for their owners. Governments, not businesses, are responsible for sorting
   out social problems. In pursuing the profit motive, firms become more efficient and prosperous, thereby helping society indirectly (through employment, wealth creation and corporation tax payments).
2. The altruistic attitude
   Humanitarian and unselfish behaviour, i.e. altruistic businesses do what they can
   to improve society such as willingly donating money to charity or investing in local community projects, regardless of whether their actions help to increase profits.
3. The strategic attitude
   This view argues that businesses ought to be socially responsible only if such actions help them to become more profitable. Such firms see CSR as a
   method of long-term growth.

Question 22

The reasons why organizations set ethical objectives and the impact of
implementing them
AO3

4. Advantages of ethical behaviour

Answer 22

1. Improved corporate Image
   Acting ethically and in a socially responsible way can help to enhance the corporate image and reputation of a business. Conversely, the media will report unethical business behaviour which could seriously damage the firm’s corporate image.
2. Increased customer loyalty
   Customers are more likely to be loyal to a business that does not act immorally. For example, The Body Shop has established a large customer base worldwide based on its ethical policy of not testing its products on animals.
3. Cost cutting
   Ethical behaviour can help to cut certain costs, e.g. being environmentally friendly can reduce the amount of (excess) packaging. Socially responsible businesses can benefit from avoiding litigation costs (expenses associated with legal action taken against a business) due to unethical and irresponsible business activities.
4. Improved staff morale and motivation Ethical and socially responsible behaviour can help a business to attract and retain
   highly motivated staff. People are more likely to be proud of the business they work for if it acts ethically and within the
   law. Thus, it is a driving force for improved productivity and employee loyalty.

Question 23

The reasons why organizations set ethical objectives and the impact of
implementing them
AO3

4. Disdvantages of ethical behaviour

Answer 23

1. Compliance costs
   The costs of being socially responsible are
   potentially very high, e.g. organic agricultural products are far more expensive to harvest than genetically modified crops due to the additional time and money involved.
2. Lower profits
   If compliance costs cannot be passed onto consumers in the form of higher prices, profitability is likely to fall. An ethical dilemma for the business exists when ethical decision-making involves adopting a less profitable course of action.
3. Stakeholder conflict
   Not all stakeholders are keen on the
   business adopting CSR, especially if this conflicts with other objectives such as profit maximisation. Speculative shareholders and financial investors are more concerned with short term profits than its long term ethical stance. So, managers may be pressured into pursuing goals other than ethical ones.
4. Ethics and CSR are subjective
   Views about what is considered right or wrong depend on the beliefs and principles held by individuals and society. Legislation can help to provide guidelines about what is socially accepted.

Question 24

The evolving role and nature of CSR
AO3

The evolving role and nature of CSR means that businesses must adapt to meet their social responsibilities. There are numerous ways they might do this, such as by:

4p

Answer 24

1. Providing accurate information and labelling
   This can help consumers to make better informed decisions, e.g. food manufacturers might provide truthful nutritional information.
2. Adhering to fair employment practices
   Firms can fulfill their social responsibilities to their employees by providing decent working conditions, fair remuneration and
   training opportunities. Conversely, some multinational companies have been criticised for exploitation of child labour by hiring under-aged workers in less economically developed countries.
3. Having consideration for the environment
   Firms may seek to use more recycled materials in the production process, recycle a greater proportion of their waste materials and aim to reduce any pollution caused by their operations.
4. Active community work
   This includes voluntary and charity work, helping to give something back to society, e.g. sponsoring and participating in local community
   events.

Question 25

The evolving role and nature of CSR AO3 8p

Answer 25

1. Attitudes towards CSR may change over time. 2. What was once considered acceptable by society, such as smacking or caning disruptive students in school, may no longer be the case. 3. Environmental protection was not a major issue prior to the 1980s. Some countries do not think it is necessary to impose a national minimum wage, whilst others feel that this should prevent some businesses from paying unethically low wages to their employees. 4. The advertising of tobacco products is considered socially immoral in many parts of the world (where advertising of tobacco products is banned), but this is not the case in other countries. 5. The nature of CSR is rather subjective - what is considered 'right' or 'wrong is largely based on public opinion, which tends to change over time. 6. Some analysts argue that it is not the role of managers to decide what is right or wrong. This is because managers do not use or risk their own money when making decisions about what they personally believe to be socially responsible. 7. Instead, managers are employed to run a business on behalf of the owners who seek profit,rather than using money in socially responsible ways such as donating money to charity. 8. Moreover, it can be difficult to measure or monitor the extent to which a business is socially responsible due to the subjective and evolving nature of CSR.

Question 26

SWOT analysis of a given organization AO3, A04 ``` internal factors (strengths and weaknesses) ```

Answer 26

Strengths are internal factors that are favourable compared with competitors, e.g. strong brand loyalty, a good corporate image or highly skilled workers. Strengths help the business to better achieve its objectives. Hence, strengths need to be developed and protected. Weaknesses are internal factors that are unfavourable when compared with rivals, i.e. they create competitive disadvantages. Weaknesses are therefore likely to prevent or delay the business from achieving its goals. Hence, to remain competitive, the business needs to reduce or remove its weaknesses.

Question 27

``` SWOT analysis of a given organization AO3, AO4 external factors (opportunities and threats) ```

Answer 27

Opportunities are the external possibilities (prospects) for future development, i.e. changes in the external environment that create favourable conditions for a business. For example, India and China present many business opportunities, such as a huge customer base and rapid economic growth. Hence, SWOT analysis can help firms to formulate their business strategy. Threats are the external factors that hinder the prospects for an organization, i.e. they cause problems for the business. Examples include: technological breakdowns, product recalls, changes in fashion, price wars, oil crises, recession, natural disasters, and infectious diseases.

Question 28

SWOT analysis of a given organization AO3, A04 5 advantages

Answer 28

1. Completing a SWOT analysis can be quite simple and quick. 2. It has a wide range of applications, e.g. reacting to the threat of rivals entering the market. 3. SWOT analysis helps to determine the organization's position in the market and therefore aids the formulation of business strategy for its long-term survival. 4. It encourages foresight and proactive thinking in the decision making process. 5. It can help reduce the risks of decision-making by demanding objective and logical thought processes.

Question 29

SWOT analysis of a given organization A04 4 disadvantages

Answer 29

1. It is rather simplistic and does not demand detailed analysis. 2. The model is static whereas the business environment is always changing, so the shelf life of a SWOT analysis is rather limited. 3. The analysis is only useful if decision-makers are open about the weaknesses and willing to act upon them, i.e. devoting time, people and money to tackling weaknesses and threats. 4. SWOT analysis is not typically used in isolation. Better decisions are made if more information is available, so other strategic tools are also used.

Question 30

Exam tip!

Answer 30

When carrying out a SWOT analysis, remember that strengths and weaknesses are the internal factors that an organization currently faces. Opportunities and threats are the external factors that the organization is likely to face in the near future.

Question 31

Exam tip!

Answer 31

A common exam question will require you to examine the position of a business by using a SWOT analysis framework. Therefore, be sure to learn how to use a SWOT analysis properly. Remember that the strengths and weaknesses refer to the current and internal position of the firm. The opportunities and threats should stem from a STEEPLE analysis of the external environment (see 1.5).

Question 32

Exam tip!

Answer 32

When using a SWOT analysis in the exam, do not present the SWOT in tabular form. Using such a format can encourage candidates to squeeze their answers to fit inside the table (drawn by the student). Instead, examiners prefer written explanations and Justifications. It is acceptable to write in bullet point format under each SWOT heading so long as the examiner can understand the reasoning behind your arguments.

Question 33

Example SWOT Strengths | 9p

Answer 33

1. Unique selling point 2. Brand awareness and brand loyalty 3. Experience, knowledge and skills 4. Market share/market dominance 5. Corporate image and reputation 6. Accreditation, endorsement or official support 7. Core competencies, e.g. product quality 8. Geographical location 9. Value for money (price In relation to quality)

Question 34

Example SWOT Weaknesses | 9p

Answer 34

1. Limited sources of revenue 2. Escalating costs of production 3. Poor cash flow/liquidity problems 4. Higher prices than competitors 5. Demotlvated and/or unproductive workforce 6. Limited sources of finance 7. Lack of spare capacity 8. Restricted product range 9. Poor location

Question 35

Example SWOT Opportunities | 9p

Answer 35

1. Economic growth / upswing in trade cycle 2. Trade liberalisation 3. Weakening exchange rate 4. Technological developments / innovations 5. Market growth 6. New markets and locations 7. Demographic and social lifestyle changes 8. Government spending programmes 9. Mergers and acquisitions of rival firms

Question 36

Example SWOT Threats | 9p

Answer 36

1. New entrants in the market place 2. Economic downturn (recession) 3. Inflation (causing higher production costs) 4. Pressure group action, e.g. protests 5. Social, environmental and legal constraints 6. Negative media coverage and publicity 7. Unfavourable changes in seasons and weather 8. Adverse changes in fashion and tastes 9. Outbreak of infectious diseases

Question 37

Ansoff matrix for different growth strategies of a given organization AO3, AO4 4 growth strategies which set the direction for the business strategy: (read page 43 onward)

Answer 37

1. Market penetration 2. Market development 3. Product development 4. Diversification

Question 38

Market penetration | 2p

Answer 38

Market penetration is the name given to a growth strategy where the business focuses on selling existing products into existing markets. A market penetration marketing strategy is very much about “business as usual”. The business is focusing on markets and products it knows well. It is likely to have good information on competitors and on customer needs. It is unlikely, therefore, that this strategy will require much investment in new market research.

Question 39

Market penetration | 4 objectives

Answer 39

1. Maintain or increase the market share of current products this can be achieved by a combination of competitive pricing strategies, advertising, sales promotion and perhaps more resources dedicated to personal selling 2. Secure dominance of growth markets 3.Restructure a mature market by driving out competitors; this would require a much more aggressive promotional campaign, supported by a pricing strategy designed to make the market unattractive for competitors 4. Increase usage by existing customers for example by introducing loyalty schemes

Question 40

Market development | 2p

Answer 40

Market development is the name given to a growth strategy where the business seeks to sell its existing products into new markets. Market development is a more risky strategy than market penetration because of the targeting of new markets.

Question 41

Market development | 4 ways to approach

Answer 41

1. New geographical markets for example exporting the product to a new country 2. New product dimensions or packaging: 3. New distribution channels (e. g. moving from selling via retail to selling using e-commerce and mail order) 4. Different pricing policies to attract different customers or create new market segments

Question 42

Product development | 2p

Answer 42

Product development is the name given to a growth strategy where a business aims to introduce new products into existing markets. This strategy may require the development of new competencies and requires the business to develop modified products which can appeal to existing markets. A strategy of product development is particularly suitable for a business where the product needs to be differentiated in order to remain competitive.

Question 43

A successful product development strategy places the marketing emphasis on:

Answer 43

1. Research & development and innovation 2. Detailed insights into customer needs (and how they change) 3. Being first to market

Question 44

Diversification | 3p

Answer 44

Diversification is the name given to the growth strategy where a business markets new products in new markets. This is an inherently more risk strategy because the business is moving into markets in which it has little or no experience. For a business to adopt a diversification strategy, therefore, it must have a clear idea about what it expects to gain from the strategy and an honest assessment of the risks. However, for the right balance between risk and reward, a marketing strategy of diversification can be highly rewarding.

Question 45

read page 44 for summary

Answer 45

Table 1.3.e Summary of the Ansoff matrix

Question 46

SMART objectives:

Answer 46

• Specific - Objectives need to be precise and succinct rather than being vague. • Measurable - Objectives should be quantifiable, e.g. to increase market share, raise sales revenue or reduce staff absenteeism by a certain amount. • Achievable - Objectives must be practically feasible (attainable).Onevariation ofthis criterion isthat objectives should be Agreed, i.e. be accepted and understood by key stakeholders. • Realistic - Firms should ensure that their objectives are reasonable given their limited resources, e.g.it is irrational for a new business to strive to become the market leader within its first few months of operating in an established industry. • Time constrained - There should be a specified time frame within which the objectives should be achieved.