3.1- mission statements, aims and objectives Flashcards
What is added value?
The difference between the cost of the inputs and the value of the outputs
What are the four main reasons as to why a business exists ?
They create employment
They create new products
Can Enhance a countries reputation
They create wealth
Give examples of input ?
People Finance Capital requirement Land and natural resources Materials and components
Give examples of outputs
Goods
Services
Waste products
What are ways in which firms seek to add value?
They reduce costs
They innovate
They use marketing
What sectors is the economy split into?
Primary
Secondary
Tertiary
What is the primary sector? Give examples
This is the extraction of raw materials
E.g coal mining, fishing and farming
What is the secondary sector? Give examples
This is the manufacturing of the product
E.g Ford cars, mars bars and dyson vacuums
What is the tertiary sector? Give examples
This is a service being provided
E.g retailing, hairdressing, financial advice and banking
What is a mission statement?
Qualitative statement of the organisations aims. It uses language intended to motivate within the firm and to convince theses outside of the company’s sincerity and commitment
Ensures everyone knows what they should be trying to do
Helps when a business if faced with a decision
Which firms need mission statements?
LARGE ORGANISATIONS-> co ordinating the actions of a wide number of diverse individuals is more difficult when the organisation is large. Set of clear principles is helpful
MULTINATION-> greater the geographical spread of the organisation, the greater the need there is for strong cultural values to be laid down
TIMES OF CHANGE-> when two different organisations merge, there may be a danger if cultural clash. New mission statement is helpful in situations
FIRMS UNDER PRESSURE-> the ones that are suffering in the market may also need a new decision , which can be expressed In a mission statement
What are the benefits of the mission statement?
Everyone knows what they should be trying to do
Helps culture of the organisation
Makes decision making easier. They can compare the options with the mission statement
Motivation may be improved. The statement will give the workers a sense of belonging and directions
Criticism of a mission statement ?
They can be too long
They can be full of jargon
Can be viewed as a PR exercise - manager may say they want to do something but do the total opposite
Will on,t have value if the behaviour of everyone within the firm supports it
What is a aim?
Long-term plan of business which its corporate objectives are devised
Who are corporate aims set by? Why are they set?
Senior employees within the business and are intended to provide guidance for setting other objectives and also to guide and assist junior managers in their decision making
What are the six business objectives?
Survival
Profits and profit maximisation
Growth
Diversification
Social and ethical objectives
Cash flow
Explain profit and profit maximisation as a business objective
Profits are maximised when the difference between sales revenue and total cost is at its greatest
Explain growth as a business objective
They pursue growth because their managers believe that the organisation will not survive otherwise
If a firm grows it will be able to exploit its market position and earn higher profits
Benefits shareholders in the long term by providing greater dividends as well as offering better salaries and more job security to the employees and managers of the business
Explain survival as a business objective
Objective is to continue to trader over a defined period of time, rather than to submit to some form of commercial pressure and be forced to cease trading.
What are the times in which survival is a key objective ?
Period of recession or intense competition
Times of crisis - hostile takeover bid
What is cash flow?
Flow of cash into and out of the business
Explain cash flow as a business objective
When a firm experiences cash flow problems it is forced to close as it cannot pay its bills
Ones with long cash flows need to be careful about their cash flow position
What is a cash cycle ?
The time that elapses between the outflow of cash to pay for the resources needed to produce a product and the receipt of cash following the sale of the product
What are social objectives ?
The area in which a business operates
