4. Business Objectives Flashcards
The importance of objectives within a business
- Objectives are set to direct, control and review business activities
- Businesses have objectives to provide a clear end purposes to work towards to. This enables everyone in the organisation to focus on the work, check on progress and make improvements
- It includes strategy to check whether business is on target or not
- Must based on the corporate aims
SMART
- Specific - Measurable - Achievable - Realistic - Timely
Hierarchy of objectives
Aim: long term goals Corporate Objectives Divisional Objectives (region) Departmental Objectives Individual targets
What are some of the common corporate objectives?
- Profit maximisation: producing the greatest positive difference between total revenue and total costs
- Profit satisficing: achieving enough profit to keep the owners happy but no aiming to earn as much profit as possible
- Growth
- Increasing market share
- Survival
- Maxmising shareholder value: increase share price and dividens to shareholders
- Reputation/Brand loyalty
- CSR
Define mission statement
A statement of the business’ core aims, phrased in a way to motivate employees and to stimulate interest by outside groups
Benefits of mission statement
- Give an overall idea and vision of the business
- Spreads positivity => motivates employees
Limitions of mission statement
- Too vague - Common for businesses of different industries to have the same mission statement - Impossible to analyse - A marketing tool so stakeholder groups “feel good” about the organisation
Define CSR
The concept applies to businesses that consider the interests of society by taking responsibilities for the impact of their decisions and activities on customers, employees, communities and the environment
Advantages of CSR
- Promotes innovation: forces business to generate new ideas so that products can benefit stakeholders
- Cost savings: lean production, save money on energy and operating costs and manage risk, less social costs
- Brand differentiation: results from innovation
- Develop and enhance relationships with customers, suppliers and networks
Disadvantages of CSR
- Costly to be sustainable because it requires technology
- People try to find faults and denigrate the company
- A marketing tool - deception to establish a good reputation to earn brand loyalty
- Not ideal for small businesses that want to focus on growth. Small businesses also have small impact on stakeholders
Conflicts between corporate objectives
- Growth vs. Profit: achieving higher sales by raising promotional expenditure and decrease the selling price
- Stakeholder conflicts
Why would corporate change over time?
- Sastisfy survival objective and now wishes to pursue objectives of growth or increased profit
- Change in the business environment (economy recession or new competition)
Factors that determine the corporate objectives
- Corporate culture: the code of behaviour and attitudes, way of doing things that is shared by all those work in the organisation
- The size and legal form of the business: profit maximisation or satisficing
- Public or private sector: public => aim not focused on profits
- Number of years it has been operating: survival or growth
What are the processes involved in the decision making process?
- Identify objective
- Collect info and ideas
- Analyse (weigh positives and negatives)
- Choose decision
- Communicate and carry out
- Evaluate
What are the 3 types of decisions and who make them?
- Strategic decisions made by owners or board of directors
- Tactical decisions made by the managers
- Operational decisions make by the employees
