7.1- Mission, Corporate Objectives and Strategy Flashcards
describe a mission statement
It sets out the purpose of an organisation and gives its reasons for existing.
what do mission statements commonly focus on?
- what the business wants to be
- the values of the business
- the range of the firm’s activities
- the importance of different groups (stakeholders)
what is the main purpose of having a mission statement?
- allows everyone in the Bs to know what they should be trying to do. all of their actions should be directed towards the same thing
- makes decision making easier when faced with series of options, can be compared to the mission to see which may be more appropriate
- used to motivate people, they know why they’re employed and what the bs is trying to achieve.
what is a vision statement?
sets out what the bs wants to do/ be in the future. tends to be more long term
vision statements should…
coincide with bs corporate objectives as they are forward-looking.
Achieving the targets embedded in its CO’s should enable the bs to fulfill its vision.
what will influence a business’ mission?
- values of founders of bs (fundamental principles of founders ingrained)
- the values of bs’ employees (views align with bs)
- the industry in which the bs is a part (eg. fashion -> creativity, uniqueness aligns with mission)
- society’s views (eg. caring for environment)
- the ownership of the bs
(state-owned: potentially more sig. on social values eg NHS)
(privately owned: maximise returns for owners eg. major hedge fund)
Corporate objectives:
- still quite generic, not specific to a function eg. finance/marketing
- set by senior management in order to help more junior managers to set their specific objectives lower down the organisational structure
what are the 8 areas of business activity where useful objectives could be set? (Peter Drucker)
- Market Position- market share/ sales growth
- Innovation- invention, new product/ new process
- Financial Resources- amount of capital available, SOF, and how it’s used
- Physical Resources- buildings, land, equipment
- Human resources- employee motivation/ engagement
- Productivity- efficient use of resources- max output from min input
- Social Responsibility- responding to stakeholder needs
- Profits- level of profits or measured against revenue/ investment
what is meant by strategic decision:
Clive Boddy: (management writer) ‘involving a specific commitment to action’
define shareholder:
someone who owns a % of a bs
define dividend:
part of company profits which are paid out to shareholders in proportion to the number of shares they own
define shareholder returns:
financial benefits from buying shares. Combination of appreciating share price and dividends paid.
The business’s ownership
- some private limited companies (PLC or LTD) may be under pressure to deliver high levels of shareholder returns
- may decide to set corporate objectives which are intended to generate high levels of profits to improve dividends, as well as driving up share price
- This will vary depending on ownership structure, John Lewis (owned by employees) have no external shareholders and can do best for long term health of the business + employees benefits
- Sole trader / small businesses may be more focused on excellent levels of customer service or fulfilling a social need (providing jobs in the local area)
pressures for short-terminism
- excessive pressure for ST results eg: maximise profits in 2021
- this can be at the expense of LT interests
- instead of thinking: invest in training, improve products, new production processes they think: cut costs, lost jobs
Internal:
- Poor Performance- may decide to close some stores, sell surplus land and increase staff in remaining stores
- A New Leader- change in focus or strategy
- The Business’s Culture- may be entrepreneurial and encourage ideas and initiatives, which could lead to decentralisation and delegation. May be customer focused and invest in product development and employee training.
