Business Objectives Flashcards
1
Q
Definition of a Mission Statement
A
A mission statement sets out what an organisation is trying to achieve. i.e. the reason it exists. It is a summary description of key objectives of a business.
2
Q
What are the Advantages of a Mission Statement ?
A
- Gives a sense of COMMON PURPOSE so that all actions are geared towards the same end. this can ensure that the business is working together and should help increase sales and Profit.
- MAKES DECISIONS EASIER by enabling options to be compared against the mission statement.
- Gives stakeholders A SENSE OF DIRECTION AND BELONGING, this motivates and inspires them. i.e employees work more productively and efficiently.
- Can be a marketing tool, corporate image highlighting their aims and this can be used on their website or letterheads. Serves as a basis for organisational targets and objectives.
3
Q
What are the Disadvantages of a Mission Statement ?
A
- CAN BE TOO VAGUE- nothing quantifiable so many not help communicate objectives and targets. May be
- IGNORED by senior management causing employees to be cynical. Bad PR if not achieved - Can highlight faults or failures and deter customers from the business. Business could lose their successful image.
- Can be EXPENSIVE and TIME CONSUMING to draw up so it will need a lot of dedication
- May not relate to stakeholders e.g. customers wont look at the Mission Statement before making a purchase within the business
4
Q
Definition of Strategic Objectives
A
How a business plans to achieve its aims or goals, often a long term approach.
5
Q
Definition of Tactical Objectives
A
The day-to-day objectives needed to ensure the strategic objectives are achieved.
6
Q
List the Business Objectives
A
- SURVIVAL
- GROWTH
- PROFITABILITY/ PROFIT MAXIMISATION
- CORPORATE IMAGE
- SOCIAL RESPONSIBILITY
- ETHICAL
7
Q
Advantages of Survival
A
- Ensures the business will stay open in the near future
- Ensures not too many jobs are lost
- Ensures UK economy remains competitive in a difficult time
- Ensures better communication with other stakeholders particularly shareholders as they may have to be told in advance that dividends will not be paid
8
Q
Disadvantages of Survival
A
- Won’t benefit shareholders in terms of profit
- Rather than dwelling too much on surviving in this market some businesses should take this opportunity to expand into new markets
- Will still need to make a profit which has to be its top priority
- May hold the business back as they could miss out on business opportunities or expansion opportunities
9
Q
Advantages of Profit Maximisation/ Profitability
A
- The profit can be used to reward owners/shareholders e.g. dividends – This keeps them happy.
- The profit can be reinvested back into the business and therefore increase market share.
- Profit will ensure that the business grows and expands gaining from economies of scale.
- May attract more investors due to higher possible return on investment.
- Can be reinvested into new equipment – improving efficiency and helping the business become lean.
10
Q
Disadvantages of Profit Maximisation / Profitability
A
- Could affect the corporate image as profit maximisation may require cost cutting e.g. redundancies.
- Focusing too much on profit as an objective make may the business unethical e.g. sweat shops.
- Focusing too much on profit might take away from the quality of the end product which could affect their reputation.
- Could go against the mission statement and what the business stands for especially if they become more concerned on profit and revenue potential rather than quality.
11
Q
Advantages of Growth
A
- Can improve the business competitive advantage e.g cost advantage through economies of scale or differentiation advantage through greater brand awareness.
- Reduce the chances of failure which will motivate workers.
- Can improve the corporate as they will be creating jobs. Motivated workers due to job security.
12
Q
Disadvantages of Growth
A
- Diseconomies of scale may occur e.g communication problems or coordination issues which can lead to lower productivity.
- Growth can fail if it happens too quickly, i.e. borrowing too much money too quick
- May be open to investigation – Competition and Markets Authority may investigate if they feel the business is gaining too much control of the market.
- Can be difficult depending on the economic climate to achieve growth.
13
Q
Non- Financial Objectives: Advantages of Green Objective/ Concern for the Environment
A
- Consumers could be more attracted to businesses with environmental friendly policies – therefore it could become a source of competitive advantage through differentiation.
- Can be used to promote the business in its mission statement.
- The business will be seen as a responsible and caring organisation and could lead to more investment.
- They may qualify for grants for solar power or energy saving technology or techniques which could provide very useful financial support.
- May attract high quality employees who want to work for an ethically responsible business therefore may likely to attract and retain the best employees.
14
Q
Disadvantages of Green Objective/ Concern for the Environment
A
- Research and developments costs are significant – perhaps this money could have been spent on other things to improve the efficiency of the business.
- Going green can lead to higher prices for consumers e.g waste management/green production methods can be more expensive.
- Time is required to conduct an environmental audit and draw up an environmental policy which takes time and resources away from other more important elements of the business such as product development.
- There is no guarantee it will attract customers as they may be more price conscious and not willing to pay a higher price for a more ethical product.
15
Q
Corporate image is all about ensuring that the business and its name is protected and that it looks good to all stakeholders, in particular customers, suppliers and pressure groups. What are the advantages of Corporate Image?
A
- Improves the corporate image of the business, therefore increasing market share.
- It is quality/implies better quality.
- It could motivate employees/attract a better calibre of staff.
- It builds up a good reputation for the business which can assist with negotiating with suppliers for discounts etc
- Can help gain competitive advantage of the rivals as it helps build a positive image which can in turn increase sales and profits.
- If corporate image wasn’t focused on and the business didn’t focus on creating a positive environment it could lead to high employee turnover which could increase recruitment expenditure.
- If a business has a good corporate image banks may be more likely to lend more to them due to the reputation that they have. Also helps to attract investors Easier to raise capital to grow the business.
