Chapter 3 The purposes of a business

Question 1

1.1 Mission statements

Answer 1

An organisation’s mission statement is the written communication of an organisation’s mission to internal and external stakeholders. It is usually a brief statement set out in general terms which doesn’t include a timescale or commercial terms.

Question 2

1.2 Features of a successful mission statement

Answer 2

• Purpose: why does the organisation exist and what does it aim to achieve for stakeholders
• Strategy: what resources, competencies or generic strategy give the company a competitive advantage
• Policies: what standards and behavioural patterns are adopted within the organisation
• Values: what beliefs do the managers and employees share

Question 3

1.3 Advantages and criticisms

Answer 3

Advantages are they help resolve stakeholder conflict, set the direction of the organisation and so help formulate strategy and to help communicate the values and direction of the organisation to stakeholders.
Criticisms are that they often are full of meaningless terms which give staff like idea of aims, they are often ignored by management and are often considered to be a public relations exercise.

Question 4

1.4 Role of mission

Answer 4

Mission (general direction), objectives (specific goals – should be aligned to mission), strategies (long term plan to achieve objectives) and action plans and budget (short term plans to implement strategy).

Question 5

2.1 Organisational objectives

Answer 5

Objectives should be SMART:
- Specific: clear statement, easy to understand
- Measurable: enable control and communication down the organisation
- Attainable: it is pointless setting unachievable objectivise
- Relevant: appropriate to the mission and stakeholders
- Timed: have a time period for achievement

Question 6

2.2 Profit making entities vs not-for-profit entities

Answer 6

Profit making entities: primary objective is to maximise shareholder wealth. Secondary objectivise include customer satisfaction, social responsibility, innovation and meaningful employment.
Not-for-profit entities: primary objective is to maximise the benefit to target stakeholder. Secondary objectivise include investing in staff, minimal impact on the local environment and economy, efficiency and effectiveness.

Question 7

2.3 Issues with the objectivise of Not-for-profit organisations

Answer 7

• NFPs often have multiple objectivise to consider
• They may experience difficulty in measuring these objectives as success is typically non-financial
• Stakeholder conflicts may be more difficult to resolve as NFPs typically have a wide range of influential stakeholders
• Financial constraints may limit the amount that they can achieve

Question 8

3.1 Stakeholder mapping

Answer 8

Mendelow’s power-interest stakeholder mix is used to analyse stakeholders and identify an appropriate response.
- Low level of interest and low power: minimal effort and can be directed
- High level of interest and low power: keep informed
- Low level of interest and high power: keep satisfied
- High level of interest and high power: key players need participation