Chapter 4 - Business objectives Flashcards
Objectives purposes
- Creates a sense of direction
- Ensures ability to direct, control and review
- Provides target and means to measure
- Plan of action
- Goal - main aim
Private sector Objectives
- Profit Maximisation
- Profit Satisficing
- Growth
Profit Maximisation Limits
- Short term focus-
- Sales not profit
- Other issues are
greater for the stakeholders - Attempts to
achieve it may lead
to negative
consumer
reactions
Growth limits
- Too rapid growth causes cash flow
problems - Growth at cost of
profit - Diseconomies of
scale - Lower short term
returns - Loss of focus
Profit Satisficing
Meaning to achieve enough profit to keep owners happy (Profit is not main priority). To live comfortably not work continuously. = Satisfactory level
Types of Corporate objectives
- Maximising short term
sales revenue»_space; Benefits staff + managers as salaries and bonuses are dependent on sales - Maximising shareholder
value»_space; Decisions to increase company share price and dividends paid to shareholders -Also achieved via profit maximisation - Increasing
Market Share»_space; Keen retailer = Lower profit margin for retailers and more profit for producer
» Brand leader marketing capabilities - Corporate Social
Responsibility»_space; considers interest of society, evaluates impact and takes responsibility = avoids bad publicity with law = favoured by public - Survival»_space; most businesses due to high failure rate, important objective for the 1st 2 years
Social enterprise objectives
Focused on triple bottom line of people, planet and profit
Objectives of public sector business
- To provide efficient, reliable services to public
- To encourage economic and social
development - To create employment and prevent major job losses
- To meet financial targets set by
government - To achieve high environmental standards
Factors influencing business
objectives
- Public/Private sector
- Business culture
- Number of years in operation
- Ethics
- Size and legal form of the business
Hierarchy of objectives
- Aim
- Mission
- Business objectives
- Divisional objectives
- Departmental objectives
- Individual targets
Mission Statement
Statement of business’s core aims - motivates employees and stimulates interest. Condense central purpose of a business’s existence in one sentence
Pro mission statement
Central Vision
Motivation
Moral guide
About Section
Con mission statement
Too Vague - “Feel good’’
Impossible to disagree with
Not specific
Roles of objectives and decision making
- Set objectives to provide focus for strategic decisions
- Assess and clarify the problem that needs strategic action
- Gather data about the problem and identify possible strategic solutions
- Analyse the likely impacts of all decision options on the chance of achieving business objectives
- Make strategic decisions
- Plan and implement the decision
- Review its success against the original business objectives. Has the business, through its decisions, achieved its objectives
Management by objectives MBO
- Coordination between divisions
- Consistency between departments
- The adequate resources are provided to allow achievement
Ethical Influences
CSR led to ethical code - most decisions have a
moral dimension.
Code of conduct should regulate how employees behave and make decisions.
- Is it acceptable to the pollute the area as long
as the company is saving costs?
- Is it acceptable to put additives into food to make it addictive as long as no one finds out?
Communicating objectives
If employees are communicated with and therefore involved in the setting of individual targets
Benefits include:
- Employees and managers have greater understanding of both individual and company wide goals
- Employees understand overall plan and how
individual goals interlinked
progress
Evaluating ethical choices
Short term = More costs, less sales Less profit, less
competitiveness
Long term = Can avoid court cases Avoid bad publicity if caught
