Chapter 4 - Business objectives

Question 1

Objectives purposes

Answer 1

• Creates a sense of direction
• Ensures ability to direct, control and review
• Provides target and means to measure
• Plan of action
• Goal - main aim

Question 2

Private sector Objectives

Answer 2

• Profit Maximisation
• Profit Satisficing
• Growth

Question 2

Profit Maximisation Limits

Answer 2

• Short term focus-
• Sales not profit
• Other issues are
  greater for the stakeholders
• Attempts to
  achieve it may lead
  to negative
  consumer
  reactions

Question 3

Growth limits

Answer 3

• Too rapid growth causes cash flow
  problems
• Growth at cost of
  profit
• Diseconomies of
  scale
• Lower short term
  returns
• Loss of focus

Question 3

Profit Satisficing

Answer 3

Meaning to achieve enough profit to keep owners happy (Profit is not main priority). To live comfortably not work continuously. = Satisfactory level

Question 4

Types of Corporate objectives

Answer 4

• Maximising short term
  sales revenue&raquo_space; Benefits staff + managers as salaries and bonuses are dependent on sales
• Maximising shareholder
  value&raquo_space; Decisions to increase company share price and dividends paid to shareholders -Also achieved via profit maximisation
• Increasing
  Market Share&raquo_space; Keen retailer = Lower profit margin for retailers and more profit for producer
  » Brand leader marketing capabilities
• Corporate Social
  Responsibility&raquo_space; considers interest of society, evaluates impact and takes responsibility = avoids bad publicity with law = favoured by public
• Survival&raquo_space; most businesses due to high failure rate, important objective for the 1st 2 years

Question 5

Social enterprise objectives

Answer 5

Focused on triple bottom line of people, planet and profit

Question 6

Objectives of public sector business

Answer 6

• 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

Question 7

Factors influencing business
objectives

Answer 7

• Public/Private sector
• Business culture
• Number of years in operation
• Ethics
• Size and legal form of the business

Question 8

Hierarchy of objectives

Answer 8

1. Aim
2. Mission
3. Business objectives
4. Divisional objectives
5. Departmental objectives
6. Individual targets

Question 9

Mission Statement

Answer 9

Statement of business’s core aims - motivates employees and stimulates interest. Condense central purpose of a business’s existence in one sentence

Question 10

Pro mission statement

Answer 10

Central Vision
Motivation
Moral guide
About Section

Question 11

Con mission statement

Answer 11

Too Vague - “Feel good’’
Impossible to disagree with
Not specific

Question 12

Roles of objectives and decision making

Answer 12

1. Set objectives to provide focus for strategic decisions
2. Assess and clarify the problem that needs strategic action
3. Gather data about the problem and identify possible strategic solutions
4. Analyse the likely impacts of all decision options on the chance of achieving business objectives
5. Make strategic decisions
6. Plan and implement the decision
7. Review its success against the original business objectives. Has the business, through its decisions, achieved its objectives

Question 13

Management by objectives MBO

Answer 13

• Coordination between divisions
• Consistency between departments
• The adequate resources are provided to allow achievement

Question 14

Ethical Influences

Answer 14

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?

Question 15

Communicating objectives

Answer 15

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

Question 16

Evaluating ethical choices

Answer 16

Short term = More costs, less sales Less profit, less
competitiveness

Long term = Can avoid court cases Avoid bad publicity if caught