Chapter 4 (business objectives)

Question 1

what is the acronym S.M.A.R.T stand for?

Answer 1

S- specific M- measurable A- achievable R- realistic & relavent T- time specific

Question 2

what is a mission statement?

Answer 2

a statement of the businesses core aims, phrased in a way to motivate employee’s and to stimulate interest by outside groups e.g of mission statements: Google; “to organise the worlds information and make it universally accessible and useful”

Question 3

what are corporate aims

Answer 3

these are the very long-term goals which a business hopes to achieve. The core of a businesses activity is expressed in its corporate aims and plans.

Question 4

what are the benefits of having corporate aims?

Answer 4

1. become a starting point for which successful management would take place.
2. help develop a sense of purpose and direction for the whole organisation if they are clearly communicated to the workforce
3. They allow future assessment to be made, at later date of how successful the business has been attaining its goals?
4. they provide the framework within which the strategies or plans of the business can be drawn up. A business without a long term corporate plan or aim will often stray from event to event without a clear purpose.

Question 5

arguments used to in favour of a mission statement

Answer 5

1. they quickly inform groups outside the business what the central aim and vision are. 2. they prove motivating to employees, as well as to the community if mission statement is positive to the environment or to the public. 3. they help guide and direct employee’s 4. helps a business tell outsider ‘what the business is about’

Question 6

mission statements are of the criticised

Answer 6

1. they can be to vague and general 2. virtually impossible to analyse or disagree with 3. it can be common for 2 rather opposite businesses having similar mission statements

Question 7

Common corporate objectives

Answer 7

1. profit maximisation 2. profit satisficing 3. growth 4. increasing market share 5. survival 6. corporate social responsibility (CSR) 7. maximising short term sales revenue 8. maximising shareholder value

Question 8

profit maximisation is?

Answer 8

producing at the that level of output that where the greatest positive difference between total sales revenue and total costs is achieved.

Question 9

limitations of profit maximisation

Answer 9

1. the focus on short term profits may encourage competitors to enter the market and jeopardiser the long-term survival of the business 2. most business analysts assess the performance of a business on capital employed and not total profits. 3. it is difficult to to asses whether the point of profit maximisation has been reached 4. constantly changing prices or output to attempt to achieve profit maximisation may have a negative affect on the business

Question 10

profit satisficing is?

Answer 10

aiming to achieve enough profit to keep the owners happy but not be working ‘flat out’, often common among owners who wish to live comfortably but do not want to work longer hours.

Question 11

benefits of growth (Common corporate objectives) is?

Answer 11

1. larger firm will be less like to be taken over and should be able to benefit form economies of scale 2. motivate managers from the desire to see the business succeed due to them getting higher pay or fringe benefits . 3. business who do not attempt to grow are argued to cease to be competitive and will loose appeal to investors.

Question 12

limitations of growth (Common corporate objectives)

Answer 12

1. expansion that is too rapid can lead to cash-flow problems 2. sales growth might be achieved at the expense of lower profits margins 3. larger businesses can experience diseconomies scale 4. using retained profits to finance growth can lead to lower short-term return to shareholders 5. growth into new business areas and activities could cause a loss of direction and focus for the whole origination

Question 13

benefits of having the highest market share, being ‘market leader’

Answer 13

1. retailers will be keen to stock and promote the best selling brand 2. profit margins offered to retailers may be lower than competing brands as the shops are so keen to stock it - this leaves more profit for the producer. 3. effective promotional campaigns are often based alongs the lines of “buy our product with confidence, its the market leader”

Question 14

the survival objective is?

Answer 14

likely to be the key objective of new or starting up businesses. high rate of failure within the first 2 years of a business means that survival is important. after being firmly established long-term goals are set in place

Question 15

corporate social responsibility (CSR) is

Answer 15

this concept applies to those businesses that consider the interest of society by taking responsibility for the impact of their decisions and activities on customers, employee’s, communities and the environment

Question 16

ways in which businesses promote corporate social responsibility (CSR)

Answer 16

1. firms the promote organic and vegetarian foods 2. retailers the emphasise the promotion of their products being made from recycled materials 3. businesses that refuse to stock goods that have been tested on animals, or foods that base on genetically modified ingredients

Question 17

benefit and downside of maximising short term sales revenue are?

Answer 17

ADV 1. it will benefit managers and staff when salaries and bonuses are dependent on sales revenue levels DISADV 1. if sales are achieved by reducing prices the actual overall profits of the buisness might fall

Question 18

maximising shareholder value is

Answer 18

decitions that would increase the companies share price and dividends paid to workers paid to shareholders

Question 19

Important issues relating to corporate objectives

Answer 19

1. must be based on the corporate aim and should clearly link with it 2. should be achievable and measurable if they are to motivate employees 3. need to be communicated to employees and investors in the business, effective communication is vital in order to be successful 4.

Question 20

whats the difference between corporate aims, mission statement and corporate objectives?

Answer 20

both the corporate aims and the mission statement have the same problems, they lack specific detail for operational decisions. corporate objectives turns the aims into targets and goals quite specific to each business which can be broken down into strategic departmental targets. they provide a much clearer guide for management action plan.

Question 21

conflicts between corporate objectives

Answer 21

1. growth vs. profit 2. short-term vs. long-term 3. stake holder conflicts

Question 22

possible changes to corporate objective

Answer 22

1. newly formed business might change from survival to growth or increased profit. 2. the competitive and economical environment may change, (e.g new powerful rival, economic recession) forcing objectives from growth to survival.

Question 23

management by objective (MBO) is?

Answer 23

a method of co-ordinating and motivating all staff in and organisation by dividing its overall aim into specific targets for each department, manager and emplyee

Question 24

hierarchy of objectives

Answer 24

see picture

Question 25

ethics are?

Answer 25

the moral guidelines thet determine decision making

Question 26

ethical code (code of conduct) is?

Answer 26

a document detailing the company’s rules and guidelines on staff behaviour that must be followed by all employees