Chapter 5- Aims and Objectives Flashcards
What is a vision statement?
A statement describing what the business sets out to achieve in the long term
Benefits of having a vision statement?
1) A clear vision can give the business a clear identity and ethos
2) Can help in setting objectives and support the business strategy
3) Focus senior managers on the tasks to achieve the vision
4) Communicates to employees how they can contribute and can improve employee engagement
5) Commits resources to achieving the vision
What is a mission statement?
A broad statement of its aims and values; it guides the everyday operations and decision-making of the business
Seen as a crucial element in the strategic planning of a business organisation
Reasons for having a mission statement?
1) Helps to ensure that all stakeholders are clear on the purpose of the business so everyone can be focused on the same goals and objectives
2) Helps with the strategic planning since this should be the starting point
3) Gives some transparency for investors- they understand how their capital will be put to use
4) Helps customers understand the ethics and objectives of a company
The main purpose of a mission statement?
To give an organisation cohesiveness; enables everyone from the CEO to the shop floor workers have a set of common aims and know what the business is trying to achieve
Limitation of a mission statement?
Can be argued they are unrealistic and can never be achieved
What is a business aim?
What the business wants to achieve in the future and they tend to be quite generic and broad; the goals
What is a business objective?
A more specific and measurable targets the business will set out in order to achieve its aims
Categories of business aims and obejctives?
1) Survival
2) Profit maximisation
3) Sales maximisation
4) Growth
5) Increase shareholder value
6) Corporate social responsibility/ environmental/ ethics
Survival?
Around 30% of business fail within the first 2 years
Aim is relevant in times of economic recession
Profit maximisation?
Especially for those operating in the private sector a big goal is to maximise profits.
Measures of profitability include gross profit, gross profit margin, net profit and net profit margins as well as return on capital employed
Usually in comparison with competition and historical profit figures
Growth and gaining market share?
Some businesses will spend money to gain customers, reducing profits in the short term but hopefully increasing profits in the long run.
Growth is often based on reinvesting profits= reducing short term return to owners but leads to greater dominance in the long term which can lead to greater profit margins
Through advertising etc. the business can grow its brand identity and customer loyalty
Increasing shareholder value?
Measured by the amount of dividends paid to shareholders and any increases in share price.
Corporate social responsibility/ environmental/ ethics?
Some businesses will try to minimise the impact their business activities on the environment and consider the needs of society.
E.G. employees earn a fair wage and have good working conditions, sourcing raw materials from a sustainable source
May be costly but earn the respect of wider society
SMART objectives?
Writing objectives in a SMART model allows the business to make them clear and more meaningful to understand and achieve
What does SMART stand for?
S- specific
M- measurable
A- achievable
R- realistic
T- time bound
Specific objectives?
Objectives should specify what the business wants to achieve. They should be clear so that all stakeholders understand what the objective is
Measurable objectives?
Objectives should be measurable to make sure the objective can be achieved. This measurement should be numeric
Achievable objectives?
Is the objective attainable? There is no point in setting an unrealistic target, this can be demotivating
Realistic objectives?
Is the business likely to achieve the objective with the resources available?
Time bound objectives?
A timescale needs to be set for achieving the objectives
Benefits of SMART objectives
1) Encourage team work and direct resources to be most effective
2) Enable feedback and learning within the organisation, allowing management to monitor achievement and make changes were necessary
