Unit 1 - 1.3 Business objectives Flashcards
Hierarchy of objectives
Vision
Mission
Strategies
Tactics
How does time relate to the hierarchy of objectives
Top: very long term
Bottom: very short term
How does specificity relate to the hierarchy of objectives?
Top: broadly expressed ideas
Bottom: very specific
Objectives
Specific, measurable, achievable, relevant, and time-bound targets (SMART targets) that give targeted direction to a business for the future
SMART
Specific
Measurable
Achievable
Relevant
Time-bound
Business aims
The long-term aspirations of an organisation (realised through objectives)
Vision
An outline of an organisation’s aspirations in the distant future
* focus on the very long-term and are broad statements
Mission
A simple declaration of the underlying purpose of an organisation’s existence and its core value
* focus on the medium to long-term and are well written, clearly defined and achievable
Mission or vision:
Aspirational (i.e. “What do we want to
become?”).
Vision
Mission or vision: Does not specify actual targets to
achieve
Vision
Mission or vision: Declaration of purpose (i.e. “What is our
business?”).
Mission
Mission or vision: Infrequently updated
Vision
Mission or vision: Immediate time period
Mission
Common business objectives
GPPE
* growth
* profitability
* protection of shareholder value
* ethical objectives
Why is growth an objective to businesses?
Growth is essential for
survival in order to adapt to
ever-changing and
competitive business
conditions
* failure can lead to declining competitiveness and threaten firm’s sustainability
* usually measured by an increase in sales revenue or market share
Profit equation
Total revenue - total cost
Revenue equation
Price x quantity
Total costs equation
Total fixed cost + total variable cost
Market share equation
(total product sold / total product sold in market) x 100
Why is profitability an objective to businesses?
Provides incentive for entrepreneurs to take risks due to personal gain
* it is traditionally the main objective
Why is protecting shareholder value an objective to businesses?
To earn profitable return for shareholders in a sustainable way
* challenge for directors (shareholders) is to balance short-term profits (dividends) with investments in long-term value of the company
Why is ethical consideration an objective to businesses?
Corncerned with societal perspectives on what ir morally correct
* focused on due to reputation and personal responsibility towards the moral principles that guide decision-making
Advantages of ethical objectives (name 3)
- Improved corporate image
- Increased customer loyalty
- Cost-cutting
- Improved staff morale and motivation
Disadvantages of ethical objectives (name 3)
- Compliance costs (taxes and addional costs to adhere to regulations)
- Lower profits
- Stakeholder conflicts (difference in what notion they support i.e. profit maximisation or health and safety)
- Subjective nature
Startegies
Plans of action to achieve the objectives of an organisation
* medium to long-term goals and expressed specifically
* their fulfillment will allow reach of objectives
Examples of strategic objectives (name and define 3)
- Market standing: the extent to which a business has presence in the industry
- Image and reputation: consumer beliefs and perception of firm
- Market share: firm’s sale revenue as a percentage of industry’s total sales
Corporate social responsibility (CSR)
The consciencious consideration of ethical and environmental practice related to business activity
* policies require regular review to adapt to evolving attitudes and expectactions of different market/time/country
* can provide competitive advantages and long-term sustainability
Examples of CSR (4)
- Provide accurate product labelling/description
- Be conscious of impacts to the environment
- Adhere to fair employment practices
- Contribute to communities via volunteer or charitable work
Theranos - ethical objectives case study
2003 - blood testing company claimed to have invented medical machine that could detect diseases using one drop of blood
* 2016 - firm shut down due to investigation which showed machine has technological flaws
* produced widespread innacurate data
* 2018 - CEO and COO were charged with massive fraud by authorities
Stores in COVID-19 - Tactics case study
Groery stores during COVID
* stop-and-go system or delivery services were implemented
* some transitioned from cafés to grocery stores
* many had to let go of workers
Misleading food labels - CSR case study
Use of “natural” label on food products without standardised definition
* many contain artificial ingredients
* consumers (USA) are asking for ban of label due to interpretive nature
Recycling furniture at IKEA - CSR Case study
Transition to a CBM system
* initially 200 million physical copies of catalogue published in 2016
* transitioned to online catalogue in most countries
* reuse, buy back thousands of used products across 27 countries
* in order to keep them in circulation for as long as possible
Wage theft at Funtea - CSR case study
Coworker assaulted (slapped and kicked) after confronting boss about underpayment ($10 /day) - 2021 Australia?
* video leaked and viewed by over 50 million
* assailant given assault conviction at court
* fully paid back $672 underpayment
* in response: widespread underpayment and exploitation of workers in Chinatown was discovered
Community engagement by Nissan - CSR case study
Nissan and Habitat for Humanity refurbished/built more than 300,000 humes for families in need
* with over $25 million private money from donations
* aims to provide affordable, safe and decent housing for all
