UNIT 1. Chapter 4 (Part 2): Business Objectives

Question 1

Factors that ensure that corporate objectives were effective in assisting a business to achieve its aim.

Answer 1

• Must be based on corporate aim with a clear link
• Should be achievable and measurable to motivate employees
• need to be communicated to employees and investors
• will form the framework of departmental objectives
• SMART

Question 2

Why change corporate objective? (4)

Answer 2

• A newly formed business satisfied “survival” objective, and wants to move on
• The competitive and economic environment many change
• Short term objectives might become longer term objectives
• Change of law

Question 3

Factors that determine the corporate objectives of a business (4)

Answer 3

• Corporate culture: the behaviour and attitude that influence the decision making style.
• The size and legal form of the business: such as small businesses care about “profit satisficing” while Plc due to “divorce between ownership and control” will have “maximising shareholder value”.
• Public or private sector
• The number of years the business has been operating

Question 4

Divisional, departmental and individual objectives

Answer 4

• Corporate objectives cannot be used for each division or department
• Divisional objectives must be coordinated between divisions because if they do not work together, the business will seem confused to outsiders, and it arises disagreements between departments; consistent and relevant.
• Divisional objectives are then divided into departmental, then individual.

Question 5

Def. Management by objectives (MBO)

Answer 5

A method of coordinating and motivating all staff in an organisation by dividing its overall aim into specific targets for each department, manager and employee.
-Process undertaken after discussion and agreement with personnel at each level of the organisation.

Question 6

Def. Ethics

Answer 6

Are the moral guidelines that determine decision making

Question 7

Def. Ethical code (code of conduct)

Answer 7

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

Question 8

Disadvantages of ethical decisions (4)

Answer 8

• Using ethical and Fair-trade suppliers can add to costs
• Not lying in advertising can mean less attention and interests.
• Not pricing competitively may lower profits
• Paying fair wages adds to costs

Question 9

Advantages of ethical decisions (5)

Answer 9

• Avoiding potential expensive court cases
• Getting caught can lead to loss of consumer loyalty and long term reduction in sales
• Attract ethical consumers
• More likely to be awarded government contracts
• Attracts well qualified staff