Unit 1.3 : Organizational Objectives

Question 1

Vision statement

Answer 1

1. A vision statement outlines a business’s
   aspirations (where it wants to be) in the distant future.
2. Vision statements tend to relate to the
   attainment of success i.e. visualisation of what
   success looks like.

Question 2

Mission statement

Answer 2

1. A mission statement explains in general terms what the business is trying to achieve and outlines the organization’s values.
2. It is a simple declaration that broadly states the underlying purpose of an organization’s existence.
3. A company’s mission statement is usually found
   in its annual report and its home page on the
   internet.
4. A mission statement does NOT have a distinct
   time frame and tends to be qualitative rather
   than quantitative.
5. A well-defined mission statement is realistically
   achievable.
6. It should serve to unify all people and corporate
   cultures within the workforce in their attempt
   to achieve the organization’s vision.

Question 3

Difference between vision and mission statements

Answer 3

1. Vision statement addresses the question ‘what do we want to become?’ while mission statement deals with the question ‘what is our business’
2. Vision statements are focused on the long term whereas mission statements are medium or long term
3. Mission statements are updated more frequently than vision statements
4. Vision statements do not have to be actual targets that must be achieved but rather allow people to see what could be
5. Mission statement tends to outline the values of the business and the principles that set the framework for how managers and employees operate on a daily basis

Question 4

Limitations of vision and mission statements

Answer 4

1. Critics argue its no more than a public relations stunt as the ultimate purpose of most businesses is to maximise profits
2. They can be very time consuming to construct
3. Even the best thought out statements might not be supported by all stakeholders

Question 5

Aims

Answer 5

1. Aims are the general and long-term goals of an organization of an organization
2. They are broadly expressed as vague and unquantifiable statements such as “to promote social and environmental integrity”
3. Aims serve to give a general purpose and direction for an organization and are often expressed in a mission statement
4. Aims are usually set by the senior directors of the organization

Question 6

Objectives

Answer 6

1. Objectives are the short to medium specific targets an organization sets in order to achieve its aims
2. They are more specific and quantifiable (measurable)
3. e.g. “to achieve a 95% pass rate with two years”
4. Objectives must be consistent with the firm’s aims
5. They can be set by managers and their subordinates

Question 7

Importance of aims and objectives

Answer 7

1. To measure and control - aims and objectives help to control a firm’s plans as they set the boundaries for business activity. They provide basis for measuring and controlling the performance of the business as a whole
2. To motivate and inspire managers and employees to reach a common goal, thus helping to unify and motivate the workforce

Question 8

Strategies

Answer 8

1. Strategies are the plans of action to achieve the strategic objectives of an organization
2. Serve matching purpose of tactics

Question 9

Tactics

Answer 9

1. Tactics are short-term methods used to achieve an organization’s tactical objectives
2. Serve matching purpose of strategies

Question 10

Levels of Business strategy

Answer 10

1. Operational strategies
2. Generic strategies
3. Corporate strategies

Question 11

Operational strategies

Answer 11

1. Operational strategies are the day-to-day methods used to improve the efficiency of an organization
2. These are aimed at trying to achieve the tactical objectives of a business
3. e.g. a restaurant investigating how to reduce customer waiting time without compromising the quality of its service

Question 12

Generic strategies

Answer 12

1. Generic strategies are those that affect the business as a whole

Question 13

Corporate strategies

Answer 13

1. Corporate strategies are targeted at the long term goals of a business
2. e.g. a firm might aim for market dominance through mergers and takeovers or rivals in the industry

Question 14

Difference between aims and objectves

Answer 14

1. Aims are what a business wants to achieve while objectives are what the business has to do to achieve the aims
2. Aims are not necessarily time-bound while objectives are
3. Aims are vague or abstract goals while objectives have to be specific and measurable
4. Aims are what a business wants to happen while objectives are what a business needs to happen
5. Aims are set by senior leaders while objectives are set by managers or their subordinates

Question 15

Tactical objectives

Answer 15

1. Tactical objectives are short-term goals that affect a section of the organization
2. They are specific goals that guide the daily functioning of certain department’s or operations
3. e.g. “to keep staff turnover below 10%”
4. Examples of tactical objectives include survival and sales revenue maximisation

Question 16

Strategic objectives

Answer 16

1. Strategic objectives are the longer-term goals of a business
2. They can include profit maximisation, growth, market standing, and image and reputation.

Question 17

Need for changing objectives

Answer 17

1. There are various factors that can cause the aims and objectives of an organization to change, requiring innovative responses to these factors
2. These factors can be internal or external

Question 18

Internal factors that cause the need to change objectives

Answer 18

1. Corporate culture (firms that have a more flexible organizational culture are more likely to have innovative objectives)
2. Type and size of organization (any change in the legal structure of a business is likely to cause a change in its objectives)
3. Private vs public organizations
4. Age of the business
5. Finance
6. Risk Profile
7. Crisis management - businesses may face internal crises such as unexpectedly high rates of staff turnover

Question 19

External factors that cause the need to change objectives

Answer 19

1. State of the economy - economic boom brings opportunities but economic slumps cause threats
2. Government constraints - government rules and regulations can limit what a business might strive to achieve
3. Presence of pressure groups
4. New technology

Question 20

Ethics

Answer 20

1. Ethics are the moral principles that guide decision-making and strategy
2. Morals are concerned with what is considered to be right or wrong, from society’s point of view

Question 21

business ethics

Answer 21

1. Business ethics are the actions of people and organizations that are considered to be morally correct
2. An ethical and socially responsible business acts morally towards workers, customers, shareholders and the natural environment

Question 22

CSR

Answer 22

1. Corporate social responsibility (CSR)
2. Socially responsible businesses are those that act morally towards their stakeholders such as their employees and the local community
3. CSR is the conscious consideration of ethical and environmental practices that are related to business activity

Question 23

Pros of ethical behaviour in businesses

Answer 23

1. Improved corporate image as acting ethically and in a socially responsibly way can help to improve the image and reputation of a business. Alternatively, media will report unethical business behaviour which can damage a firm’s image
2. Increased customer loyalty as the business acts morally
3. Ethical behaviour can help to cut certain costs as they can benefit from avoiding litigation costs due to unethical business activity
4. Improve staff morale and motivation as it helps a business to attract and retain highly motivated staff. People are more likely to be proud of the business they work for if it acts ethically and within the law

Question 24

Cons of ethical behaviour in businesses

Answer 24

1. High compliance costs such as to get better products or higher salaries
2. There are lower profits as if compliance costs cannot be passed onto consumers in the form of higher prices, profitability is likely to fall. An ethical dilemma for the business exists when ethical decision-making involves adopting a less profitable course of action
3. Stakeholder conflict as not all stakeholders are keen on adopting CSR as it may contradict profit maximisation
4. Ethics and CSR are subjective as what people consider to be right or wrong depend on the beliefs and principles held by individuals and society.

Question 25

SWOT analysis

Answer 25

1. SWOT analysis is a simple yet very useful decision-making tool
2. It stands for Strengths, Weaknesses, Opportunities, and Threats
3. It can be used to assess the current and future situation of a product, brand, business, proposal, or decision
4. SWOT analysis considers internal factors (strengths and weaknesses) and external factors (opportunities and threats)

Question 26

Strengths (SWOT)

Answer 26

1. Strengths are internal factors that are favourable compared with competitors
2. e.g. strong brand loyalty, highly skilled workers, good corporate image etc
3. They help the business to better achieve their objectives so they should be developed and protected

Question 27

Weaknesses (SWOT)

Answer 27

1. Weaknesses are internal factors that are unfavourable when compared with rivals
2. e.g. competitive disadvantages
3. Weaknesses are therefore likely to prevent or delay the business from achieving its goals
4. In order to stay competitive, the business needs to reduce or remove its weaknesses

Question 28

Opportunities (SWOT)

Answer 28

1. Opportunities are the external possibilities (prospects) for future development
2. e.g. changes in the external environment that create favourable conditions for a business

Question 29

Threats

Answer 29

1. Threats are the external factors that hinder the prospects for an organization
2. They cause problems for the business
3. e.g. technological breakdowns, product recalls, changes in demographic, price wars, recession, natural disasters, infectious diseases etc

Question 30

Uses of SWOT analysis

Answer 30

1. Competitor analysis (threats posed by a rival or the strengths of a competitor)
2. Assessing opportunities
3. risk assessment
4. Reviewing corporate strategy
5. Strategic planning

Question 31

Pros of SWOT analysis

Answer 31

1. Completing a SWOT analysis can be simple and quick
2. It has a wide range of applications such as reacting to the threat of rivals entering the market
3. SWOT analysis helps to determine the organization’s position int he market and therefore aids the formulation of business strategy for its long-term survival
4. Encourages foresight and proactive thinking in the decision-making process
5. Can help to reduce the risks of decision-making by demanding objective and logical thought processes

Question 32

Cons of SWOT analysis

Answer 32

1. It is rather simplistic and does not demand detailed analysis.
2. The model is static whereas the business environment is always changing so the shelf life of a SWOT analysis is rather limited.
3. The analysis is only useful if decision makers are open about the weaknesses and willing to act upon them e.g. devoting time, people and money to tackling weaknesses and threats.
4. SWOT analysis is not typically used in isolation. Better decisions are made if more information is available so other strategic tools are also used.

Question 33

Ansoff Matrix

Answer 33

1. The Ansoff Matrix is a marketing planning tool which usually aids a business in determining its product and market growth corporate growth strategies.
2. This is usually determined by focusing on whether the products are new or existing and whether the market is new or existing and establishing strategies to achieve sales growth.
3. Consists of Market penetration, Product development, Market development, Diversification

Question 34

Market penetration

Answer 34

1. Selling existing products in existing markets
2. usually to increase market share of current products
3. a low-risk growth strategy
4. Could be by offering more competitive prices or by improving advertising

Question 35

Pros of market penetration

Answer 35

1. The business focuses on markets and products that it is familiar with so market research expenditure can be minimised
2. Safest of the 4 strategies

Question 36

Cons of market penetration

Answer 36

1. Competitors, especially stronger ones, will retaliate to firms trying to take away their customer base and market share. This can lead to aggressive behaviours like price wars which will harm profits
2. One existing markets become saturated, the scope of growth is small

Question 37

Product development

Answer 37

1. Medium-risk growth strategy’s
2. Selling new products in existing products such as McDonald’s adding new products to its menu
3. Tends to rely heavily on product extension strategies to prolong the demand for goods that have reached saturation or the decline stage of their product life cycle.

Question 38

Market Development

Answer 38

1. Medium-risk growth strategy
2. Selling existing products in new markets such as an established product being marketed to a new set of customers
3. Could be done through new distribution channels such as selling the product overseas

Question 39

Diversification

Answer 39

1. High-risk growth strategy
2. Selling new products in new markets
3. However, it could spread risks across the business =
4. Usually uses subsidiaries or parent companies

Question 40

Cons of Ansoff matrix

Answer 40

It only considers 2 factors: product & market. It therefore lacks depth and consideration of other factors that tools such as a SWOT or STEEPLE analysis would offer. So, these tools should be used in tandem to achieve a better holistic judgement. It is too simplistic