Mission Vs Vision Statements
Mission statement: condense the central purpose of an organization’s existence/its core aims into one short paragraph
Vision statements: describes what the organization would like to achieve/accomplish in the long term
Uses | Constraints of these statements |
inform outside groups what the business is about/ stimulate their interests | Vague, woolly, lacking in specific details, virtually impossible to analyze |
Motivate employees | Accused of Public relations exercise |
Inclusion of ethical statements helps to guide and direct individual employee behaviour at work. | |
Aims, objectives, strategies & tactics
Corporate aims: long term goals of the business; occupies the top position in the hierarchy of objectives
Benefits of corporate aims:
- Control, review activity and measure business success
- A starting point for divisional objectives, to plan strategies etc
- Develop a sense of purpose or direction
Divisional/operational objectives: short/medium-term goals usually specific in nature – which must be achieved for an organisation to attain its corporate aims.
SMART objectives: criteria with which business objectives are set.
- Specific: unambiguous, not too general and directly applicable to a business
- Measurable: progress can be easily measured if quantitative targets are set and also makes it clear for the workers how much work should be put in to attain the goal
- Achievable: setting unachievable targets could demotivate employees
- Realistic & relevant: realistic when compared to company’s resources and should be expressed in relevant terms to people who carry out
- Time-specific: time limit helps to plan strategies accordingly and check if a business has met the objective.
Management by objectives: a strategic management model that aims to improve the performance of an organization by clearly defining objectives; agreed to by both management and employees.
Strategy: a long-term plan of action for the whole organization, designed to achieve a particular goal
Tactic: short-term policy or decision aimed at resolving a particular problem or meeting a specific part of the overall strategy
Strategy | Tactics |
e.g. develop new markets abroad | E.g. sell product in different-sized packaging |
Long term | Short to medium term |
Difficult to reverse once made – departments will have committed resources to it | Reversible, but there may still be costs involved |
Taken by directors/ senior managers | Taken by less senior managers and subordinates with delegated authority |
Cross-functional – impacts major departments of the business | Impact often only one department |
Common corporate aims
- Profit maximization: producing at the level of output where the greatest positive difference between total revenue and total costs is achieved
Benefits | Limitations |
Rewards investors | Business performance usually assessed through capital employed |
Supports expansion | Independence and control issues are of more importance to small business owners |
Attracts potential investors | Stakeholder priorities e.g. job security |
| | High short term profits attracts competitors |
| Difficult to achieve this since constant change in price may result in negative consumer reactions |
- Profit satisficing
- Growth: in terms of sales/value of output
Benefits | Limitations |
Larger firms will be less likely to be taken over | Rapid expansion lead to cash-flow problems |
Larger firms benefit from economies of scale | Sales growth achieved at the expense of lower profit margins |
Businesses that do not attempt to grow may cease to be competitive | Larger businesses can experience diseconomies of scale |
Businesses that do not attempt to grow will lose their appeal to new investors | Using profits to finance growth can lead to lower short-term returns to shareholders |
- Increase market share
Benefits
- Retailers keen to stock the bestselling brand
- Profit margins offered to retailers may be lower than competing brands
- Effective promotional campaigns (market leader status)
- Survival: for most startups or businesses during economic crisis
- Maximize shareholder value: can be done by achieving profit maximization
- Maximize short term sales revenue: not profitable if sales revenue is increased by reducing prices
Conflict between corporate objectives:
- Growth vs profit
- Short vs long term
- Stakeholder conflict
Factors affecting corporate objectives:
- Corporate culture
- status /size of business
- public/private sector organizations
- well-established/startups
Changing business objectives:
Reasons:
- Startups have survived, now looking to maximize profits and increase sales
- Economic recession and rivals may result in survival as the main objective
- Important manger responsible for international expansion may leave hence making the business focus on domestic markets until replacement
"To consider" when changing business objectives:
- What’s the risk of (not) changing business objectives to fit the new situation?(the cost to employees and business)
- How to manage the business once new strategies are adopted to achieve the changed objectives?
- Is the internal/external situation so significant that a change is actually necessary?
Ethics in Business
Ethical objectives
Ethics: moral guidelines that determine decision-making
Ethical code (code of conduct): a document detailing a company’s rules and guidelines on staff Behavior; must be followed by all employees
Costs | Benefits (of ethical decisions) |
Using ethical/fair trade suppliers adds to business costs | Good publicity, increased sales |
Pay fair wages in a low wage country add to business costs, reduce competitiveness against companies that exploit workers | Well qualified staff is attracted |
Limiting ads to reducing pester power result in lost sales | Awarded government contracts |
Not taking bribes to secure business contract results in loss | Cost of fines from expensive court cases avoided |
Not fixing prices with competitors leads to less prices and profit | Attracts ethical customers as this group is growing |
Corporate Social Responsibility: business which takes interests of other stakeholders apart from shareholders into consideration, by accepting responsibility for the impacts of their activities on employees, customers, environment
Stakeholders: people who can be affected by, therefore have an interest in the business’s actions.
Benefits | Costs (of CSR) |
Good publicity, attracts customer, encourages loyalty from existing customers | Short run costs increase e.g. anti-pollution equipment, fair wage levels, not exploiting vulnerable groups in ads |
Goodwill of other stakeholder may result in better relationship with employees, suppliers etc | social backlash if the business just claims to follow CSR |
Attracting best employees | During recession consumers may not really care how product is made rather how cheap it is |
Bad publicity and pressure group activity is unlikely to rise | Shareholder may not accept lower short term profits |
High long term profitability resulting from all factors above | Business costs and losses if rivals don’t adopt CSR |
Changing attitudes towards CSR:
- Due to increased influence of pressure groups because of social media
- Laws more strict regarding wages and legal responsibilities for a product
- Growing environmental concerns like climate change and advocation of environmentally sustainable growth
Social audit: a report on the impact a business has on society. E.g. pollution levels, health and safety record, sources of supplies, customer reviews, employee benefit schemes.
Benefits | Costs (of social audit) |
Can improve company image, maybe used to boost sales | Doesn’t really prove one is socially responsible |
Sets targets for improvement in CSR | Time and money needs to be spent. Is it necessary if not legal? |
Identifies what CSR is being met and what hasn’t yet been achieved | Customers interested in cheap goods not if they’re CSR produced |
| | Won’t really be taken seriously |
SWOT Analysis & Ansoff's matrix
SWOT analysis: a form of strategic analysis to identify internal strengths & weaknesses, external opportunities & threats that influences business decisions, future direction and setting objectives and adopting strategies.
Limitations of SWOT:
- subjective
- not quantitative hence cost of overcoming weakness cannot be compared with potential profit from pursuing an opportunity.
Strength | Weaknesses |
useful to gain competitive advantage. Identified by internal audit undertaken by specialist management consultants. E.g. - loyal, well-trained workforce
- effective management
- major product ranges, quality, new
- Location
- Marketing expertise
- Any aspects that adds value to product
| e.g. - ageing equipment
- Spare (if not used, may result in additional business costs)/ low production capacity
- Damaged reputation
- (opposite of everything in strengths)
|
Opportunities | Threats |
identified by external audit of the market business operates in and its competitors e.g. - expansion of export markets
- new technology
- low interest rates increasing consumer demand
- Market vacant by an ineffective competitors
- New market: internet
- New market segment identified
- Mergers, joint ventures & strategic alliances
| Threats: market conditions, business and economic environment.
E.g. - globalization driving down prices
- New rival
- Rivals have superior access to distribution channels
- Price wars
- changes in the law regarding sale of their products
- economic policy change, taxation
- Rival has new, innovative product
|
Ansoff’s matrix: model used to show the degree of risk associated with the four growth strategies of: market penetration, market development, product development and diversification.
Market penetration: increase market share in existing markets with existing products. Less risky, fewer unknowns, but less prices may reduce the profit margin for the whole industry.
Product development: the development and sale of new products or new developments of existing products in existing markets, provides unique identify for a business, e.g. diet Pepsi
Market development: strategy of selling existing products in new markets. E.g. health tonic turned into sport drinks, export overseas, sale in new market segments.
Diversification: process of selling different, unrelated goods or services in new markets.
- Related (backward/forward vertical integration) is less risky than unrelated diversification
- Reduces business-portfolio risk
- Most risky
Limitations of Ansoff’s matrix:
- only considers 2 factors unlike SWOT/STEEPLE
- recommendations based on this matrix tend to lack hard evidence
- doesn’t provide detailed marketing options
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