Organizational Objectives

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:

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.

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

- 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:

Factors affecting corporate objectives:

Changing business objectives:

Reasons:

"To consider" when changing business objectives:

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:

 

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:

 

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.

 

Limitations of Ansoff’s matrix:



https://www.investopedia.com/terms/m/management-by-objectives.asp

https://www.investopedia.com/terms/e/economiesofscale.asp

 

 

Editors

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