business objectives

business objectives

1. an objective is simply a target that is measurable and has a given time scale

   • a good objective should be
     • Specific
     • Measurable
     • Achievable
     • Realistic & relevant
     • Time-specific
     • SMART
   • setting and the pursuit of objectives help a business coordinate its objectives
     • provides goals for personnel at all levels
       • aids managers in coordinating activity son all employees

2. Hierarchy of objectives

   • individual targets
     • departmental objectives
       • divisional objectives
         • corporate objectives
           • mission
             • aim
           • long term goals a business hopes to achieve
   • corporate objectives
     • CSR as a biz objective
       • CSR is a concept that applies to businesses that consider the interests of society by taking responsibility for the impact of their decisions and activities on customers, employees, community and the environment
         • why is there a trend for CSR as a business objective?
           • bad publicity for business activity that is deemed as damaging to stakeholder groups
           • influential pressure groups are forcing businesses to reconsider they approach to decision making
           • by law; minimum wage, health and safety laws, EU laws regarding discrimination, etc
           • consumers are reacting positively to businesses that act socially responsible
           • Peter Ducker- businesses have an objective of public responsibility and want to behave in these ways
     • Profit Maximization
       • all stakeholders are working for reward.
         • profits are necessary to reward investors & to finance further growth
         • profits are necessary to persuade entrepreneurs or business owners to take risks.
       • producing at the level of output where the greatest positive difference between total revenue and total costs is achieved
       • argument is support of this objective it seems rational to seek maximum profit from a given venture and not doing so is seen as a missed opportunity
       • focus on high short term profits may encourage competitors to enter the market and jeopardize the long term survival of the business.
         • not an objective of smaller businesses as these are more concerned with ensuring that leisure time is safeguarded and may wish to focus on retaining control and independence
           • business analysts mostly asses business performance through ROCE rather than through total profit figures
             • preferred objectives of owners and shareholders, but other stake holders may have different objectives.
               • in practice, it is difficult to assess whether the point of PM has been reached and constantly changing prices or changes to output will result in negative consumer reaction
     • Profit Satisficing
       • aiming to achieve enough profit to keep owners happy but not aiming to work flat out to earn as much profit as possible
         • common amongst small business owners who wish to live comfortably but not to work long hours.
           • once satisfactory profit level has been achieved the owners consider that others aims take priority
     • growth
       • usually measured in terms of sales or value of output
       • large business have less risk of being taken over and also benefit from EOS
         • managers will be motivated to see the business achieve its full potential , from which they may gain higher salaries and fringe benefits
           • argues that a business that does not attempt to grow will cease to be competitive and will gradually lose appeal to new investors
       • rapid expansion can lead to cash flow problems
         • sales growth might be achieved at the expense of lower profit margins
           • larger businesses can experience diseconomies of scale.
             • using profit to finance growth (retained earnings) can lead to lower short term returns to shareholders
               • growing into new business areas and activities can result in a loss of focus & direction from the whole org.
     • increasing market share
       • usually related to growth , it is possible for an expanding business to suffer from market share reductions if the market is growing at a faster rate than the business
       • this indicates that the marketing mix of the biz is proving to be more successful than that of its competitors
       • brand leader ( business with high market share)
         • retailers keen to stock and promote the best selling brand
           • profit margins offered to retailers may be lower than competing brands as the shops will be keen to stock it= more profit for the producer
             • effective promotional campaigns are based on(usually)- "buy out product with confidence it is the brand leader"
     • survival
       • key objective of most start ups
       • once the business has firmly established, other long term objectives can be established
     • maximizing short term sales revenue
       • benefits management and staff when salaries and bonuses are dependent on sales revenue levels
         • if, however, increases sales are achieved by reducing prices the actual profit might fall
     • maximizing shareholder value
       • apply to Plc.
       • directs management action towards taking decisions that wouldd increase company share price and dividends paid to shareholder.
         • these targets might be achieved by pursuing the goal of profit maximization.
       • puts shareholders interest above other stakeholders

3. mission statement

   • a statement of the business's core aims, phrased in a way that motivates employees and stimulates interest by outside groups
   • corporate objectives exist to turn the mission into, specific and time related targets
     • business has to decides the most effective ways in which it can achieve targets which is when business uses a strategy
       • strategy is a long term plan to achieve the business's objectives
       • the strategy needs to be put in action
         • tactics are the short term actions needed to implement a strategy
   • arguments in favor
     • quickly informs groups outside the business what the central aim and vision are
       • motivate employees
       • often include moral statements/values to be worked towards, thus can help guide & direct individual employee behavior at work
         • worthwhile for public relations
       • not meant to be detailed, but can help inform outside groups what the business is about
   • arguments against
     • too vague & unspecific= tell little about the biz or its future plans
       • based on PR exercise to make stakeholders feel good about the organization
         • nearly impossible to analyze or disagree with
           • do not tell managers what decisions to take & how to take them
   • important to communicate this
     • features in published accounts
     • appear in corporate plan of the biz
     • company newsletter/magazine
     • advertising slogans

4. importance of business objectives

   • objectives are simply what business wishes to achieve
     • provides a focus for all decisions= employees will know what they have to achieve and can make adequate decisions about the resources to use
     • motivates employees by setting a target
       • provides as a measure of control as progress can be reviewed against targets

5. and decionmaking

   • effective decision making requires clear objectives
     • without objectives, business can not decide on strategies
   • stages
     • setting objectives
       • essential as success can only be measured agains the set objectives
       • asses problem/situation
         • gathering data about the problem and possible solutions
           • consider all strategic decision options
             • make the strategic decision
               • implement the strategic decision
                 • review success against set objectives

6. how objectives might change overtime

   • can be internal change or external change in objectives
     • newly formed businesses may have satisfied 'survival' objective and now wish to pursue objectives of increased profits or growth
       • competitive & economic environment may change & increased rivalry or economic recession may force business to change objectives from growth to survival, for example
         • short term objective of growth in sales or market share may be adapted to long term objective of maximizing profits from higher level of sales
   • factors that determine corporate objectives
     • corporate culture-- the code of behavior & attitudes that influence decision making style of the managers and other employees. It is about how people in the organization perform, deal with others, etc
       • size & legal form-- small businesses have profit satisficing as their objective. Large businesses may be more concerned with growth to increase power and status of managers= result of divorce of ownership & control
         • public or private sector business -- state owned firms don't tend to have profit as an objective, although their objectives can vary greatly but usually the objectives of such bizs in public sector are the quality of services
           • number of years business has been operating-- similar to how objectives wary between established and new businesses
             • divisional, department & individual objectives--- once corporate objectives have been set they need to be broken down into specifics targets for separate divisions, departments and ultimately hr individuals.
               • divisions objectives must be set by senior managers to ensure that
                 • coordination between all divisions
                   • consistency with cooperate objectives
                     • adequate resources are provided to allow for the successful achievement of the objectives
             • ethics
               • ethical behavior is though too be morally correct, and not necessarily the most profitable behavior.
                 • growing acceptance of CSR has led to businesses adopting an ETHICAL CODE to influence their decision making
                   • ETHICAL CODE(OF CONDUCT)-- document detailing a company's rules & guidelines on staff behavior that must be followed by all employees
                     • sometimes objectives of the business can encourage unethical behavior
                       • the way in which employees behave and take decisions in ethical dilemmas should be explained and covered in the ECOC.
                         • evaluation
                           • adopting & keeping to strict ethical code of conduct in decision making can be very costly in the short term
                             • using ethical & fairtade suppliers can add to business's costs
                               • not taking bribed to secure business contacts can mean failure to secure significant sales
                                 • limiting advertising of toys and other child related products to just adults to reduce 'poster power' may result in lost sales
                                   • accepting that it is wrong to fix prices with competitors might lead to lower prices & profits
                                     • paying fair wages even in low wage economies raises wage costs and may reduce firm's competitiveness again rival firms that exploit workers
                           • substantial benefits in the long run
                             • avoid potentially expensive court cases and heavy fines
                               • bad publicity can lead to lost consumer loyalty and long term reduction in sales
                                 • attract ethical consumers and as pressure for CSR increases, group of such consumers increases as well
                                   • attract well qualifies staff may be attracted to work for ethical companies with socially responsible and ethical policies.

7. MBO-- method of coordinating and motivating staff in an organization by dividing its overall aims into specific targets for each department, manager and employee

   • very effective way of delegating authority and motivating staff ONLY if the process is undertakes after discussion and agreement with personnel at each level
     • accords with McGregor's Theory Y approach if agreement and discussion with those involves
     • theory X approach if no discussion and simply imposes= low motivation

8. communicating objectives

   • employees cannot contribute to achieving objectives if they are not even aware of what the objectives are
   • if employees are communicated with and involved in the string of individual target then:
     • management and employees can achieve more as they have greater understanding of individual and company objectives
       • employees seeing the overall plan and understanding how there individual goals fit into the business;s objectives
         • creates shared employee responsibility by interlinking individual goals with other individuals in the company
           • managers can easily stay in touch with workers as they're regular monitoring the employees work and can easily reinforce or train to keep deadlines on track