Strategic Objectives

Strategic Objectives

1. Unincorporated Organisations

   • Secondary Objectives
     • Achieve Budget Surplus
     • Employee Morale
     • Quick Response Times
     • Quality
     • Market Share
   • Primary Objectives
     • Survive
     • Minimising Risk
     • Maximising Profit
   • Smaller Organisations

2. Unquoted Organisations

   • Primary Objectives
     • Survival
     • Maximise Dividend
   • Secondary Objectives
     • Market Share
     • Quality
     • Quick Response Times
     • Employee Morale
     • Achieving Budget Surplus
   • Shares are hard to sell, easiest way of obtaining a return is to receive a dividend
     • Focusing on the short-term
   • Protection provided by limited liability, due to the shareholders of the organisation investment's
   • Shares are not traded on the stock market

3. Quoted Organisations

   • Secondary Objectives
     • Market share
     • Quality
     • Employee morale
     • Achieving budget surplus
     • Quick response times
   • Primary Objectives
     • Survive
     • Maximise shareholder wealth
   • Maximise Profit
     • Ignores Risk
     • Focuses on the short-term
   • Protection provided by limited liability, due to the shareholders of the organisation investment's

4. Value for Money

   • Secondary Objectives
     • Efficiency
       • Use inputs to maximise output
       • Operating within budget
     • Economy
       • Purchase inputs of appropriate quality at minimum cost
   • Primary Objectives
     • High quality
     • Effectiveness
     • Non-financial

5. Shareholder Wealth Maximisation

   • Investors care about the dividend
     • How much will their shares sell for
   • Investors care about financing plans
     • This will impact shareholder wealth
     • Where is it coming from
   • Investors care about risk management
     • How is risk being managed
   • Investors care about the future
     • Strategic
     • Long-term

6. Profit Based Ratios

   • Earnings per share / Shares in issue
   • Useful as secondary financial objectives
   • Earnings / Shareholder funds
   • If profit targets are being missed, then shareholder wealth maximisation is unlikely to be achieved

7. Risk Based Ratios

   • Not included within the gearing ratio
     • Interest accrued
     • Interest payable
     • Accounts payable
   • Interest Cover
     • How many times over we can pay our interest
   • Measures Financial Risk
     • Impacts shareholder return
   • Gearing
     • Book value or market value
     • Includes short-term and long-term debt
     • Focuses on the principle amounts of debt obligations

8. Non-Financial Objectives

   • Argued that broader social & environmental objectives should be set, monitored & measured
   • Balance Scorecard Approach
   • Effectiveness
     • What causes it
   • Also important in assisting an organisation in their strategic goals
   • Other targets to increase shareholder wealth

9. Integrated Reporting

   • Urges organisations to focus on the value creators
   • Involve reporting on sustainability & environmental issues
   • Should help organisation's make more sustainable decisions to ensure the effective allocation of scarce resources
   • Visible capitals and how the organisation uses them to create value in the short, medium & long-term
   • Wider & long-term focus on the organisation
   • Linkage between strategy, governance & financial performance and the social, environmental & economic context of how the organisation operates
   • Aim is to explain how an organisation creates value over time, the nature & quality of an organisation's relationship with its stakeholders

10. Earnings Growth & Dividends Growth

11. Exchange Rates

12. International Framework

13. Balance Scorecard