Unit 1.

3: Business Objectives

Vision statement and mission statement

In practice, the vision statement and the mission statement may overlap or one may be a part of the other. However, there are
differences:

 A mission statement is what the business does, who it serves, how it adds value to customers and stakeholders.
 The vision statement outlines an organizations aspiration in the distant future by defining its purpose, social aims
or broader goals, such as health improvements.

The mission statement

Mission statements define an organisation’s purpose and primary objectives, stating ‘who we are and what we do’. They act
as a whole philosophy for the firm. They may not have quantifiable targets, but aim to inform customers, employees and
other stakeholders about the firm’s objectives.

The vision statement

The vision statement is a general statement on where the business wishes to be in the future and the values it holds; what it
wants to become and what it wants to achieve. The vision statement should make employees feel proud, motivated and
excited to part of the organisation’s journey.

Aims, objectives, strategies and tactics, and their relationships

Aims and objectives allow businesses to measure success by comparing actual performance against targeted performance.
Aims and objectives drive decision-making and provide targets that aim to motivate staff.

Strategic and tactical objectives

Strategic objectives are the long-term goals of a business. Tactical objectives are short term goals that affect a section of
the organization.

Strategic Objectives:

1. Growth of the business

2. Profit: Profit maximisation
3. Protecting and maximising shareholder value is earning a profitable return for shareholders in a sustainable way
4. Market standing: Refers to the extent to which a business has presence in the industry.
5. Image and Reputation: A bad image, can turn a customer against a firms’ products and services and tarnish the
corporate image of the business.
6. Increased Market Share: measured by the firms’ sales revenue as a percentage of the industry’s total sales.

Tactical objectives:

1. Survival: new businesses are likely to encounter a number of problems such as lack of brand recognition, a small
customer base and intense rivalry from existing firms.
2. Sales revenue maximisation: new businesses strive to maximise their sales revenue to establish themselves in the
market place.

The planning process

The first, the most basic and the perpetual goal of any firm is survival. Only after this has been secured can it develop
significant strategic aims, such as:

 increased profit
 greater market share
 elimination of competition
 possible takeovers
 international expansion
 improving corporate image
 improving quality.
Management by objectives
Objectives set in this way need to be SMART or SMARTER.

SMART objectives

 S = Specific, clear and easily defined.

 M = Measurable and quantifiable targets and tasks.
 A = Achievable using existing resources, so objectives should be realistic.
 R = Relevant and must not conflict with other objectives.
 T = Time-bound (within a specified period of time) allowing measurement.

SMARTER objectives

A business can make objectives SMARTER by ensuring it can:

 Extend the target to account for new circumstances and/or make them Exciting.
 Reward the achievement of objectives and/or record the results.

Changes in internal and external environments

Aims and objectives are not fixed. They respond to changes in internal and external environments, which offer opportunities
or pose threats.

The internal environment

This is the part of a business under its control and includes functions such as human resources and marketing. The drivers to
change in the internal environment may be negative or positive.

Negative changes:

 high staff turnover and/or absenteeism

 falling quality standards
 loss of productivity and falling motivation
 liquidity problems
 increasing costs

Negative changes are a threat to the business.

Positive changes:

 recruiting talented individuals

 improving productivity and quality
 successful innovation
 exceeding performance measures

Positive changes should result in new business activity and strategic objectives.
The external environment

The external environment is the ‘world beyond the firm’ and is not controllable by it. It includes the political, economic,
social and technological (PEST) changes that impact on the business

Negative changes:

 recession
 new competition
 new products from competitors
 new laws and regulations that increase the firm’s costs
 changes in social behaviour and trends decreasing demand for a firm’s products

These are threats to the business. Although the firm cannot change its external environment, it may alter its operations to
reduce its effects.

Positive changes:

 economic booms
 new technologies reducing production costs
 changes in consumer behaviour favouring the firm’s products
 lower taxes

Changing external factors should lead the business to review its corporate objectives and strategy.

Ethical objectives and corporate social responsibility

The distinction between ethical objectives and corporate social responsibility (CSR)
CSR is an umbrella term that covers the firm’s ethical objectives, but there is a distinction:

 Ethical behaviour is about managing the behaviour of individual employees and other stakeholders.
 CSR is focused on the behaviour of the organisation as a whole as opposed to the actions of individuals within it. It
is about the positive role of the organisation in its environment and its social impact.

Ethical objectives are the moral principles and values underpinning human behaviour. Morals are concerned with ‘right’ or
‘wrong’. Business ethics are moral principles that underpin business behaviour.

Setting ethical objectives

Ethical businesses

Setting ethical objectives requires organisations to apply ethical values to all their tactical and strategic actions. An ethical
business:

 applies moral principles to all interactions with stakeholders, e.g. the treatment of employees and customers
 goes beyond merely complying with laws and regulations
 excludes behaviour that, although legal, conflicts with its ethical policy.

Adopting an ethical approach

Benefits

 improved employee motivation

 reduced labour turnover and improved recruitment
 positive consumer reaction, enhancing brand value (e.g. fair trade)
 attracting investors who avoid firms that pollute the environment or support oppressive regimes

Costs
  using ethically sourced raw materials may raise costs and make a firm less price competitive
 suppliers may not hold the same ethical views as the firm, leading to conflict
 lower profit margins if higher costs cannot be passed on to the consumer
 not all stakeholders will be keen on an ethical approach if it affects their interests, e.g. if it reduces dividends for
shareholders.

The role of corporate social responsibility (CSR)

Firms have responsibilities to various stakeholders. By being socially responsible, firms hope to be seen as:

 good employers
 responsible capitalists
 preserving a good corporate image
 trustworthy
 reducing the risks of legal actions.

Firms may act ethically when profits are high, but change their behaviour when under economic pressure.

Changes in a firm’s CSR over time

A firm’s attitude to CSR is formed by internal and external factors.

Internal factors

 A business is made up of individuals who are also consumers and citizens. The business must reflect the views and
norms of employees, who are influenced by the society in which they live.
 Corporate cultures evolve over time, with staff joining and leaving the business.
 Profitability and cash flow influence the extent of CSR.
 Shareholders may elect new managers who reflect their views.

External factors

 Government laws and regulations constrain business behaviour.

 The state of the economy influences how much firms are prepared to spend on improving their socially responsible
image.
 Pressure groups may force changes to business practices by lobbying governments.
 Firms benchmark their behaviour against their competitors.
 Social attitudes change over time.