Business

Objectives
Case Study
Objectives Of Different
Types Of Business
• Sole trader businesses- not written down or formalised
in any way, but the owners will often have a clear idea
of what they are trying to achieve.
• Partnership organisations - it is important for partners to
agree on the direction their business should take or
future disagreements can cause much time to be wasted
that would be better spent on running the business
effectively.
• Limited companies must state in Memorandum of
Association
 Clear idea of what activities need to be done

Helps to direct, control and review the success of

business activity.

Importance A plan of action helps in achieving the gaols with

Of Objectives
appropriate use of resources.

Strategy needs to be checked in order to see that the

objectives are achieved.

Change in objectives and plan of action needs to be

done over time.
 SMART
Criteria • S – Specific:
• M – Measurable:

for • A – Achievable:
• R – Realistic and relevant:

Business • T – Time-specific:

Objectives
Hierarchy
of
Objectives
 Corporate Aims

VERY LONG-TERM GOALS THAT A CORE CENTRAL PURPOSE OF A

BUSINESS HOPES TO ACHIEVE. BUSINESS’S ACTIVITY IS EXPRESSED
 If clearly
Starting point
communicated
for the entire
they help
set of
develop a sense
objectives on
of purpose and
which effective
direction for the
management is
whole
based.
organisation

Benefits Provide the

framework
Allow an within which
assessment to the strategies
be made or plans of the
business can be
drawn up
 • A statement of the business’s
core aims, phrased in a way to
motivate employees and to
stimulate interest by outside
groups.
Mission • An attempt to condense the
Statement central purpose of a business’s
existence into one statement.
 • Quickly informs groups outside the business
about the central aim and vision
Argument in • Employee motivation
favour of • Guide and direct individual employee
behaviour at work
Mission • Are not meant to be detailed working
Statement objectives, but they help to establish in the
eyes of other groups ‘what the business is
about’
Argument against the
Mission Statement • too vague and general
• based on a public relations exercise to make
stakeholder groups feel good about the organisation
• virtually impossible to really analyse or disagree
with
• often rather woolly (Vague) and general, so it is
common for two completely different businesses to
have very similar mission statements
• Activity 4.2 on page 41
 • they lack specific detail for operational
Problem of decisions and they are rarely expressed
Mission in quantitative terms.

statement and
Aim
Corporate Objective

• based upon the central aim or mission of the business, but they are
expressed in terms that provide a much clearer guide for management
action or strategy.
Common corporate
objectives
• Profit maximisation
• Profit satisficing
• Growth
• Increasing Market Share
• Survival
• Corporate social Responsibility
• Maximization of short term sales revenue
• maximizing shareholder value
 Profit Maximization
LIMITATIONS
• encourage competitors
• seek to maximise sales in order
to secure the greatest possible
market share, rather than to
Producing at that level of output maximise profits.
where the greatest positive • independence and control
difference between total revenue • assess the performance of a
and total costs is achieved business through return on
capital employed
• Priority given to other issues by
the stakeholders
• Negative customer reaction
 achieve enough profit
to keep the owners
happy but not aiming to

Profit satisficing make maximum level of

profit
Growth

measured in terms of sales or value of output

LIMITATIONS

• cash-flow problems
• sales growth might be achieved at the expense of lower profit margins
• larger businesses can experience diseconomies of scale
• lower short-term returns to shareholders
• growth into new business areas and activities – away from the firm’s core
activities – can result in a loss of focus and direction for the whole organisation
Increasing market share
marketing mix of the
retailers will be keen to
business is proving to be
stock and promote the best-
more successful than that
selling brand
of its competitors.

BENEFITS More profit for producer

effective promotional
campaigns are often based
on ‘buy our product with
confidence – it is the brand
leader’
Survival

• survive for the first two years of trading is an important aim for
entrepreneurs. Once the business has become firmly established, then
other longer-term objectives can be established
 • applies to those businesses that
consider the interests of society by
Corporate taking responsibility for the impact
of their decisions and activities on
Social customers, employees,
Responsibili communities and the environment

ty
Maximising short-
term sales revenue
Benefit
managers and
staff

Profit might
fall if sale price
is decreases
 increase the company share
price and dividends paid to
shareholders. These targets
Maximizatio might be achieved by pursuing
n of the goal of prof t maximisation.

Shareholder
s Value Can be achieved by putting the
shareholders interest above that
of the other stakeholders
Relationship between mission, objectives,
strategy and tactics
• Aims and objectives provide the basis and focus for business strategies

• Long-term plans of action of a business that focus on achieving its aims.

• Based on the objectives
- The manager takes important strategic decisions.
- The marketing objective is decided
- difficult to make decision which leads to lack of direction and a means of assessing success.
• Every stage of decision-making – collecting data about options, choosing a strategic option and
reviewing success/failure – is made much more meaningful with specific business objectives to
refer to
 1 Set objectives.

2 Assess the problem or situation.

Stages in 3 Gather data about the problem and possible
decision solutions.

making 4 Consider all decision options.

framework 5 Make the strategic decision.

are
6 Plan and implement the decision.

7 Review its success against the original objectives

 New firm - Movement from
survival to profit making stage
Changes in
Economic changes - Movement
Corporative from Growth to survival
Objectives
Movement from Short term
objective to long term objective
 Corporate culture

Size and legal form of business

Factors that
determine the Public/ Private sector
corporate
objectives number of years the business has been operating

Divisional, departmental and individual objective

Management
by objectives a method of coordinating and motivating all
(MBO) staff in an organisation by dividing its overall
aim into specific targets for each department,
manager and employee
 Employees and managers
achieving more

Benefits of Employees seeing the overall plan

Communicating
Objectives Creating shared employee
responsibility

Managers more easily staying in

touch with employees’ progress
Ethical code a document detailing a company’s
rules and guidelines on staff
(code of behaviour that must be followed by
conduct) all employees
Evaluating ethical decisions

Drawback Benefits
• Increase in cost of Raw material • Less court cases
• Increase in labour cost • Government contracts
• Decrease in Profits • Attract customer
• Decrease in Sales • Attract well qualified employees
• Avoids bad publicity