2. Unit 1.3 Organizational Objectives

4. Decision making is the core role of management Decision making is the core role of management Businesses ask themselves 4 key questions: Businesses ask themselves 4 key questions: 1.Where are we now? 2.Where do we want to be? 3.How do we get there? 4.How do we know we are there?

5. Businesses of any size can benefit from setting clear objectives. In small businesses, such as sole traders, these objectives are often not written down or formalized in any way, but the owners will often have a clear idea of what they are trying to achieve. In partnerships, it is important for partners to agree on the direction their business should take to avoid future disagreements.

6. Limited companies must state the overall objectives of the business in their Memorandum and Articles of Association, but this often lacks much strategic detail. This chapter focuses on the importance of business objectives, the different forms that these can take, including ethical and social targets, and how they can be used to direct the work of all staff in an organization.

7. Organizational Objectives Serve to guide a business and give it a sense of direction Serve to guide a business and give it a sense of direction Will be formed by the various stakeholders of a business (Unit 1.4) Will be formed by the various stakeholders of a business (Unit 1.4) Answer the key question: Answer the key question: “ Where do we want to be? ”

8. 3 Key Functions of Organizational Objectives To Control To Control –objectives can help control a firm ’ s plan; they set the boundaries for business activity To Motivate To Motivate –objectives can help inspire managers and employees to reach a common goal To Direct To Direct –objectives provide an agreed and clear focus for all individuals and departments of an organization

9. The Importance of Objectives They serve to give businesses a sense of direction, purpose and unity. This can help to unify and motivate management and workers. They form the foundation for business decision- making. Organizations can then create strategies to achieve these goals. They can help to encourage strategic thinking i.e. planning for the long-term. They provide the basis for measuring and controlling the performance of the workforce, the management and the business as a whole.

10. Effective Business Objectives S- Specific:  Objectives should focus on what the business does and should apply directly to that business  Example: a hotel may set an objective of 75% bed occupancy over the winter period  The objective is specific to this business

11. Effective Business Objectives M- Measurable:  Objectives that have a quantitative value are likely to prove to be more effective targets for directors and staff to work towards  Example: to increase sales in the south-east region by 15% this year

12. Effective Business Objectives A- Achievable:  Objectives must be achievable.  Setting objectives that are almost impossible to achieve in a given time will be pointless. They will demotivate staff who have the task of trying to reach these targets.

13. Effective Business Objectives R- Realistic and Relevant:  Objectives should be realistic when compared with the sources of the company and should be expressed in terms relevant to the people who have to carry them out.  Example: informing a factory cleaner about ‘increasing market share’ is less relevant than a target of reducing usage of cleaning materials by 20%.

14. Effective Business Objectives T- Time Specific:  A time limit should be set when an objective is established.  Example: by when does the business expect to increase profits by 5%?  Without a time limit it will be impossible to assess whether the objective has actually been met.

15. Levels of Business Objectives Corporate Objectives Deals with the whole organization’s goals (i.e. business survival, growth and profit maximization) Departmental Objectives Specific objectives for the various sections of a business. Individual Objectives Targets that are set for and/or by individual employees.

17. Vision Statements Outlines a business’ aspirations (where it wants to be) in the distant future. Provide a sense of direction in the long term -- they provide the means to the future. Is a description of the business as you want it to be. In dictionary terms it is, 'a mental image produced by the imagination'. It involves seeing the optimal future for the business, and vividly describing this vision. The description might include HOW things will be, WHERE, WHO with, WHAT you'll be doing and HOW you'll feel.

18. Mission Statements A statement of the business’ core aims, phrased in a way to motivate employees and to stimulate interest by outside groups Is the definition of the 'special assignment' being undertaken by the business. It is likely to cover the customer groups that are being served, as well as (perhaps more importantly) the customer needs that are being met. Simple declaration that broadly states the underlying purpose of an organization’s existence.

19. Mission Statements Mission statements guide the organization in its day-to-day operations A good Mission Statement normally contains what is important to the organization and its purpose. However, it is often intertwined with a vision to guide its future.

20. Important Differences Vision statement addresses the question ‘what do we want to become?’ whereas the mission statement deals with the question ‘what is our business?’ Vision statements are focused on the very long run, whereas mission statements can focus on the medium or long term. Mission statements are updated more frequently than vision statements

21. Important Differences Vision statements do not have to have actual targets that must be realized (this is the purpose of setting mission statements). Instead, vision statements allow people to see what could be. The mission statement tends to outline or highlight the values of the business, i.e. its beliefs and guiding principles. This sets the tone for how managers and employees behave on a day-to-day basis.

22. The Starbucks Mission Statement Establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow. The following six guiding principles will help us measure the appropriateness of our decisions: Provide a great work environment and treat each other with respect and dignity.great work environment Embrace diversity as an essential component in the way we do business. Apply the highest standards of excellence to the purchasing, roasting and fresh delivery of our coffee.coffee Develop enthusiastically satisfied customers all of the time. Contribute positively to our communities and our environment.communitiesenvironment Recognize that profitability is essential to our future success.

23. College offering IB and A Level qualifications – ‘To provide an academic curriculum in a caring and supportive environment’. BT – ‘To be the most successful worldwide telecommunications group’. Nike, Inc. – ‘To bring inspiration and innovation to every athlete in the world’. Microsoft – ‘To enable people and businesses throughout the world to realize their full potential’. Google – ‘To organize the world’s information and make it universally accessible and useful’.

24. "To be a leading entity to provide training, knowledge and consulting services all over the world in the fields of self development and human resources development for individuals and business societies." "Within ten years, support and process ten million risk and error free investment transactions per year for a million customers"

26. Mission vs. Vision Stmts. http://www.youtube.com/watch?v=b2MyaR 0gMo0 http://www.youtube.com/watch?v=b2MyaR 0gMo0

27. Vision and Mission Statements Exercise

28. Mission Statement Talks about HOW you will get to where you want to be. Defines the purpose and primary objectives related to your customer needs and team values.

29. Mission Statement It answers the question, “What do we do? What makes us different”

30. Vision Statement Clarity and lack of ambiguity: Describing a bright future (hope); Memorable and engaging expression; realistic aspirations, achievable; alignment with organizational values and culture

31. Mission Statement Talks about the present leading to its future.

32. Vision Statement Where do we want to be going forward? When do we want to reach that stage? How do we want to do it?

33. Vision Statement WHERE you want to be. Communicates both the purpose and values of your business

34. Mission Statement It lists the broad goals for which the organization is formed. Its prime function is internal, to define the key measure or measures of the organization's success and its prime audience is the leadership team and stockholders.

35. Mission Statement May change, but it should still tie back to your core values, customer needs and vision.

36. Mission Statement What do we do today? For whom do we do it? What is the benefit? In other words, Why do we do what we do? What, For Whom and Why?

37. Vision Statement It answers the question, “Where do we aim to be?”

38. Vision Statement It should remain intact, even if the market changes dramatically, because it speaks to what you represent, not just what you do.

39. Mission Statement Purpose and values of the organization: Who are the organization's primary "clients" (stakeholders)? What are the responsibilities of the organization towards the clients?

40. Vision Statement Talks about your future.

41. Vision Statement It lists where you see yourself some years from now. It inspires you to give your best. It shapes your understanding of why are you working here

42. Question 1.3.1 Vision and Mission Statements

43. Vision and Mission Stmts. “To be the most successful premium manufacturer in the industry” – BMW “The company exists to benefit and refresh everyone it touches” – Coca Cola “To organize the world’s information and make it universally accessible and useful” – Google “Creating the finest ice cream” – Haagen Dazs “To solve unsolved problems innovatively”- Mary Kay Cosmetics “We work to help people and businesses throughout the world realize their full potential” – Microsoft “Connecting people has always been, and continues to be, our reason for business” – Nokia “To make people happy” – Walt Disney

44. 1.Define the term “mission statement” Mission statement refers to the declaration of an organization’s overall purpose, such as Nokia’s “connecting people…”. It forms the foundation for setting the objectives of a business.

45. 2. Using the examples given, examine the role of vision and mission statements in business organizations. The role of vision and mission statements in a business organization includes: To have a clear purpose, ie. what the business is trying to achieve Outlines the organization’s values States the underlying purpose of an organization’s existence Serve to unify all people and corporate cultures within the workforce

46. Aims Objectives Long term goals of an organization Vague Unquantifiable statements Serve to give a purpose to the general direction of an organization Often expressed in a mission statement Short term goals of an organization More specific Quantifiable / measurable statements

47. OBJECTIVES Short term goals of an organization

48. AIMS Long term goals of an organization

49. AIMS Vague and Unquantifiable Statements

50. OBJECTIVES More specific Quantifiable / measurable statements

51. AIMS Serve to give a purpose to the general direction of an organization

52. Aims and Objectives http://www.youtube.com/watch?v=rnrBFgm 3Bzshttp://www.youtube.com/watch?v=rnrBFgm 3Bzs

53. Exam Tip! Students often misuse the terms ‘aims’ and ‘objectives’ opting to use the words interchangeably. This reveals a lack of understanding and application of these concepts. Remember, the main difference between aims and objectives is the time scale; with a longer time frame for corporate aims. Another difference between the two concepts is that objectives tend to be more specific whereas aims may be quite vague.

54. Objectives Short term Long term Tactics – are short term ways that firms can use to achieve their aims and objectives Tactical Objectives (Operational Objectives or Secondary Objectives) Strategy – refer to any plan or scheme to achieve the long term aims of a business Strategic objectives or primary objectives “ How do we get where we want to be? ”

55. Levels of strategy that a business can adopt: Operational strategies Day to day methods used to improve the efficiency of an organization Aim to achieve the tactical objectives of a business Generic strategies Affect the business as a whole Looks at ways in which a business can gain a competitive advantage in order to meet its goals Corporate strategies Aimed at the long term objectives of a business Achieve the strategic objectives of an organization

56. Tactical Objectives Short term objectives that affect a segment of the organization, such as a department Short term objectives that affect a segment of the organization, such as a department They refer to specific goals that guide the daily functioning of certain operations that are in line with the primary objectives of the business They refer to specific goals that guide the daily functioning of certain operations that are in line with the primary objectives of the business Short term objectives tend to refer to targets set for the next 6-12 months Short term objectives tend to refer to targets set for the next 6-12 months

57. Tactical Objectives Survival Survival - new and established business are likely to encounter a number of problems such as limited recognition by customers or intense competition from existing firms. Hence, survival becomes a key priority Sales Revenue Maximization Sales Revenue Maximization - maximize sales to establish themselves in the marketplace

58. Strategic Objectives Long term aims of a business organization Long term aims of a business organization (i.e. targets for the next few years) Profit Maximization Profit Maximization Growth Growth Image and Reputation Image and Reputation Market Standing Market Standing

59. Strategic Objectives Profit maximization Profit maximization –Profit = Total Revenue - Total Costs –Profit acts as an incentive for entrepreneurs to take risks in setting up and running a business –Short-term profit maximization goals – where businesses maximize their profits during busy periods in order to survive during the off-peak periods –Long-term profit maximization goals – develop corporate strategies to achieve the organization ’ s aims; greater benefits for the owners, employees, suppliers and customers

60. Strategic Objectives Growth Growth –Usually measured by an increase in sales or by market share (the percentage of the industry ’ s sales made by the business) –Essential to business survival –Failure to grow may result in a loss in competitiveness

61. Strategic Objectives Benefits of Growth include: Economies of Scale Economies of Scale –Larger firms are able to enjoy lower average costs of production, such as being able to borrow money from banks at a lower cost. –Having lower costs helps a firm to improve its price competitiveness. Market Power Market Power –By being larger, the business is able to enjoy more monopoly power such as being able to charge higher prices. Reduced Risks Reduced Risks –Through diversification can help to reduce the risks of doing business.

62. Strategic Objectives Image and reputation Image and reputation –Business may aim to enhance their image and reputation –Businesses are delivering better levels of customer service, better facilities, after sales care etc. Market Standing Market Standing –Refers to the extent to which a firm has presence in the marketplace –Example: Microsoft has high market standing for being number one in the computer software industry; Wal- Mart – world ’ s largest retailer

63. Exam Tip! Students should insure that they understand the link between aims, objectives and corporate strategy: Aim state what an organization wants (e.g. to become the number one supplier of a product) Aim state what an organization wants (e.g. to become the number one supplier of a product) Objectives state what an organization needs to achieve in order to get what they want (e.g. increase in market share) Objectives state what an organization needs to achieve in order to get what they want (e.g. increase in market share) Strategies are the actions that facilitate an organization to meet its objectives (e.g. expanding into overseas markets) Strategies are the actions that facilitate an organization to meet its objectives (e.g. expanding into overseas markets)

64. Question 1.3.2 Lenevo

65. Reasons could include: Provides a focus for its staff Can be used to measure the performance of the business Informs strategic planning

66. Reasons (barriers) could include: Conflict, e.g. “ accuracy and truth seeking ” might limit Lenovo ’ s ability to earn high profits. Alternatively, shareholders might demand high dividends, but management seek to invest profits for the long term.

67. Reasons (barriers) could include: Culture clash, e.g. compatibility of Chinese and American cultures. Financial constraints, e.g. sponsorship could harm cash outflow in the short term; any benefits are only reaped in the long run.

68. Ethical Objectives  Ethics are the moral principles that guide decision-making and strategy  Morals are concerned with what is considered to be right or wrong, from society’s point of view  Business ethics are the actions of people and organizations that are considered to be morally correct

69. Ethical Objectives  Ethical business is likely to be responsible for its treatment towards its workers, customers, shareholders and the natural environment  Socially responsible actions, such as treating and paying employees fairly, would be considered as being ethical

70. Other Examples of Ethical Objectives  Reducing pollution by using more environmentally friendly production processes  Increased recycling of waste materials  Disposal of waste in an environmentally friendly manner  Offering staff sufficient rest breaks during their work shift  Fairer conditions of trade with less economically developed countries

71. Examples of unethical business behavior include:  Financial dishonesty  Environmental Neglect  Exploitation of the workforce  Exploitation of suppliers  Exploitation of consumers

72. Advantages of Ethical Behavior  Improved corporate image  Increased customer loyalty  Cost cutting  Improved staff motivation  Improved staff morale

73. Ways in business meet its social responsibilities  Providing accurate information and labeling  Active community work  Having consideration for the environment  Adhering to fair employment practices

74. Limitations of Ethical Behavior  Compliance costs High costs of acting ethically High costs of acting ethically  Lower profits If compliance costs cannot be passed onto the consumer in the form of higher prices If compliance costs cannot be passed onto the consumer in the form of higher prices Ethical dilemma for a business exists when ethical decision-making involves adopting a less profitable course of action Ethical dilemma for a business exists when ethical decision-making involves adopting a less profitable course of action  Stakeholder conflict Managers may be pressured into pursuing goals other than ethical ones Managers may be pressured into pursuing goals other than ethical ones

75. Question 1.3.3 McDonald ’ s versus Burger King

76. Define the meaning of ethical business behavior in the context of the case study. Ethical business behavior means that McDonald ’ s and Burger King operate in a moral manner, rather than acting purely for commercial gains. Ethical actions, such as improving the wellbeing of children or using humanely-sourced meat, would be considered as being ethical and socially responsible behavior.

77. Discuss with reference to the case study whether acting ethically can provide McDonald ’ s and Burger King with commercial and competitive advantages Whether acting ethically can provide McDonald ’ s and Burger King with commercial and competitive advantage will depend on the relative strengths of taking such action. Potential advantages of such behavior include: Easier to recruit staff and improved staff retention since employees feel that they work for to a socially responsible employer Greater employee satisfaction, morale and motivation Improved corporate and brand image; particularly important since the image of fast food chains have been tarnished by health concerns such as obesity

78. Potential advantages of such behavior include: Ethical behavior is a potential source of differentiating products and services from rival firms, thereby possibly promoting customer loyalty Local communities are more likely to welcome the companies and pressure groups are less likely to oppose them Ultimately, these factors can, in the long run, lead to improvements in competitiveness, sales and profits for McDonald ’ s and Burger King

79. However, the potential drawbacks of introducing ethical and socially responsible activities include: Compliance costs mean that there are additional items of expenditure to both companies, e.g. McDonald ’ s donating funds to help ill children and their families and Burger King having to source their suppliers Higher costs mean that profits margins will fall, unless prices are increased (which is perhaps unlikely in highly competitive markets such as fast food); as price is a fundamental deciding factor in this market, the commercial advantages are therefore reduced Since Burger King has also decided to act in an ethical way, albeit by alternative actions, McDonald ’ s might lose any initial competitive advantage that it might have had (but the higher costs remain)

80. Potential drawback cont…. It is not known whether consumers genuinely care about a firm ’ s ethical policies – what is more important to diners: price and taste of the food or whether the restaurants donate money to charitable organizations? Ultimately, these factors are likely to increase the costs to McDonald ’ s and Burger King, thereby possibly leading to lower profits for both firms Some stakeholders, such as shareholders, may therefore oppose these activities if they believe that there will be reduced profits

81. Corporate Social Responsibility (CSR)  Refers to the consideration of ethical and environmental issues relating to business activity.  A business that adopts CSR will act morally towards its various stakeholder groups.

82. Differing views of social responsibility  Free Market (non-compliance) CSR attitude Economists believe that businesses is to generate profit and government to take care of the social problems Economists believe that businesses is to generate profit and government to take care of the social problems Businesses pursuing profit will become more efficient and prosperous, thereby helping society indirectly Businesses pursuing profit will become more efficient and prosperous, thereby helping society indirectly

83. Differing views of social responsibility  Altruistic CSR attitude Altruism refers to acting in a humanitarian and unselfish manner Altruism refers to acting in a humanitarian and unselfish manner Businesses do what they can to improve the society regardless of whether their actions help to increase their profits Businesses do what they can to improve the society regardless of whether their actions help to increase their profits It can be difficult to determine in reality whether businesses help society due to altruism or because they believe that such action would (selfishly) help to improve their corporate image It can be difficult to determine in reality whether businesses help society due to altruism or because they believe that such action would (selfishly) help to improve their corporate image

84. Differing views of social responsibility  Strategic CSR attitude Businesses ought to be socially responsible only if such actions help the business to become more profitable Businesses ought to be socially responsible only if such actions help the business to become more profitable Firms see CSR as a method of long-term growth Firms see CSR as a method of long-term growth

85. CSR Strategies  HRM Strategies Fair employment practices, health and safety policies and bonuses paid to executives Fair employment practices, health and safety policies and bonuses paid to executives  Marketing Strategies Misleading and offensive advertising techniques Misleading and offensive advertising techniques  Finance Strategies Accuracy and integrity of recording and reporting of financial accounts Accuracy and integrity of recording and reporting of financial accounts

86. CSR Strategies  Natural environment policies Impact of business activity on the environment or the testing of products on animals Impact of business activity on the environment or the testing of products on animals  External business environment Issues concerning consumer rights and responsibilities towards the local community Issues concerning consumer rights and responsibilities towards the local community

87. Social Auditing  Is a way to ensure that socially responsible objectives are being implemented  Social audit is an independent assessment of how a firm’s actions affect society

88. Social Auditing  Audit is likely to include a review of the ff: Firm’s environmental impact Firm’s environmental impact Also known as Environmental AuditAlso known as Environmental Audit Pollution and waste levelsPollution and waste levels Staff management Staff management Workforce health and safetyWorkforce health and safety Contribution to society Contribution to society Involvement in local community projectsInvolvement in local community projects

89. Social Auditing Policies  Using renewable and sustainable resources  Using reputable and socially responsible suppliers  Systems that cater for the well-being of employees  Establishment of an ethical code of conduct  Methods to monitor management and employee commitment to CSR policies

90. Unit 1.3 Terms

91. AIMS Are the long term goals of a business, often expressed in the firm’s mission statement. They are a general statement of a firm’s purpose or intentions and tend to be a qualitative in nature.

92. Corporate Social Responsibility (CSR) Is the consideration of ethical and environmental issues relating to business activity. A business that adopts CSR acts morally towards its stakeholders.

93. Ethics Are the moral values that determine and affect business behavior and decision-making, such as taking actions that are in the best interest of the natural environment.

94. Mission Statement Refers to the declaration of an organization’s overall purpose. It forms the foundation for setting the objectives of a business.

95. Objectives Are the relatively short-term targets of an organization. They tend to be expressed as SMART.

96. SMART Objectives Are objectives that are specific, measurable, achievable, realistic and timed.

97. Social Audit Refers to an independent assessment of how a firm’s actions affect society such as a review of the firm’s environmental impact, its contributions to society and staff welfare.

98. Social Responsibility Refers to a business being conscientiously devoted to the wellbeing of society as a whole. Such organizations behave ethically and consider the needs of all their stakeholders.

99. Strategy Refers to the various methods that businesses can use in an attempt to achieve their mission or vision.

100. Tactics Refer to the short-term methods that firms can use to achieve their objectives.

101. Vision Statement Is an organization’s long-term aspirations, i.e. where it ultimately wants to be.