2 Organisational Objectives Decision making involves management considering the following questions:Where are we now?Where do we want to get to?How to get there?How to know when we are there? Organisational objectives have 3 functions:To control- set plans and boundaries for business activityTo motivate- inspire managers and employees to reach goalsTo direct- provide an agreed focus for all individuals and departments
3 Stakeholder objectives Stakeholders: people or organisations with an interest in the businessObjectives will be different for all stakeholders in a firmDirectors e.g. Max. Profit GrowthShareholders e.g. Max. share valueManagers e.g. Expansion, product development, market shareEmployees e.g. Rewards, securitySuppliers e.g. Secure lucrative contracts, continuityGovernment e.g. Corporate tax revenue, employment, exportsPublic sector business objectives will be different from the private sector e.g. Service levels, cost management- not profit
4 Importance of objectives Give a business direction, purpose and unityForm the foundation for decision-makingEncourage strategic i.e. long –term thinkingProvide a basis for measurement and control of the workforce Business objectives may be set at different levels- a hierarchy of objectives:
5 At all levels, the objectives should be consistent with the overall aim of the business.AIMS of Business1Corporate objectivese.g. Profit maximisation2Departmental objectivese.g. Sales revenue/contribution3Individual objectivese.g. Staff performance appraisal
6 Mission Statements (Vision statements) A Vision or Mission statement outlines the business’s aspirations for the future e.g. “To be the leading manufacturer of personal transport in the next 20 years”. Adidas is “To be the leading sports wear brand in the world”. Having a mission statement means to have a clear purpose, It declares what the business is trying to achieve and the organisation’s values. Mission statements are often found in the company annual report and corporate web site. They are used to communicate the business mission to the publics, and will tend to be qualitative rather than quantitative statements. They should also be realistic and achievable, and unify the people in an organisation to assist in achieving the vision.
7 Mission Statements (Vision statements) Vision statements will be long term.Mission statements will focus on the medium termVision statements will tend not to have quantifiable targets- rather show people what could be…. But…..Often seen cynically as PR exercisesCan be very time consuming and introspectiveMay not reflect individual’s beliefs and behaviours. Task: Vision and Mission statements
8 Aims and objectivesAims are the long–term goals of an organisation. Aims tend to be unquantifiable, but serve to give a purpose to the general direction of a business. E.g. KWC to become the leading IB school in the World. Objectives are more short term and more specific goals- usually measurable e.g. To obtain 100% IB diploma pass rate at KWC in 201x.Short v long-term objectivesStrategy is used to refer to a plan to achieve long-term aims of business- strategic objectives.Tactics are short-term ways that a firm can achieve their aims and objectives.
9 Aims and objectives 2Once a business decides its short and long term objectives it must decide on the ways that these objectives can be attainedThere may be:Operational strategies (day to day methods to achieve increased efficiency)Generic strategies (Ref: Porter Generic strategies Unit 1.7)- ways to obtain competitive advantage e.g. Cost leadership, Differentiation of product, or Focus on particular market segmentsCorporate strategies are aimed at the long term objectives of the business e.g. Market dominance- leading to a strategy of takeover of major competitors in a marketTactical objectives are short term. They are used to guide the operation of the business.
10 Aims and objectives 3Strategic objectives usually longer term aims e.g. over the next 5-10 years and may include:Profit maximisation-the incentive for entrepreneurs and shareholders as a long-term aim for the businessGrowth-.Increase in sales revenue or by market share, achieving:Economies of scale by growing larger, or market power- thereby controlling prices in a market for a productReduced risk- achieved through scale of business and diversification into other marketsImage and Reputation (Market standing)E.g. Customer satisfaction, employee motivation and image of a business will be linked to the status and reputation of a firm.A company with reputation for its products or service will be more highly trusted and valued. Examples such as Microsoft, Apple, Virgin and BMW all enjoy high market standing and reputation among customers, suppliers and employees.
11 Aims and objectives 4 E.g. Tactical objectives To achieve sales of £x m in the next 3 months.To reduce the cost per unit of a product to £xx in the next 6 months in the production departmentTo achieve labour reduction of 10% in the next year through voluntary redundancyLaunch 2 new products in 6 months A tactical objective for most new business is survival- short term- to gain a contract, to avoid takeover, or create cash flow.
12 To do Task: Question 1.3.2 Lenovo Hoang p47 Group Exercise: Develop a Mission statement, Strategic, and Tactical objectives for KWC over the next few years aimed at improving the school revenues (work in groups).