The importance of objectives

All firms will still consider the following objectives as important. They have been termed traditional as they form the natural starting point for all organizations whether large or small.
external image business-strategy-planning.jpgThese objectives will depend on the ‘age’ of the firm and also the prevailing external environment:
• Survival/break-even
• Cost minimization
• Growth (market share)
• Profit maximization
• Profit satisficing






Profit satisficing (a portmanteau of “satisfy” and “suffice”)
From observation it has been noticed that, as some
private limited companies reach a certain size and level of
profi tability, the owners may decide to satisfice, i.e. agree
not to focus on profit maximization but to try to satisfy
other objectives such as debt repayment or innovation
through increased research and development.



Explain the importance of objectives in managing an organization.

In economic terms, profit is considered as the reward
for risk taking. If the entrepreneur has decided to combine
human and non-human resources and land to create a
business, then profit is seen as the incentive. Without the
profit motive, risk taking would not be rewarded and very
few new businesses would be created. Also, objectives are
useful when it comes to planning. Some steps are below:
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Statements · Mission statements · Vision statements

Mission Statement
Vision Statement
  • Brief and succinct
  • Can be long/short
  • States the reason for the business’s existence
  • Looking at the future/the long run of the company
  • Main purpose in the current market
  • they see themselves in the market in the future
  • Set a pace for workers
  • Often not done to avoid seeming bold/arrogant


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Explain the purpose of mission and vision statements.
Analyse the role of mission and vision statements in an organization.

  • It can help clarify in the minds of stakeholders the purpose of the businesses. This may have important considerations for customers, investors and suppliers, both present and potential.
  • A vision can reassure shareholders that the business is forward-looking and willing to create and pursue new opportunities. A vision could be perceived asunobtainable in the short term, but stakeholders may feel that the company is striving to do the best that it can within its market.
  • But the mission and vision must be credible and realistic in the minds of the stakeholders too and this is one chief criticism laid at the door of those companies who set them, that they can be too vague or too imprecise.

Aims and objectives - Aims, Strategic objectives, Tactical/operational objectives
  • A strategic objective is usually defined as a longer-term aim of the business, defined perhaps by the vision of the owner as represented in the vision statement.
  • A tactical or operational objective is more short term in nature and is usually defined as an aim or mechanism designed to help achieve the strategic objective and support the overall vision.

As a business begins trading:
  • A tactical objective may be survival of the first year of trading in order to preserve and guarantee that a vision has a chance of being realized.
  • Second, a tactical move to reduce costs and waste may allow a future goal of profit maximization or growth to take place.
  • Generally, tactical objectives are designed to be subordinate to but also try to affect the overall strategic direction.

Distinguish between objectives, strategies and tactics, and discuss how these interrelate.

The aim of a business is what it wants to achieve by a future date and time. These are its goals and statements of purpose. For example a business may aim to control 25% of a specified market share before 2015.


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Business objectives are measurable targets of how the aims can be achieved. There are many different types of business objectives that an organisation can set, such as increasing profits by 20%, or expanding into another market within a particular time period. In all cases in order to make the objectives realizable an acronym used to set objective is SMART:

1. Specific – Objectives must be clear.
2. Measurable – Easy to determine if they are being achieved or not.
3. Achievable – They should within the reach of the business.
4. Realistic –Does the business have the resources?
5. Timely –A time-frame for should be set meet the objective.


Ethical Objectives
Examine the reasons why organizations consider setting ethical objectives.
Analyse the advantages and disadvantages of ethical objectives.
Discuss the impact of implementing ethical objectives.
Advantages
Disadvantages
  • Considerable stakeholder pressure to ‘do the right thing’ in business after a number of high profile and damaging corporate scandals (Enron, WorldCom).
  • If we consider opportunity costs, then an ethical position may conflict with the profit motive. Shareholders may not be happy to forgo future profits if the business is not allowed to compete in some markets or geographical regions.
  • Linked to this point is the need for the company to differentiate itself from the competition by building a credible ethical stance (e.g. Fair Trade Movement and the plight of coffee growers in the developing w orld). This could be the basis for a new mission and visionto develop a new strategic direction.
  • If the ethical stance is leaning towards environmental concerns, the firm may have to spend vast sums of capital in the short term implementing environmental assurances on production processes. This will raise costs and impact on profitability.

  • The ethical stance will need to be credible and effective in the eyes of the market in order for the firm to build a competitive position. This again will take time and capital.

  • Finally, in a deteriorating economic environment, an ethical stance may mean redundancy for some line workers if contracts are not won or projects refused on ethical grounds. This could be an unpopular move in the wider community.

Corporate social responsibility · Differing views of social responsibility · Policies to implement objectives of social responsibility (such as environmental auditing)

The topics of business ethics and social responsibility are closely linked. In his excellent review of CSR, Walling (2007) argues that in the US the two topics are seen as one, while in the UK and Europe, CSR is more idealistically associated with businesses wanting to leave the world a better place. It may surprise the reader to note that the adoption of CSR is not accepted by all. Milton Friedman famously remarked that: Businesses have no social responsibility other than to increase profi ts and refrain from deception and fraud. When businesses seek to maximise profits they always do what is good for society. And The Economist said: Firms should not do the work of governments. In this unit, we will not have the space for a full investigation. The reader is asked to consider some of the ideas presented and perhaps again undertake some independent research on what constitutes CSR and its impact on stakeholders. Explain the different views that firms may take of their social responsibility in an international context. Analyze the value of social and environmental audits to different stakeholders.