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Business IB > 1.3 Organisational objectives > Flashcards

1.3 Organisational objectives Flashcards

1
Q

Mission statement

A

A statement of the business’s core aims, phrased in a way to motivate employees and to stimulate interest by outside groups

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2
Q

Vision statement

A

A statement of what the organisation would like to achieve or accomplish in the long term

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3
Q

Reasons for vision and mission statement

A

Quickly inform groups outside the business of aim and vision

Motivate employees

Guide individual employee behaviour if it is based on work

Explains what the business is about

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4
Q

Criticisms of vision and mission statement

A

Too vague

Based on a public relations exercise to make stakeholders feel good

impossible to analyse

No specific detail

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5
Q

Corporate aims

A

The long term goals which a business hopes to achieve

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6
Q

Divisional/operational objectives

A

Short or medium term goals or targets usually specific in nature which must be achieved for an organisation to attain its corporate aims

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7
Q

Benefits of a corporate aim

A

Become the starting point for divisional/operational objectives on which effective management is based.

Can help develop a sense of purpose and direction for the whole organisation

Allow an assessment to be made

provide the framework within which the strategies or plans of the business can be drawn up

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8
Q

What should operational objectives be?

A

SMART

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9
Q

What does SMART stand for?

A

Specific

Measurable

Achievable

Realistic and relavant

Time specific

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10
Q

Why are divisional, operational objectives set by senior managers?

A

Coordination between all divisions

Consistency with strategic corporate objectives

Adequate resources are provided to allow for the successful achievement of the objectives

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11
Q

Hierarchy of objectives

A

Aim

Corporate objectives

Divisional objectives

Departmental objectives

Individual targets

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12
Q

Example of an aim

A

To maximise shareholder value

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13
Q

Example of a corporate objective

A

To increase profits of all division by 10% per year

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14
Q

Example of a divisional objective

A

For marketing would be to increase profit margins by 7%

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15
Q

Example of an individual target

A

For marketing would be increase shares by an average of 5% per client

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16
Q

Strategy

A

A long term plan of action for the whole organisation, designed to achieve a particular goal

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17
Q

Tactic

A

Short term policy or decision aimed at resolving a particular problem or meeting a specific part of the overall strategy

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18
Q

Differences between strategy and tactics

A

Strategy decisions are long term

Strategy decisions are difficult to reverse once made

Strategy decisions are taken by directors

Strategy decisions are cross functional

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19
Q

What are the common corporate aims

A

Profit maximisation

Profit satisfying

Growth

Increasing market share

Survival

Maximising short term sales revenue

Maximising shareholder value

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20
Q

Disadvantages of profit maximisation objective

A

High short term profits can lead to competitors to enter the market

Small business owners are more concerned over independence

Most businesses look at return on capital employed

Not liked by all stakeholders

Difficult to determine profit maximisation

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21
Q

Disadvantages of growth objective

A

Over rapid expansion can lead to cash flow problems

Can come at the expense of profit margins

Large businesses can experience diseconomies of scale

Growth in new business areas can lead to loss of focus

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22
Q

Advantages of being brand leader with the highest market share

A

Retailers want to stock the best selling brand

Profit margins offered to retailers can be lower than for competing brands as shops are so keen to stock it, more profit for the producer

Promotional campaigns can say that they are the brand leader

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23
Q

Ethics

A

Moral guidelines that determine decision making

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24
Q

Ethical code

A

A document detailing a company’s rules and guidelines on staff behaviour that must be followed by all employees

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25
Q

3 examples of ethical codes being expensive in the short term

A

Using ethical and Fairtrade suppliers can add to a business’s costs

Not taking bribes to secure business contracts can lead to a loss in sales

Paying fair wages raises costs

26
Q

3 advantages of ethical codes in the long term

A

Avoiding expensive court cases can reduce costs of fines

Lead to good publicity

More likely to be awarded government contracts

27
Q

Stakeholders

A

People or groups of people who can be affected by, and therefore have an interest in, any actionably an organisation

28
Q

Corporate social responsibility

A

This concept applies to those businesses that consider the interests of society by taking responsibility for the impact of their decisions and activities on customers, employees, communities and the environment

29
Q

Benefits of a business adopting CSR policies

A

Image can be improved - competitive advantage

Attracting the best motivated and most efficient employees

Better relations with stakeholders

Higher long term profitability

30
Q

Disadvantages of a business adopting CSR policies

A

Short run costs could increase

Shareholder may be reluctant to accept lower short run profits

Loss of cost and price competitiveness if rival business do not follow

Consumers may prefer low prices during recession

31
Q

Social audits

A

An independent report on the impact a business has on society. This can cover pollution levels, health and safety record, sources of supplies, customer satisfaction and contribution to the community

32
Q

What details can social audits include?

A

Health and safety record

Contribution to local community events and charities

Proportion of supplies that come from ethical sources

Employee benefit schemes

Feedback from customers and suppliers on how they perceive the ethical nature of the business’s activities

Environment

33
Q

Advantages of social audits

A

Identifies what social responsibilities the business is meeting - and what still needs to be achieved

Sets targets for improvement in social performance by comparing audits with the best performing firms in the industry

Gives direction to the action plans a business still needs to put into effect to achieve its objectives

Improves a company’s public image and this can be used as a marketing tool to increase sales

34
Q

Disadvantages of social audits

A

If the social audit is not independently checked - as published accounts must be - will it be taken seriously by stakeholders

Time and money must be devoted to producing a detailed social audit

Many consumers may just be interested in cheap goods

A social audit does not prove that a business is being socially responsible

35
Q

Evaluation of social audits

A

Social audits need to be made compulsory as otherwise they will not be taken seriously

Companies need to be accused of using them as a publicity stunt

Time consuming and expensive to produce and publish, limit their value

36
Q

Issues relating to corporate objectives

A

Must be based on the corporate aim and should link in with it

They should be achievable and measurable if they are to motivate employees

They need to be communicated to employees and investors in the business.

They form the framework for more specific departmental or strategic objectives

Should indicate time scale (SMART)

37
Q

Conflicts between corporate objectives

A

Growth versus profit

Short term versus long term

Stakeholder conflict

38
Q

Factors determining corporate objectives

A

Corporate culture

Size and legal form of the business

Public sector or private sector businesses

Well established businesses

39
Q

Reasons for a business to change objectives

A

Satisfied the survival objective

External competitive and economic environment changes

Short term objective of growth in sales or market share

40
Q

What do businesses need to consider when changing objectives?

A

Is the internal/external change significant and long lasting enough to make a change in objectives?

What are the risks of not changing

How can the new objective be managed?

41
Q

SWOT analysis

A

A form of strategic analysis that identifies and analyses the main internal strength and weaknesses and external opportunities and threats that will influence the future direction and success of a business

42
Q

Strengths of a SWOT analysis

A

Internal factors that can be looked upon as real advantages.

Basis for developing competitive advantage.

43
Q

Weaknesses of a SWOT analysis

A

Negative factors

Eg: poorly trained workforce, limited capacity, obsolete equipment

44
Q

Opportunities of a SWOT analysis

A

Potential areas for expansion of the business and future profits

45
Q

Threats of a SWOT analysis

A

Hindrances to the business

46
Q

How does a SWOT analysis help managers?

A

Assess the most likely successful future strategies and the constraints on them.

47
Q

Issue with SWOT analysis

A

Subjective

Not quantitative

48
Q

Ansoff’s matrix

A

A model used to show the degree of risk associated with the four growth strategies of: market penetration, market development, product development and diversification

49
Q

What type of strategy is the Ansoff’s matrix used for?

A

Growth strategies

50
Q

How is market penetration made?

A

Existing product + existing market

51
Q

Market penetration

A

Achieving higher market shares in existing market with existing products

52
Q

How is market penetration made?

A

New product + existing market

53
Q

Product development

A

The development and sale of new products or new developments of existing products in existing markets

54
Q

How is market development made?

A

Existing product + new market

55
Q

Market development

A

The strategy of selling existing products in new markets

56
Q

How is diversification made?

A

New product + new market

57
Q

Diversification

A

The process of selling different, unrelated goods or services in new market

58
Q

Advantage of diversification

A

If successful, higher gains can be reaped from various industries

Spreads out risks and safeguards against economic shocks over diverse product portfolio

59
Q

Advantage of market development

A

New distribution channel
Expanding geographically
Attract new market segments
New consumers may not like the product

60
Q

Advantage of product development

A 
Innovation to replace existing products
Focusing on consumer needs
Brand extension
Capitalize on technology
Consumers in existing market may not like the new product
61
Q

Advantage of market penetration

A 
Seeks to maintain or increase market share
Price adjustments
Increase of market promotion
Minor product improvements
Intense competition
62
Q

Issue with Ansoff’s matrix

A

Only considers two factors

No detailed marketing options

Business IB (39 decks)

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