3 - Purpose of a business

Question 1

Mission Statement

e.g. “Critically evaluate the organisation’s mission statement….”

Answer 1

Written communication of the objectives of the company to internal and external stakeholders

Ashridge Criteria:
Purpose - exist? Aim to achieve?
Strategy - resources, competency and general strategy
Policies - standards, behavioural patterns
Values - beliefs of employees/management

Question 2

Stakeholder Analysis

Answer 2

Mendelow’s’ Matrix (Power vs Interest)
Keep Informed, Keep satisfied, Minimal effort, Key players need participation

Question 3

Traditional view

Answer 3

‘Traditional view that the duty of directors as agents appointed by shareholders is to maximise shareholder wealth’

Question 4

Ethics framework

Answer 4

Transparency - Does company mind others knowing about decision?

Effect - Who does decision impact? More than one group of stakeholders negatively impacted?

Fairness - would company decision be deemed fair?

Question 5

Corporate Governance

Answer 5

Relationship between management, BoD and shareholders

Question 6

Porter’s Generic Strategies (Links to competitive advantage - PVC)

Answer 6

Cost leadership

Product differentiation

Can focus on niche area of market

Question 7

Good Corporate governance

Answer 7

Balance of power
Role of independent NEDS
Established committees (e.g. remuneration),
Effective risk management

Question 8

Social sustainability

Answer 8

Social sustainability is about providing a safe work environment, health and safety measures, diversity and community investment.

Question 9

Economic sustainability

Answer 9

This looks at the economic stability a company brings, growth and job creation and investment in innovation and new products.

Question 10

Environmental sustainability

Answer 10

Environmental sustainability looks at the impact of a business on things like climate change,
pollution and the use of natural resources.