Unit 1: Business objectives Flashcards
- the nature (def) and 2. importance of business objectives at corporate, departmental and 3. individual levels.
Def: how ethics may influence business objectives and activities.
Importance:
They clarify to everyone what the business is working to achieve
They aid in decision making and choice of alternative strategies
They enable checks on progress and corrective action
They provide means by which performance can be measured
They motivate employees
They can be broken down to provide targets for each part of the organisation
They provide shareholders with a clear idea of the business in which they have invested
They facilitate the resolution of conflict between departments
3. SMART S-Specific M-Measurable A-Achievable R-realistic T-Time framed
corporate social responsibility (CSR) as a business objective.
refers to a set of policies designed to demonstrate the commitment of a business to the well-being of society and others by taking responsibility for the impact of business decisions on all stakeholders. Some businesses have objectives which are based on their beliefs of how one should treat the environment and people. CSR applies to those businesses that considers the interests of society by taking responsibility for their decisions and activities on consumers, employees, communities and the environment. Some business activities are very damaging to other stakeholders. Thus governments and some international organisations like European Union (EU) must ensure that businesses take responsibility of their actions on people and the planet
Benefits of being socially responsible
The business can be given government contracts/ tenders
The business can easily attract highly skilled and experienced personnel
Business will gain public acceptance and reduced risk of negative publicity
Employees committed to the same values
Customer loyalty
relationship between mission statement, objectives, strategy and tactics.
Mission and Objectives
Mission statements and objectives provides the basis and focus for business strategy ie The long-term plans of action of a business that focus on achieving its aims. Without a clear objective, a manager will be unable to make important strategic decisions. The setting of clear and realistic objectives is one of the primary roles of senior management. Before strategy for future action can be established, objectives are needed. Thus setting mission and objective gives a business a sense of purpose and direction
Strategies and Tactics
Mission statements and objectives alone cannot guarantee business success. They have to be developed into actual courses of action known as strategies and tactics.
Strategy: is a plan setting out how a business as a whole will achieve its overall long-term objectives. For example the business objective of a car manufacturer could be, “To manufacture 4 million cars by 2018.” The strategies to achieve such an objective could include:
Increasing efficiency
Building a new factory
Designing new models of cars
For strategies to work well in the business they need to be complemented with tactics. At tactic is a short- term plan for day-to-day operations of a business with the aim of contributing towards the overall strategy. For example, in order to achieve productivity improvements the workforce might get prizes for the teams that make the biggest improvements to productivity.
NB Tactics refer to a short-term course of action for the day-to-day management of a business for trying to meet part of an overall strategy
the different stages of business decision making and the role of objectives in the stages of business decision making.
Business Decision making.
Objectives not only give a sense of direction to a business, they are essential for making decisions. Without setting relevant objectives at the start of this process, effective decision making for the future of the business becomes impossible.
Stages in the decision making process
Set objectives: it is impossible to make decisions in the future if the objectives are not clear or if
they are non-existent.
Identify and analyse the problem: managers make decisions to solve a problem. It is imperative
that you must understand the problem before finding a solution for it, otherwise, you might make a
wrong decision.
Collect relevant information: gather data about the problem and possible solutions. It is always
important to analyse all possible solutions to find which one is the best
Analyse/Evaluate all options : consider the advantages and disadvantages of each option or
possible solution
Make the final decision : make a strategic decision. Select the best option with more advantages and few disadvantages
Implement a decision: this means that the manager must see to it that the decision is carried out and is working according to plan
Review and evaluation of the decision: review its success against the original objective. If the decision didn’t work, then a corrective action must be done for the objectives to be achieved
how objectives might change over time.
Change in owners’ priority: the owners shift from one object to the next as time unfolds
Change in market conditions: in a recession the business may aim for survival
Change in size of the business: owners’ objective could be growth in early stages and then profit
maximisation as the business becomes well established
Change in management: when new management comes in, they can introduce new changes which
could be new objectives
Change in competitor behaviour: the business can change its objectives in responses to changes
made by the competitors
Change in legislation: a change in government laws can force a business to come up with new
objectives in a new environment
translation of objectives into targets and budgets.
This statement simply means a process by which objectives are translated into targets and budgets. Thus corporate objectives should be broken down into individual targets. Target or key performance indicators (KPIs) refers to a detailed operational objective for a specific area of a business to be achieved by a specific date. Once targets have been set for individuals or groups they can be monitored and adjusted to increase the chances of achieving overall objectives, and can be used as a motivational tool. Communication is very important to make the employees aware of the business objectives. Targets can also be used in the budgeting process. A budget refers to a plan expressed in financial terms for targets to be achieved, financial resources to be made available. Employees must be involved in the setting of targets. Unrealistic targets will, however, lead to unobtainable and misleading budgets.
Advantages of targets
Employees will be motivated to work harder
Productivity of employees and managers will improve
Encourages team work which then reduces mistakes at the business
Managers will always be in touch with employees and this helps employees to meet deadlines
Help managers to identify problem areas
An easy way to translate corporate objectives into individual and other subsidiary objectives
Disadvantages of targets
Can be demotivation especially if they cannot be achieved or an employee fails to achieve them. There can be many reasons for failing to reach a target.
Can dehumanise a job. People are treated like machines rather than as humans
Can lead to ‘blame culture’
Difficult and expensive to monitor
Importance of Budgets
Reviewing past activities
Controlling current activities i.e helping the business to stick to the objectives
Planning for the future
the communication of objectives and their likely impact on the workforce.
Targets in business have been a valuable management tool for a long time. In 1945, Peter Drucker developed the idea of Management By Objectives (MBO). This is a method of managing staff by defining objectives for individuals members derived from the overall objectives of the business.
how ethics may influence business objectives and activities.
Differences between business ethics and code of conduct Business ethics
Making the business gains in a proper manner
Avoiding discrimination on staff and stakeholder groups
Not linked to political parties
Being fair to all who have business relationships with the company
Protecting the environment
Code of Conduct
Upholding the principal of honesty and fairness
Protecting the properties and reputation of the business
Conducting business in the best interest of the owners
Behaving appropriately at all times towards others
Unethical business activities
Buying supplies from businesses that use child labour
Exploiting suppliers in poor countries by demanding and paying low prices
Lending to people and businesses who will struggle to repay the loans
Wilful selling of harmful products to the people
Not paying a fair wage
Avoiding paying tax
Polluting the environment
Newspapers prying into people’s private lives
Target advertisements for sweet at children
Getting business secrets from competitors
Encouraging top employees to move from a competitor
Paying bribes to get contracts
Failure to give correct or accurate information
Testing cosmetics products on animals
Over charging tourists
Benefits of acting ethically
The business will be offered with government contracts
The business may attract qualified and experienced staff
The business may get more customers
Avoiding expensive court cases on ethical related crimes
Challenges of acting ethically
Charging lower prices leads to lower profits
Paying fair wages in harsh economic environments may raise wage costs and this reduces the firm’s
competitiveness
Not taking bribes may lead to lower sales
Disposing of waste material can be costly to the business
