1.3 - Organizational objectives

Vision statements and mission statements

• Vision statement: Outlines an organization's aspirations and where they wanna be in the future.

• Mission statement: Simple declaration of its purpose and core values

  • Vision statements focus on the very long term while the mission statement is more on the medium

  • People argue that these statements are nothing more than PR after all their only purpose is to make money

Aims, objectives, strategies, and tactics

• Aims are long-term goals of an organization; they are vague and unquantifiable.

• Objectives are short to medium-term targets that are more specific and quantifiable.

  • They are there to measure and control but also to motivate and inspire.

• Strategies are plans of actions to achieve the goals of an organization.

  • Strategies affect the day-to-day

• Tactics are short-term based and used to achieve their tactical objectives.

• Generic affect the entire business.

• Corporate affect the long term goals.

• Tactical objectives are short-term goals that affect a section of the organization, they are specific and guide the daily functioning of the department. Also they are set up for the next 12 months.

  • Ex. Survival tactics to keep the business afloat, sales revenue maximization to make more money.

• Strategic objectives are long term.

  • Ex. Profit maximization, growth, market standing, image and reputation.

The need for changing objectives

• There are many reasons the objectives may change.

  • A flexible and adaptive organization may have more innovative goals over time.

  • Change in the legal structure is also likely to change its ownerships same with a separation of ownership.

  • The age of the business may want them to fight for survival

  • How much money they have dictates them as well

  • If the company takes more risks they may have more ambitious goals

  • Any crisis in management may also change them.

  • External factors may change them as well; State of the economy, government constraints, new technologies, presence of pressure and power.

• Public sector organizations do not strive for profit maximization.

Ethical objectives

• Ethics are moral principles that guide the decision-making and strategy.

  • They are concerned with the right or wrong from society’s point of view.

  • Ethical and socially responsible businesses act morally towards the customers, employees, shareholders and the environment.

  • They may be pressured to do so by their employees or customers.

• Social responsibility businesses are those that act morally towards their stakeholders. It is called corporate social responsibility (CSR)

  • Mcd collecting rubbish around their vicinity

• There are 3 views surrounding CSR

  • Self-interest: businesses want to make money and the government is responsible for sorting out the social problems.

  • The altruistic attitude: when they try to improve society with their money.

  • The strategic attitude: when they only do it because they can become more profitable.

• Companies now have an ethical code of practice in their annual report where they document their beliefs and practices

The evolving role and nature of CSR

• Attitudes towards CSR may change over time

  • What was once considered acceptable by society, may no longer be the case

• Changes in societal norms mean that businesses need to review their CSR policies and practices

  • Changes include education on hiring and promotion of female staff, greater tolerance towards multiculturalism, and more action against climate change

• What is considered to be acceptable in one country may be undesirable in another

• Ways for businesses to adapt to meet their social responsibilities:

  • Providing accurate information and labelling → Can help consumers to make better informed decisions

  • Adhering to fair employment practices → Firms can fulfill their social responsibilities to their employees by providing decent working conditions, etc.

  • Having consideration for the environment

  • Active community work

• Whether a business acts in a socially responsible way depends on several factors:

  • Corporate culture and attitudes

  • Exposure and pressure from media

  • Societal expec    

  • Involvement, influence and power of various stakeholders

  • Laws and regulations

SWOT analysis

• SWOT analysis: A simple and useful decision-making tool

  • SWOT: Strengths, Weaknesses, Opportunities, and Threats

  • Used to assess the current and future situation of a product, brand, business, proposal or decision

• Considers both internal (strengths and weaknesses) and external (opportunities and threats)

• Strengths: Internal factors that are favorable compared with competitors

  • Ex. strong brand loyalty

  • Helps the business achieve its objectives → Needs to be developed and protects

• Weaknesses: Internal factors that are unfavourable when compared with rivals

  • Ex. Create competitive disadvantages

  • Likely to prevent or delay the business from achieving goals → To remain competitive, the business needs to reduce or remove weaknesses

• Opportunities: External possibilities (prospects) for future development

  • Ex. changes in the external environment

• Threats: External factors that hinder the prospects for an organization

  • Ex. Cause problems for the business; Changes in fashion, natural disasters, price wars, product recalls, etc

• Can be used and provide a good framework for:

  • Competitor analysis

    • The threats posed by a rival or the strengths of a competitor

  • Assessing opportunities

    • The development and growth of the organization

  • Risk assessment

    • Probable effects of investing in a certain project or location

  • Reviewing corporate strategy

    • The market position or direction of the business

  • Strategic planning

    • Decision to diversify or expand overseas

The Ansoff matrix

• Ansoff matrix: An analytical tool that helps managers to choose and devise various product and market growth strategies

• There are four product-market growth strategies:

  • Market penetration

    • A low risk growth strategy as businesses choose to focus on their selling existing products in existing markets

    • Might be achieved by offering more competitive prices or by improved advertising

    • Firms might attempt to entice existing customers to buy more frequently; for example, with a customer loyalty program

    • Advantage of market penetration: The business focuses on markets and products that it’s familiar with

    • The safest of the four growth strategies

    • Limitation of market penetration: Competitors will retaliate to firms trying to take away their customers and market share

      • Can lead to price wars, which would harm profit

  • Product development

    • A medium risk growth strategy that involves selling new products in existing markets

      • Example: McDonald’s constantly adds new products to the menu

    • Tends to rely on product extension strategies to prolong the demand for good and services

    • Also relies on brand development to appeal to the existing market

    • Also a reason for acquiring other companies

  • Market development

    • A medium risk growth strategy that involves selling existing products in new markets

      • Example: An established product that is marketed to a new set of customers

    • Could be done through new distribution channels → Selling the product overseas (could be risky if the business is unfamiliar with local market conditions and cultures)

    • Promotional strategies could be changed to appeal to the new audience

    • Advantage: The firm is familiar with the product being marketed

    • The success of a product in one market doesn’t guarantee success in another market

  • Diversification 

    • A high risk growth strategy that involves selling new products in new markets

      • Example: The Virgin Group is a diversified company with various business units: Virgin Mobile, Virgin Hotels, etc.

      • Advantages: 

        • Gaining market share in established markets

        • To spread risks by having a well-balanced product portfolio

      • Suitable for firms that have reached saturation and are seeking growth opportunities

      • New distribution channels need to be established and this could be time consuming and costly

      • One way to diversify: Become a holding company

        • Holding company: A business that owns a controlling interest in other diverse companies

          • Subsidiaries: Firms owned by a holding company

        • Can benefit from having a presence in a range of markets in different regions of the world

      • Two categories of diversification:

        • Related diversification: When a business caters for new customers within the broader confines of the same industry

          • Example: Toyota, Nissan, and Honda have strategic business units (Lexus, Infiniti, and Acura) → Caters for higher income customers

          • Related diversification is less risky → Builds on the product and market knowledge of the business

        • Unrelated diversification: Refers to growth by selling completely new products in untapped markets. 

          • Example: Samsung → Operations in customer electronics, construction, retail, etc.

Organizational objectives and the CUEGIS concepts

• The use of organizational objectives is to provide a clear focus and a shared sense of purpose for business strategy

  • The starting point to achieving the vision and mission of a business

    • One way to do this is setting SMART objectives:

      • Specific - Objectives need to be precise and succinct 

      • Measurable - Objectives should be quantifiable (example: to increase market share, raise sales revenue, etc)

      • Achievable - Objectives must be practically feasible (attainable)

      • Realistic - Objectives should be reasonable, given their resources (example: a new business shouldn’t strive to be the market leader within the first few months)

      • Time constrained - There should be a specified time frame, in which the objectives should be achieved

• Every manager should be involved in strategic planning, especially as the business environment is always changing 

• There is no single organizational objective that is suitable for all businesses to follow, but businesses should avoid meaningless change 

• Change that is not communicated to employees can cause major demotivation among the workforce

• Concepts of globalization and culture have impacted corporate social responsibility

  • With increasing educational awareness and media exposure of ethical issues → It is important for organizations to adopt a socially responsible attitude to the way business is conducted

  • A company that exceeds societal norms and expectations can provide a business with competitive advantages

  • The financial cost of complying with ethical and socially responsible behaviour can be too high for many businesses