Ch 4 business objectives

Question 1

The importance of objectives within a business

Answer 1

• Objectives are set to direct, control and review business activities
• Businesses have objectives to provide a clear end purposes to work towards to. This enables everyone in the organisation to focus on the work, check on progress and make improvements
• It includes strategy to check whether business is on target or not
• Must based on the corporate aims

Question 2

SMART

Answer 2

• Specific - Measurable - Achievable - Realistic - Timely

Question 3

Hierarchy of objectives

Answer 3

Aim: long term goals Corporate Objectives Divisional Objectives (region) Departmental Objectives Individual targets

Question 4

What are some of the common corporate objectives?

Answer 4

• Profit maximisation: producing the greatest positive difference between total revenue and total costs
• Profit satisficing: achieving enough profit to keep the owners happy but no aiming to earn as much profit as possible
• Growth
• Increasing market share
• Survival
• Maxmising shareholder value: increase share price and dividens to shareholders
• Reputation/Brand loyalty
• CSR

Question 5

Define mission statement

Answer 5

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

Question 6

Benefits of mission statement

Answer 6

• Give an overall idea and vision of the business

- Spreads positivity => motivates employees

Question 7

Limitions of mission statement

Answer 7

Too vague - Common for businesses of different industries to have the same mission statement - Impossible to analyse - A marketing tool so stakeholder groups “feel good” about the organisation

Question 8

Define CSR

Answer 8

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

Question 9

Advantages of CSR

Answer 9

• Promotes innovation: forces business to generate new ideas so that products can benefit stakeholders
• Cost savings: lean production, save money on energy and operating costs and manage risk, less social costs
• Brand differentiation: results from innovation
• Develop and enhance relationships with customers, suppliers and networks

Question 10

Disadvantages of CSR

Answer 10

• Costly to be sustainable because it requires technology
• People try to find faults and denigrate the company
• A marketing tool - deception to establish a good reputation to earn brand loyalty
• Not ideal for small businesses that want to focus on growth. Small businesses also have small impact on stakeholders

Question 11

Conflicts between corporate objectives

Answer 11

• Growth vs. Profit: achieving higher sales by raising promotional expenditure and decrease the selling price
• Stakeholder conflicts

Question 12

Why would corporate change over time?

Answer 12

• Sastisfy survival objective and now wishes to pursue objectives of growth or increased profit
• Change in the business environment (economy recession or new competition)

Question 13

Factors that determine the corporate objectives

Answer 13

• Corporate culture: the code of behaviour and attitudes, way of doing things that is shared by all those work in the organisation
• The size and legal form of the business: profit maximisation or satisficing
• Public or private sector: public => aim not focused on profits
• Number of years it has been operating: survival or growth

Question 14

What are the processes involved in the decision making process?

Answer 14

• Identify objective
• Collect info and ideas
• Analyse (weigh positives and negatives)
• Choose decision
• Communicate and carry out
• Evaluate

Question 15

What are the 3 types of decisions and who make them?

Answer 15

• Strategic decisions made by owners or board of directors
• Tactical decisions made by the managers
• Operational decisions make by the employees

Question 16

Definition of ethics

Answer 16

Moral guidelines that determine decision making

Question 17

Difference between legal and ethical

Answer 17

• Ethics are rules of conduct that come from within a person’s moral values
• Laws are rules established by the government and are made with ethics as guidance
• Ethics does not carry any punishment

Question 18

Importance of being ethical in business

Answer 18

• Attract customers (especially those ethical ones) => boosting sales and profit
• Make employees want to stay => increases productivity
• Attract employees => reduce retirement costs
• Good reputation and image => brand loyalty
• Attract investors => capital to carry out business activities and protect business from being taken over

Question 19

Define MBO

Answer 19

A method of coordinating and motivating all staff in an organisation by dividing its overall aim into specific targets for each department, manager, and employees

Question 20

Define ethical code of conduct

Answer 20

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