Mission,objectives and values of organisations The business strategy ‘strategy converts what you want to do into an accomplishment’ (Peter Drucker) Long term goals and short term objectives to achieve those goals The firm needs to take the decisions and develop the ability to achieve the ends The overarching aims of the organisation are referred to as the firm’s ‘mission’

The Mission/Vision Statement ‘the essential purpose of the organisation…the nature of the business(es) it is in and the customers it seeks to serve and satisfy.’ J.Thompson (1990) Exercise 5 Compare Mission statements of a range of organisations

Vision statement The Vision tends to be more futuristic and idealistic Richard Koch(1997) performance objectives ‘An inspiring view of what a company could become, a dream about its future shape and success, a picture of a potential future for a firm, a glimpse into its promised land. A vision is a long term aspiration of a leader for his or her firm.’

Aims of organisations Management by Objectives Profit market share Market share and cost advantage Sales ROCE Growth Level of service Customer or user perceptions

Management by Objectives Performance objectives Market standing Innovation Productivity Physical and financial resources Profitability Manager performance and developments Worker performance and attitude Public responsibility MbO provides an excellent link between aims and performance, and aims and measurement of performance

Profit According to Drucker ‘it is the first duty of a business to survive. The guiding principle of business economics, in other words, is not the maximisation of profits; it is the avoidance of loss. Business enterprise must produce the premium to cover the risks inevitably involved in its operation. And there is only one source for this risk premium: profits’

Profit ‘profit is not a cause, it is the result – the result of the performance of the business in marketing, innovation and productivity’ Drucker Profit maximisation is concerned with making as much profit as you can over a period The maximisation of the difference between total revenue coming into a business and the total cost being paid out Coca –cola makes high profits on a very high sales figure 60% of its profits go into R & D, promotion, advertising, market research, opening up new distrbution channels and so on Profits yield higher sales and still higher profits Exercise 6 List the problems that a business would experience if it didn’t make a profit

Market share The most reliable indicator of market share is relative to other brands:that is, the ratio of a company’s market share to that of its largest competitor. Relative market share = market share of the company market share of the nearest competitor A ratio of 2:1 would give a 20% cost advantage (I.e the company would be able to operate with costs 20% lower than its nearest rival) If a company dominates the market it can produce on a larger scale than its rivals and gain ‘economies of scale’

Market share and cost advantage Example Supermarkets Tesco and Asda have increased market share at the expense of Sainsbury’s. Supermarkets with largest market share will tend to maintain that share