IB Business Management Unit 1/Section 1.3 Organizational Objectives

1.3 organizational objectives On completing this chapter you should be able to Explain the definitions and roles of a vision and mission statement. Define aims, objectives, strategies, and tactics and explain their relationships. Examine and justify the need for organizations to change objectives and innovate in response to changes in internal and external environments. Describe Ethical objectives and corporate social responsibility (CSR) Discuss the reasons why organizations set ethical objectives and the impact of implementing them. Examine the evolving role and nature of CSR Prepare a SWOT analysis of a given organization Prepare the Ansoff matrix for different growth strategies of a given organization

THE VISION STATEMENT A philosophy, vision or set of principles which steers the direction and behavior of an organization. Outlines an organizations aspirations in the distant future What do we want to become? Focused on the very long term Allow people to see what could be (inspirational) Outlines the values, beliefs & guiding principles

THE MISSION STATEMENT A simple declaration of the underlying purpose of an organization´s existence and its core values. What is our business? Distinguishes an organization from others Focus on the medium – long term. More grounded in the aim of accomplishing objectives Qualitative rather than quantitative. Clearly defined and realistically achievable Provides direction & guides decision making Unifies all people and corporate cultures to achieve the vision.

COMPARISION MISSION - VISION Concept What do we Want? Why are we doing what we are doing? Purpose Points to the future – what the business would like to see itself as. Based on where the business is now. What needs to be done in order to achieve the mission. Audiences Internal Stakeholders- Inspires and motivates employees. External stakeholders – binds the to the business by giving a sense of shared beliefs Internal stakeholders – provides a means for accountability by defining key performance indicators. External Stakeholders –measures how successful the business is in achieving its vision Change An expression of the business core values – should never change. May change to meet new circumstances.

EXAMPLES VISION -MISSION STATEMENTS MICROSOFT: VISION: A PERSONAL COMPUTER IN EVERY HOME RUNNING MICROSOFT SOFTWARE. MISSION: TO ENABLE PEOPLE AND BUSINESSES THROUGHOUT THE WORLD TO REALIZE THEIR FULL POTENTIAL. TOYOTA USA: VISION: TO BE THE MOST SUCCESSFUL AND RESPECTED CAR COMPANY IN AMERICA MISSION: TO ATTRACT AND ATTAIN CUSTOMERS WITH HIGH-VALUED PRODUCTS AND SERVICES AND THE MOST SATISFYING OWNERSHIP EXPERIENCE IN AMERICA.

AIMS, OBJECTIVES, STRATEGIES AND TACTICS Concepts are linked and interdependent Aims: Long – term goals, what it wants to achieve in the future. Serve to give general purpose and direction. The vision statement is a summary of these aims. Objectives: Medium to short- term goals that clarify how an organization will achieve its aims and reach its vision. Concrete and can be translated into something specific and measurable. Aims Objectives What the business wants to achieve What the business has to do to achieve the aims Not necessarily time-bound Time-bound Vague or abstract goal Specific and measurable target What a business wants to happen What a business needs to happen Set by Senior Leaders Set by managers or their subordinates.

HIERARCHY OF OBJECTIVES Summary of Aims (Vision): Set by the CEO, few in #, general Strategic Objectives: Medium to long term objectives/goals set by senior managers to guide the company in the right direction to achieve the aims. Tactical Objectives: Medium to short-term objectives/goals set by middle managers to achieve the strategic objectives. Greater in #. specific goals that guide the functioning of a section of the organization (department or operations). Operational Objectives: Day to day objectives set by floor managers or the workers themselves, so that the company can reach its tactical objectives.

BUSINESS OBJECTIVES SHOULD BE SMART Specific: Clear and well defined. Measurable: To be verified if achieved. Achievable: So they can be motivational Realistic and Relevant: To the main purpose Time-specific: Deadline

STRATEGIES AND TACTICS BUSINESS STRATEGY: A plan to achieve a strategic objective in order to work towards the aims of the business. The actions that facilitate an organization to meet it goals. Medium to long term. Senior managers make decisions approved by the owners or CEO. BUSINESS TACTIC: A plan to achieve a tactical objective in order to work towards the strategies of the business. Short term methods/actions to achieve a tactical objective to work towards the strategies of the business. Middle managers make decisions approved by senior managers.

EXAMPLE MANAGEMENT BY OBJECTIVES

Corporate aims of Domestic Detergents Inc. EXAMPLE SMART OBJECTIVES Corporate aims of Domestic Detergents Inc. 1. To increase annual sales from $1 billion to $2 billion in five years. To enter a new market every 18–24 months. To achieve 30% of sales each year from products not in the company’s product line five years earlier. To be the lowest cost, highest quality producer in the household products industry. 5. To achieve a 15% average annual growth in sales, profit and earnings per share. TIME SPECIFIC SPECIFIC MEASURABLE ACHIEVABLE REALISTIC

THE NEED FOR ORGANIZATIONS TO CHANGE OBJECTIVES Businesses often need to change strategic, tactical and operational objectives due to changes in: Internal environment: Leadership, HR, type and size of organization (changes in legal structure, mergers, acquisition), product, finance, operations. External environment: STEEPLE ANALYSIS Social (demographic or cultural change) Technological (products become obsolete or uncompetitive) Economic (state of the economy, market conditions) Ethical (the values of society) Political Legal (government constraints, regulations, taxes) Ecological (environmental awareness, sustainability)

WHY ORGANIZATIONS SET ETHICAL OBJECTIVES Ethics: The moral principles that guide decision making and strategy. Morals: What is considered to be right or wrong form society´s point of view. Business Ethics: The actions of people and organizations that are considered to be morally correct. Ethical objectives: Goals based on established codes of behaviour that, when met, allow the business to provide some social or environmental benefit or at least, not to hurt society or the environment in the process of making a profit.

Why organizations set ethical objectives: The impact of implementing ethical objectives: Building customer loyalty Customers will develop brand loyalty. Satisfying customers ever- higher expectations for ethical behaviour Suppliers will have to respond. Creating a positive image Competitors: change to maintain market position. Pressure to rival businesses to adopt. Developing a positive work environment Local community: better relations – good will. Reducing the risk of legal compensation Government, foster ethical objectives. Increasing profit. The business itself: costs may rise, and employees may resist change.

CORPORATE SOCIAL RESPONSIBILITY (CSR) CSR is the concept that a business has an obligation to operate in a way that will have a positive impact on society. It differs from ethical objectives in the way that these are specific goals that a business may set for itself based on established codes of behaviour. CSR is broader and less specific than ethical objectives. By recognizing its CSR, a business is more than likely to have a sustainable business model and act as a good corporate citizen.

IN CLASS CASE STUDY- 25 MARKS

SWOT ANALYSIS Is the first stage in the planning process. A business tool created to help business set objectives & decision making. It can be used to asses the current and future situation of a product, brand, business, proposal or decision. Is based on perception: the wider the sources & more reliable the data the stronger will be the analysis of the SWOT factors. Positive Factors Negative Factors Internal To Business (current) compared with competitors Strengths: Helps achieve its objectives Weaknesses: prevent or delay from achieving its goal. External factors to Business (possibilities in the future) Opportunities: Prospects for future development. Threats: Stop the prospects.

EXAMPLE SWOT ANALYSIS APPLE INC.

SWOT ANALYSIS AND MARKET POSITION Strengths Weaknesses Opportunities Growth Strategies: Combine strengths of business with market opportunities. Short term. Reorientation Strategies: Address the weaknesses in order to use them for opportunities in the market. Threats Defusing Strategies: Eliminate threats in the market by focusing on strengths of business. Defensive Strategies: Threats & Weaknesses exist in combination. Short term.

ANSOFF MATRIX Business tool to help plan growth strategies and set objectives. Looks at the growth potential in terms of the market and product.

EXAMPLE ANSOFF MATRIX - COCA COLA

IN CLASS CASE STUDY- 20 MARKS

IN CLASS CASE STUDY- 36 MARKS