Corporate objectives and strategy TOPIC 4.1

An aim is what the business intends to do in the long term It could also be regarded as purpose of the business Business aims

Profit Shareholders value Survival Sales revenue Customer welfare Employee benefits Benefiting the local community and the environment

Vision statements Large companies may formulate a vision statement This is a statement about what the company wants to be both now and in the future. It is: – Aspirational because it describes the values of the business working to its very best; – Inspirational because it is deliberately designed to motivate staff to achieve the vision and for other stakeholders to work with the business

objectives An outcome which allows a business to achieve its aims. Business can have a wide variety of objectives such as: – To increase pre-tax profits by ten percent over the next 12 months – To increase sales in the USA by five percent over the next six months, etc

Objectives should be practical outcomes from the operation of a business Firms should set aside smart objectives Corporate objectives – Objectives set by the most senior management and directors for the company as a whole. – These are mainly financial objectives Functional objectives – Functional objectives are departmental objectives objectives

Large businesses often have a mission statement. This is a statement, written by the business of its purpose and primary objectives. Its is about here and now, in contrast to a vision statement which is about the future and where the business would like to be. Mission statements

1.Businesses have aims which they hope to achieve through their objectives. 2.But objectives are not achieved through chance. 3. Many businesses plan how to achieve their objectives. 4.Planning to achieve objectives is known as strategy Strategy

Hierarchy of strategy within a large company Corporate strategyBusiness unit or divisional strategyFunctional strategy

Strategy and tactics Strategies set out the long term objectives and the plan for how they will be achieved. tactics are short-term strategies to achieve limited objectives.

Corporate objectives for plcs Maximizing shareholder value Growth in the size of the firm diversification

Risk of diversification 1.The business will not understand the customers in a new market as well as in an existing one 2.The marketing strengths of an existing brand name and existing distribution channels may no longer apply.

Objectives for plcs Profit maximizing Profit satisfying

Corporate objectives any business might adopt Marketing standing Profit Growth survival

Market standing Establishing an image that helps add value to the product range Barclay and Black and Decker case How is Apple able to charge £400 for its product?

Not-for-profit motives People start social enterprises to overcome bureaucratic nightmare of running a charity. Any business that you know running for this purpose.....?

Corporate strategy Medium to long-term plan about how to achieve the objectives they have established. It sets out the actions that will be taken in order to achieve the goals. The key to success when forming a strategy of this kind is relating the firm’s strengths to the opportunities that exist in the market place.

Hierarchy of strategies 1.Corporate strategies 2.Business unit (or divisional strategy) 3.Functional (or departmental strategy)

Porter’s five forces Michael Porter, develops a method by which an organisation can analyse the competitive environment within which it operates in order to create strategic policy. He suggests that firms need to analyse five factors within an industry in order to understand the marketplace. This will help managers understand how fierce or how favourable the competitive environment is.

five forces The five pressures on the business that Michael Porter says affect it success in the market place: near competitors, market accessibility to new entrants, possibility of substitutes, power of suppliers, power of customers.

Porter’s five forces Industry competitors Intensity of rivalry New entrants buyers substitutes suppliers Threat of new entrants Threat of substitutes Bargaining power of suppliers Bargaining power buyers