BUSINESS AND MANAGEMENT MODULE 1 BUSINESS ORGANIZATIONS & ENVIRONMENT

ORGANIZATIONAL OBJECTIVES “If you don’t know where you are going, you’ll end up someplace else.” Yogi Berra, former MLB player

C ONTEXT On occasions when the business is faced with a difficult decision, reference to its objectives will help in the decision making process. Objectives provide a sense of direction for the business and its employees; the objectives can be assessed by reference to targets which in turn can be measured.

T HE N ATURE OF O BJECTIVES Objectives are the goals of the business. They represent the outcomes or targets that the business wants to gain in order to achieve its aims. The objectives of a business are derived from its aims. Well defined objectives are important. They will help the business to be clear about what it wants to achieve. The performance of a business could be assessed by how effectively it achieves its objectives.

C HARACTERISTICS OF SMART B USINESS O BJECTIVES Specific stating exactly what it is trying to achieve. Measurable able to be measured to decide if they have been achieved. Agreed have the approval and understanding of everyone involved. Realistic able to be achieved by the business taking into account its resources, competition, market, etc. Time Specific state a time by which they should be achieved.

L ENOVO This Chinese multinational technology firm, bought out the personal computers division of IBM in The aim was to establish itself outside of the Asian market by owning IBM’s globally recognized brands such as ThinkPad laptops. The company is committed to four key values: customer service innovative and entrepreneurial spirit accuracy and truth-seeking trustworthiness and integrity Recently, Lenovo has also tried to increase its market dominance by sponsoring key sporting events. Examples include its sponsorship deals with Williams Formula One (Grand Prix) racing team and the National basketball Association signed in 2007, and being a key corporate sponsorship of the Beijing Olympic games. Explain why it is important for Lenovo to specify its organizational objectives. Examine the reasons why Lenovo might not be able to meet its objectives.

F ACTORS W HICH D ETERMINE THE C ORPORATE O BJECTIVES OF A B USINESS The size and status of the business. The power of stakeholders. Ownership. Long and short-term objectives. External and internal pressures. Risks Corporate and business culture. Number of years the business has been operating.

AIMS MISSION CORPORATE OBJECTIVES DIVISIONAL OBJECTIVES DEPARTMENTAL OBJECTIVES The business over all purpose. The long-term goals which a business hopes to achieve. No two companies will have the same corporate aims. A statement of the business’s core aims, phrased in a way to motivate employees and to stimulate interest by outside groups. Its an attempt to condense the purpose of the business’s existence into one statement. INDIVIDUAL TARGETS These are the goals of the business. They are the outcomes or targets the business want to gain in order to achieve its aims. The objective of a business can be derived from its aims Specific targets for separate divisions. Targets for each department Individual goals/targets THE HIERARCHY OF OBJECTIVES

INDIVIDUAL TARGETS TO MAXIMISE SHAREHOLDERS VALUE TO INCREASE PROFITS OFF ALL DIVISIONS BY 10% PER YEAR WITHIN ONE REGION, TO INCREASE MARKET SHARE BY 10% AND CUT OVERHEADS BY 5% MARKETING: Increase Profits by 10%; FINANCE : Reduce Long- term borrowing by 5%; R&D: Develop one innovative product each year. eg IN THE MARKETING DEPARTMENT Increase Sales by an average of 5% per client. Introduce five more clients to the business each year. AIMS CORPORATE OBJECTIVES DIVISIONAL OBJECTIVES DEPARTMENTAL OBJECTIVES THE HIERARCHY OF OBJECTIVES

O THER T YPES OF O BJECTIVES Short term vs Long term Tactical (Operational) Strategic Ethical CSR

T ACTICAL (O PERATIONAL ) Short term objectives that are mainly departmentalized More sales; lower costs etc Survival – especially in tough economic times For example, a company may have a corporate objective of becoming a global operator in ten years, getting established in Europe within one year may be a tactical objective

S TRATEGIC O BJECTIVES Long term plans that usually affect the entire business Growth Image and reputation Market share In reality, businesses may have several strategic objectives taking place during the same time

E XAMPLES : S TRATEGIC O BJECTIVES A bigger market share. Quicker design-to-market times than rivals. Higher product quality than rivals. Better customer service than rivals Recognition as a leader in technology

E THICAL O BJECTIVES Ethics are the moral principles that guide decision-making and strategy An ethical business is likely to treat its workers, customers, shareholders and the environment in a responsible manner Ethics Report

E XERCISE – P ETER D RUCKER Complete the Peter Drucker assignment found on the drive

S TRATEGIC Q UESTIONS I NVOLVING E THICAL O BJECTIVES Is it ethical to reduce costs by exploiting cheaper labour in less economically developed countries? Is it ethical to sell products that are legal, but known to harm those who use them? Is it ethical to target children in advertising? Is it ethical to manufacture products that are used to kill? These are “big” questions that elicit strong views