2. Business Policy & Strategy
What Objectives are Pursued by General Managers
Business Goals are the primary outcomes, towards which efforts and actions are directed in a business. Normally these provide the general direction and are not quantified.
Business Objectives are more specific, often measurable and with shorter time frame. They are measurable steps an organization takes to achieve its goals. A number of objectives may serve a single business goal, over a number of years.

3. Business Policy & Strategy
SMART OBJECTIVES
Specific (what?)
Measurable (by how much?)
Achievable (can it be done?)
Relevant (why?)
Time bound (when?)

4. Business Policy & Strategy
Examples of Business Objectives
Profit growth by 10% in 2016
Improved efficiency by lowering costs by 5% in 2016
Employee satisfaction by improving the internal survey score by 5 units.
Employee development by providing 5 training days per person in a year
Product quality improvement by reducing recalls or defects by 10%
Customer Satisfaction by improving the external survey score by 5 units
Increase shareholders satisfaction by increasing dividend by 2%
Social responsibility by contributing to road safety

5. Business Policy & Strategy
Business Objectives
A company may pursue multiple objectives
Some objectives may be repeated for several years and others may be just for one year
The aggregate of all business unit objectives must provide the corporate objectives
The usual dilemma, short term objectives vs longer term objectives.
Not all objectives carry the same weighting and not all have the same priority

6. Business Policy & Strategy
Business Objectives (2)
Official Objectives vs Operative Objectives
Official objectives are those that the organisation say that they pursue on official occasions such as public speaking, press conference.
Operative objectives are those that the organisation is actually pursuing.
For example, an official objective may be to reduce pollution but if the organisation does not invest towards this then the objective does not become operative

7. Business Policy & Strategy
Business Objectives (3)
There may be constraints to reaching the set objectives. For example, pursuing higher market shares may require additional funds for promotional activities and these may not be available at that moment.
Businesses need to operate in a way that the social environment in which they are located is at least unharmed and at best promoted. Businesses are urged to be concerned with human rights, environmental protection, equality of opportunity, safety of people etc. Company objectives need to address some of these.

8. Business Policy & Strategy
Why set business objectives?
Objectives are more tangible targets than mission. They are the stepping stones in achieving the ultimate goals.
Objectives help define the organisation in its environment.
Firms need to justify their existence and to legitimize themselves in the eyes of the customers, the government and society. By stating their objectives, they attract people who identify with those objectives and would like to work with. Thus objectives define the enterprise.
Objectives help to co-ordinate decisions and decision makers. Stated objectives direct attention of employees to desirable standards of behaviours. Reduces conflict.
Objectives provide standards for assessing performance. Without objectives the firm has no clear standards to judge itself. .

9. Business Policy & Strategy
How are Mission and Objectives Formulated
Mission and Objectives are formulated by the corporate level strategists. Their choices are affected by several factors such as the external environment, firm’s resources, shareholders expectations, external and internal power relationships, past strategies, experience and goals of top executives
External Environment: For example, let’s assume that one of the objectives is to maximise sales volume. This may be limited by anti trust legislation, or government regulations on excessive profits. Trade unions may demand higher, unrealistic benefits for employees, competitors may react by offensive strategies. Suppliers may become stronger and demand outrageous higher prices. Hence, the organisation’s objective of sales maximisation may be limited by the most powerful and most dependent stakeholder.

10. Business Policy & Strategy
How are Mission and Objectives Formulated (2)
Firm’s resources – The firm may not have the available resources to pursue a specific objective. In addition, the internal power relationships can influence the availability of the resources. Does management have the support of the shareholders? Does the CEO enjoy the support of the top, middle and lower management? The power relationships between the various business units can affect the objectives. Also the withholding competitive and market intelligent information by the lower level employees may constitute an informal power which can affect the setting of objectives.
Value system of top executives – Organisations with strong cultures and values will attract and retain managers with similar values. These values will essentially dictate what is good, bad, desirable or undesirable for the organisation. Thus the setting of objectives will be guided by the values of the firm.
Risk takers vs risk aversive
Aggressive vs passive
Quality vs quantity
Autocratic vs participative

11. Business Policy & Strategy
How are Mission and Objectives Formulated (3)
Awareness by Management of the past development of the firm –
The past experience and history of the firm will play a role in setting the objectives. The process is usually incremental from previous state , given the present environmental factors
The momentum of large organisations makes step changes difficult to accomplish.
Overall,
Resources
Environment
Organizational objectives
Values
Past Development

12. Business Policy & Strategy
Why do Objectives Change
Could be due to gap analysis between expected and desired outcomes.
Managers could attempt to surpass their predecessors
Arrival of a new CEO from outside the organisation who attempts to initiate changes.
Significant and unexpected changes in the environment
Under crisis either internally or externally
New entrants into the market, new exits from the market, new government regulations

13. Business Policy & Strategy
The Specificity of Objectives
How broadly or narrowly should the objectives be stated?
Objectives are usually more narrow as one moves down the organisation
Formulation of objectives is often an evolving process and tends to change with the size of the organisation
Smaller and newer firms may set some objectives but in informal and often only top managers know them.
As firms gain more experience, they may start to formulate and communicate objectives in writing.
Then they start quantifying and prioritising objectives
Management by Objectives (MBO) technique

14. Business Policy & Strategy
Performance Contracts for Business Units and Individuals
Corporate Objectives can then be translated into targets for business units and individuals.
Performance Contracts are then developed and agreed between line managers and individuals with quantifiable targets.
For example:
Sales increase by 10% overall
Sales increase by 15% for a new product
Gain three new customers in the industrial sector
Reduce costs by 5%
Train new sales person for three months
Attend training to improve knowledge on new sales techniques
Improve team work and spirit by introducing team building events , 3 per year