BUSINESS OBJECTIVES

Business objectives in the private sector and public sector

• Explain the nature and importance of business objectives at corporate, departmental
and individual levels

• Discuss corporate social responsibility (CSR) as a business objective

Private and Public Sector

- The nature and importance of business objectives at corporate,
departmental and individual levels
- all linked;
- Aim is the purpose of the business.
 corporate; senior; strategic decisions; e.g. 5 year; directions;
 between departments; e.g. promotional campaign

The differences in the aims and objectives of private sector and public
sector enterprises

Private sector:
- Earn profit
- Survive
- Increase market share
- Growth
- Economies of scale

Public sector:
- Increase GDP ( gross domestic products ), total value of goods sold
within a specific geographical boundary of a country and within a
specific period of time.
- Decrease unemployment rates
- Provide a better standard of living
- Help the economy

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Hierarchy of Objectives – the aims and objectives of a firm are placed
in descending order of strategic importance

Draw the hierarchy of objectives

1. Aim
2. Mission
3. Corporate objectives
4. Divisional Objectives
5. Departmental Objectives
6. Individual Targets

Management by Objectives – a method of coordinating and motivating

all staff in an organisation by dividing the overall aim into specific
targets for each department, manager and employee to assist in the
achievement of a company’s goal.

Aim – where the business wants to go in the future; its goals.

Why set aims?

 They highlight key areas of development
 They help businesses keep a focus upon key areas
 They outline the ‘destination’ of where the company wants to
reach
 Provides a framework which strategies and plans can be drawn up

Corporate Aims – very long-term goals which a business hopes to

achieve.

Objectives – an objective is an aim or target for the future.

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If businesses do not have objectives then:
 There is no sense of direction or focus for the management team
or employees.
 Employees in the organisation do not know what they are aiming
to achieve.
 There is no way of assessing ‘success’ or ‘failure’
 Investors will not be keen to invest in the business as it is unlikely
to have a clear future strategy- because there is no clear
objective.

Corporate objectives: are specific goals set for the business to achieve.
– The long-term goals of the corporation that give focus and direction
to the business. These form the foundation for the strategic plans for
the business. These are SMART.
SMART – Specific, Measurable, Achievable, Realistic, Time Specific

SMART objectives
Why should objectives be smart?
- Objectives need to be SMART
S- Specific to the business
M- Measurable to allow for comparisons- how much they want this
objective to affect their business e.g. 85% of seats in an airline are economy class
A- Achievable because objectives set too high will demotivate- owners
must discuss how they want to act on these objectives
R- Realistic and relevant to the people trying to achieve them- should be
able to be financed by the business
T- Time specific- they should have a time limit to be achieved by- set a
date for the objective to be achieved by

- Clear and effective objectives should be SMART.

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 - Without a clear objective, developing effective plans of action or
taking strategic decisions will become almost impossible.

Importance of setting objective

Business objectives are important because it sets out what the business wants to
achieve and it gives an idea to employees, potential investors, stake holders etc.
So the business may be more successful in gaining people's trust that the business
it legit and capable of running the business

Why set Objectives?

 Objectives give the business a clearly defined target
 Enables businesses to measure progress towards its aims
 Can help motivate employees

Strategy – the long-term plans of action of a business that focus on

achieving its objectives.

Tactic – short-term policy or decision aimed at resolving a particular

problem or meeting a specific part of the overall strategy

Mission Statement – a statement of the business’ core aims and

purpose, phrased in a way to motivate employees and to stimulate
interest by outside groups.

Advantages of mission statement Disadvantages of mission statement

Tells stakeholders what the It can be very general and just
business ‘is about’ ‘wishful thinking’
The process of creating a mission It does not provide SMART
statement can help bring objectives for use within the
managers together. business.
It provides a sense of purpose ton It may need to be revised frequently
managers and workers. if the nature of the business
changes.
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Divisional/departmental objectives
These are the specific objectives of each division or department of the
business, based on the corporate aims and objectives.

Linking mission statements, objectives and strategies

 Once a corporate objective(s) has been established the senior
management of a business will focus on developing strategies to
achieve this objective
 Corporate objectives should not be ‘set in stone’. They may need
to be adapted or changed completely over time. For example:
i. Once a newly established firm has ‘survived’ the first crucial few
months of operation the owner may seek to expand the business
or aim to achieve high profit.
ii. Major changes to the external environment- such as an economic
recession- might result in objectives for a business growth being
changed to aiming for survival.

Common Corporate Objectives

 Profit Maximisation – To gain more money for the owners. Private

sector firms want to gain the highest profit through increasing
revenue and decreasing costs of production. But can this be
accurately measured? Or could it put other objectives at risk?
 Growth – to gain recognition, reduce costs, reduce
competitiveness, increase profits this is usually measured in terms
of sales or value of output; growth can reduce risk of takeovers,
appeal to new competitors, and motivate managers. Increased

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 size can bring benefits, but it can be too rapid and may be
achieved by reducing short-term returns to owner.
 Maximising shareholder value/ maximising returns to
shareholders – helps to direct management action towards taking
decisions that would increase share price and returns to
shareholders. To make takeover less likely.
 Increasing Market share – Increased market share often develops a
strong brand image which makes it easier to sell products to
customer. Indicates that the marketing mix of the business is
proving to be more successful than that of its competitors.
Becoming the ‘brand leader’ would make customers and retailers
want to be more involved with this product over the competitors.
It also increases power over suppliers and prices but risks
monopoly investigation.
 Maximising short-term sales revenue – would benefit managers
and staff when salaries and bonuses are dependent on sales
revenue levels
 Survival – To last at least more than a year. Likely to be key
objective of most small and new business start-ups. There is a
high failure rate of newly formed businesses, which means that to
survive for the first two years of trading is a very important aim
for entrepreneurs. Survival is also an important aim during
economic recession.
 Profit Satisficing – aiming to achieve enough/sufficient profit to
keep the owners happy but not aiming to work flat out to earn as
much profit as possible. Once a satisfactory level of profit has
been achieved, the owners consider that other aims take priority
– such as more leisure time.
Corporate Social Responsibility – The environmental, social, ethical
impacts of business's decisions. Aiming to satisfy stakeholders’
objectives as well as owners

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Corporate social responsibility (CSR) as a business objective

Corporate social responsibility: the concept that accepts that a

business should consider the interests of society in its activities and
decisions, beyond the legal obligations that it has by taking
responsibility for the impact of its decisions and activities on customers,
employees, communities and the environment.

CSR issues include:

 Business decisions that impact on the environment- should

businesses protect the environment for future generations even if
this substantially adds to costs and reduces short-term profits?
 Social and environmental auditing- should businesses report on
social and environmental impacts even though these reports
might contain some negative factors, such as levels of waste?
 Accurate financial accounting-is it acceptable to ‘window dress
accounts’
 Not paying incentives to gain contracts- this will help ensure fair
prices are paid by customers but may lead to some contracts
being lost to ‘unethical businesses’. This issue is linked to
business ethics (moral guidelines that influence decision making)

Corporate Social Responsibility and Ethics

Ethics – the moral guidelines that determine decision making

Ethical Code – a document detailing a company’s rules and guidelines
on staff behaviour that must be followed by all employees

Reasons for CSR Reasons against CSR

 Marketing and  Cost involved in ensuring a
promotional advantage – socially responsible

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 good reputation approach
 Reduces the changes of  Reduction in Profits
breaking laws, avoiding
bad publicity and heavy
court fines
 Distraction from main business
activity
 Long term financial gain –  In developing countries, it
through increase in is argued that economic
demand etc. growth is more important
than CSR
 Improvement in the  Businesses just using it for
number and quality of publicity not actually
employee applications doing it for society

Objectives and business decisions

• Explain the relationship between mission statement, objectives, strategy and tactics

• Identify and explain the different stages of business decision making and the role of
objectives in the stages of business decision making

• Explain how objectives might change over time

• Discuss the translation of objectives into targets and budgets

• Explain the communication of objectives and their likely impact on the workforce

• Discuss how ethics may influence business objectives and activities

Objectives and decision making

Clear objectives are essential for effective business decision making.
Objectives should be at the center of the decision-making process

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Corporate objectives at the center of the decision-making cycle

Factors influencing corporate objectives

The following factors determine business Objectives:
 Size and Legal Form – Smaller businesses will be more concerned
with survival or satisficing, whereas larger business may be more
concerned rapid business growth or profit maximisation.
 Corporate Culture – the code of behaviour and attitudes that
influence the decision-making style of the managers and other
employees of the business. Culture is about people, how they
perform and deal with others, how aggressive they are in the
pursuit of objectives and how adaptable they are in the face of
change.
 Sector of Business (private/public) – state-owned organisations
tend not to have profit as a major objective; instead ‘quality of
service’ measures is often used.
 Numbers of Years in Operation/Age of the business – newly
formed businesses are likely to be driven by survival. Once well
established, the business may pursue other objectives such as
growth and profit.

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  Competition
 Economic situation

Relationship between mission statement, objectives, strategy and

tactics
 Corporate objectives → marketing objectives → marketing
strategies → marketing tactics
Aim – where the business wants to go in the future; its goals.

Corporate Aims – very long-term goals which a business hopes to

achieve.

Strategy – the long-term plans of action of a business that focus on

achieving its aims

Tactic – short-term policy or decision aimed at resolving a particular

problem or meeting a specific part of the overall strategy

Why set aims?

 They highlight key areas of development
 They help businesses keep a focus upon key areas
 They outline the ‘destination’ of where the company wants to
reach
 Provides a framework which strategies and plans can be drawn up

Mission Statement – a statement of the business’ core aims, phrased in

a way to motivate employees and to stimulate interest by outside
groups. It is used in marketing and advertisements, to give others a
good impression

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The different stages of business decision making and the role of
objectives in the stages of business decision making
 Need objectives to make decision for the direction;
 Objectives can change because of external factors e.g. Recession

How objectives might change over time

- Culture, size, legal identity, number of years operated etc.

Translation of objectives into targets and budgets

 realistic objectives- targets set;
 identify the amount of money → achieve
 objective needs to be affordable; achievable; realistic

The communication of objectives and their likely impact on the

workforce
 Keep staff informed; realistic objectives → motivated.
 Don’t change objective without informing; meeting to inform.

Potential conflict between objectives

These business objectives can conflict because different people in a
business want different things at different times.
Conflict can occur in a number of different ways:
1. Maximum sales growth might conflict with the profit objective-
selling more does not necessarily mean higher profits.
2. Between short-term objectives and long-term objectives-
investing capital for long term expansion may conflict with short-
term profit objectives
3. Stakeholders objectives often conflict- it is often impossible for
business to satisfy all stakeholders all of the time. All important
business decisions must involve some stakeholders gaining and
some losing.

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Ethics – should business objectives reflect ethical standards?

How ethics may influence business objectives & activities:

Ethical codes are the rules, guidelines on staff behaviour.

Should business decisions be influenced by just profit calculations-
should moral issues be considered too? This is one of the big debates in
global business today.

Should managers be allowed to?

 Advertise directly to children?
 Employ very young workers?
 Pay workers as little as possible?
 Pollute the environment if it is not illegal to do so?
 Pay bribe to gain extra orders?

Business that makes ethical decisions has long term benefits:

 avoid expensive court cases
 don’t lose consumer loyalty → good publicity and sales
 attract ethical consumers and well-qualified staff
 awarded by government contracts

The arguments for and against ethical decisions are

For:

 May give business positive publicity

 Attract customers who are ethically minded
 Attract employees who want to work for an ethical business

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Against:

 May add to business costs, for example, paying workers above

‘poverty wages’.
 May make the business uncompetitive if other firms in the
industry are not acting ethically
 Sales may be lost if bribes are not paid
 Most customers want low prices and are not worried about how
products are made or how workers are treated.

Most businesses have an ethical code. This can be used as a guide to

all employees as to what behaviour is and is not acceptable in the
business. However, if workers and managers are paid large bonuses
for outstanding sales or profits’, might they be tempted to break the
ethical code to try to cut costs or increase sales?

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