Stakeholders and Business Objectives

Corporate aims
Definition: These are very long-term goals which a business hopes to

achieve. The core of a business’s activity is expressed in its corporate
aims and plans.
A business without a long-term corporate plan or aim is likely to drift

from event to event without a clear sense of focus.
Benefits of establishing corporate aims
v They become the starting point for the entire set of objectives on
which effective management is based.
v They can help develop a sense of purpose and direction for the
whole organization if they are clearly and unambiguously
communicated to the workforce.
v They allow an assessment to be made, at a later date, of how
successful the business has been in attaining its goals.
v They provide the framework within which the strategies or plans of
the business can be drawn up.
Mission statement
Definition: It is a brief statement of the business’s core aims, phrased

in a way to motivate employees and to stimulate interest from outside
groups.
Examples of mission statements
 A –level college: ‘ To provide an academic curriculum in a caring

and supportive environment’
 Microsoft: ‘ To enable people and businesses throughout the world
to realize their full potential’
 Google: ‘ To organize the worlds information and make it
universally accessible and useful’
Benefits of having mission statements
q They quickly inform groups outside the business what the central
aim and vision are.
q They can prove motivating to employees, especially where an
organization is looked upon, as a result of its mission statement,
as a caring and environmentally friendly body.
q When they include moral statements or values to be worked
towards, then these can help to guide and direct individual
employee behavior at work.
q They help to establish in the eyes of other groups ‘what the
business is about’.
However, mission statements have been criticized for being:
 Based on a public relations exercise to make stakeholder groups

‘feel good’ about the organization.
 Virtually impossible to really analyze or disagree with.
 Too vague and general, so that they end up saying little that is
specific about the business or its future plans.
Corporate objectives/ Business objectives
They are based upon the central aim or mission of the business, but
they are expressed in terms that provide a much clearer guide for
management action or strategy. The following are some of the
common corporate objectives.
By setting clear business objectives; managers will: -
Ø Create a sense of direction and purpose for all employees, which

will increase their motivation.
Ø Provide specific targets for future business strategies
Ø Give a means of assessing success or failure when actual

business performance is judged against the original
objectives.
A. Objectives of private sector businesses
1. Profit maximization
The chief argument in support of this objective is that it seems
rational to seek the maximum profit available from a given venture.
Not to maximize profit, according to this objective, is seen as a
missed opportunity. In addition, all the stakeholders in a business are
working for reward. Profits are essentials for:
 Rewarding investors in a business and,
 For financing further growth,
 To persuade business owners- or entrepreneurs to take risks.
2. Profit satisficing
§ It means aiming to achieve enough profit to keep the owners happy

but not to work ‘flat out’ to earn as much profit as possible. This
objective is often suggested as being common among owners of
small businesses who wish to live comfortably but do not want to
work longer and longer hours in order to earn even more profit.
§ Once a ‘satisfactory’ level of profit has been achieved, the owners

consider that other aims take priority- such as more leisure time.
3. Survival
It is likely to be the key objective of most new business start-ups.

The high failure rate of new businesses means that to survive for the
first two years of trading is an important aim for entrepreneurs. Once
the business has become firmly established, then other long-term
objectives can be established.
4. Maximizing short-term sales revenue
This could benefit managers and staff when salaries and bonuses are
dependent on sales revenue levels. However, if increased sales are
achieved by reducing prices, the actual profits of the business might
fall.
5. Growth
It is usually measured in terms of sales or value of output. It has

many potential benefits for both managers and owners. These
include:
 Large firms will be less likely to be taken over

 Large firms will also benefit from economies of scale
 Managers may gain higher salaries and fringe benefits
 The business will become competitive.
However, business objectives based on growth do have the following
limitations:
i. Expansion that is too rapid can lead to cash-flow problems.

ii. Sales growth might be achieved at the expense of lower profit
margins.
iii.Larger businesses can experience diseconomies of scale.
iv. Using profits to finance growth can lead to lower short-term returns to
shareholders.
v. Growth into new business areas and activities away from the firm’s
core activities can result in a loss of focus and direction for the
whole organization.
6. Increasing market share
It is closely linked to overall growth. Increasing market share indicates that the
marketing mix of the business is proving to be more successful than that of its
competitors. Benefits resulting from having the highest market share –being the
brand leader include:
i. Retailers will be keen to stock and promote the best selling brand.
ii. Profit margins offered to retailers may be lower than competing brands as the
shops are so keen to stock it. This leaves more profit for the producer.
iii. Effective promotional campaigns are often based on ‘buy our product with
confidence- it is the brand leader’.
7. Corporate social responsibility
It applies to those businesses that consider the interests of society by

taking responsibility for the impact of their decisions and activities on
customers, employees, communities and the environment.
Examples include:
 Firms that promote organic and vegetarian foods.

 Retailers that emphasize the proportion of their products made
from recycled materials.
 Businesses that refuse to stock goods that have been tested
8. Maximizing shareholder value
This could apply to public limited companies and directs

management action towards taking decisions that would increase the
company share price and dividends paid to shareholders. These
targets might be achieved by pursuing the goal of profit
maximization.
Important issues relating to corporate objectives
 Must be based on the corporate aim and should clearly link in with it.
 Should be achievable and measurable if they are to motivate
employees.
 Need to be communicated to employees and investors in the business.
 Will form the framework of more specific departmental or strategic
objectives.
 Should indicate a time scale for their achievement (SMART).
Conflicts between corporate objectives
Conflicts between objectives can often occur. These conflicts will

need to be resolved by senior managers and decisions taken on the
most significant objective for the next time period. The most common
conflicts that can occur are:
1. Growth versus profit
Achieving higher sales by raising promotional expenditure and by

reducing prices will be likely to reduce short-term profits.
2. Short-term versus long term
Lower profits and cash flow may need to be accepted in the short term
if managers decide to invest heavily in new technology or in
developing new products that might lead to higher profits in the longer
term.
3. Stakeholder conflicts
v This could be between shareholders and creditors. Creditors have a

claim on part of the earnings of the firm for payment of interest
and principal on the debt and they have claim on the firm’s assets
in the event of insolvency.
v However, shareholders have control through managers over

decisions that affect the profitability and risk of a business
organization.
B. Objectives of Social Enterprises
Have 3 main aims. These are: -
q Economic (financial) – to make a profit to re-invest back
into the business and provide some financial return to the
owners.
q Social – To provide jobs or support for local, often
disadvantaged, communities.
q Environmental - To protect the environment and to manage
the business in an environmentally sustainable way.
Note: -these aims are referred to as triple bottom line
C. Objectives of public sector businesses
v To provide an efficient, reliable service to the public, such
as water supply or postal service.
v To encourage economic and social development, especially
in deprived areas.
v To create employment or prevent major job losses if the
industry is making a financial loss.
v To meet the financial targets set by the government, but not
necessarily make a profit.
v To achieve high environmental standards.
STAKEHOLDERS
Definition: Stakeholders- People or groups of people who can be

affected by and therefore have an interest in any action taken by an
organization.
Stakeholder concept (CSR) - Is the view that businesses and their

managers have responsibilities to a wide range of groups, not just
shareholders.
The main stakeholders of a business are:
I. Customers
II. Suppliers
III.Employees
IV.Local communities
V. Government and government agencies

Special interest groups (pressure groups) - Are interested in
changing a business’s policy towards pollution or testing of chemicals
on animals.
Shareholders –It includes maximizing shareholders value which

consists of:
a. Increasing the company share price.
b. Payment of dividends to shareholders.

Businesses have the following responsibilities to stakeholders:
I. Customers.
i. Satisfy customers demand.
ii. Upholding the law with regards to consumer protection and accurate
advertising.
Benefits of accepting these responsibilities.
 Consumer loyalty
 Repeat purchases
 Good publicity
 Good customer feedback which helps to improve further goods and services.
Suppliers
i. Paying them promptly
ii. Placing regular orders
iii.Offering long term contracts
 Supplier loyalty
 Prepared to meet deadlines
 Reasonable credit terms likely to be offered

Employees
i. Job security
ii. Providing training opportunities
iii. Offering good working conditions
iv. Paying more than minimum wages
 Employee loyalty
 Low labour turnover
 Improved motivation
 More effective communication
 Employee suggestions for improving efficiency and customer service

Local community
i. Offer secure employment
ii. Keep the adverse environment effects to a minimum
iii.Spend as much as possible on the local suppliers to generate more

incomes.
 Planning permission to expand the business
 Likely to accept some of the negative effects caused by business

operations if financial support is given.
Government
i. Paying taxes on time
ii. Complete government statistical and other forms accurately
iii.Where possible seek export markets
 Receiving planning permission for expansion projects
 Getting valuable government contracts
 Licences to set up new operations likely to be awarded
 Approval for request for subsidies to expand businesses

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Corporate aims

Definition: These are very long-term goals which a business hopes to

A business without a long-term corporate plan or aim is likely to drift

Definition: It is a brief statement of the business’s core aims, phrased

 A –level college: ‘ To provide an academic curriculum in a caring

 Based on a public relations exercise to make stakeholder groups

Ø Create a sense of direction and purpose for all employees, which

Ø Provide specific targets for future business strategies

Ø Give a means of assessing success or failure when actual

§ It means aiming to achieve enough profit to keep the owners happy

§ Once a ‘satisfactory’ level of profit has been achieved, the owners

It is likely to be the key objective of most new business start-ups.

It is usually measured in terms of sales or value of output. It has

 Large firms will be less likely to be taken over

i. Expansion that is too rapid can lead to cash-flow problems.

It applies to those businesses that consider the interests of society by

 Firms that promote organic and vegetarian foods.

This could apply to public limited companies and directs

Conflicts between objectives can often occur. These conflicts will

Achieving higher sales by raising promotional expenditure and by

v This could be between shareholders and creditors. Creditors have a

v However, shareholders have control through managers over

Definition: Stakeholders- People or groups of people who can be

Stakeholder concept (CSR) - Is the view that businesses and their

V. Government and government agencies

Shareholders –It includes maximizing shareholders value which

a. Increasing the company share price.

b. Payment of dividends to shareholders.

i. Satisfy customers demand.

Benefits of accepting these responsibilities.

i. Paying them promptly

ii. Placing regular orders

iii.Offering long term contracts

Benefits of accepting these responsibilities.

 Prepared to meet deadlines

 Reasonable credit terms likely to be offered

ii. Providing training opportunities

iii. Offering good working conditions

iv. Paying more than minimum wages

Benefits of accepting these responsibilities.

 Low labour turnover

 More effective communication

 Employee suggestions for improving efficiency and customer service

i. Offer secure employment

ii. Keep the adverse environment effects to a minimum

iii.Spend as much as possible on the local suppliers to generate more

Benefits of accepting these responsibilities.

 Planning permission to expand the business

 Likely to accept some of the negative effects caused by business

i. Paying taxes on time

ii. Complete government statistical and other forms accurately

iii.Where possible seek export markets

Benefits of accepting these responsibilities.

 Receiving planning permission for expansion projects

 Getting valuable government contracts

 Licences to set up new operations likely to be awarded

 Approval for request for subsidies to expand businesses

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