Ramesh Naoickyer

BUSINESS MANAGEMENT (IBDP)

Unit 1: BUSINESS ORGANISATION AND ENVIRONMENT
Chapter 1.3. Organizational Objectives

Nature, role, and importance of objectives

Objectives are used to state the goals of the business, and also to assess the business' performance.

Corporate objectives need to be SMART in order to be effective:

S: Specific – not too broad or general, focused

M: Measurable – has to provide quantifiable measures or criteria that help evaluation of achievement
A; Achievable – is realistic relative to business and economic situation.
R: Relevant – related and corresponds to overall business mission and vision.
T: Time constrained – has a time limit by which success / failure are to be measured.

https://youtu.be/1-SvuFIQjK8
https://youtu.be/0Mi9_XEXQqc
https://youtu.be/wGbmAH4mBPA

The role and importance of objectives are:

• Determine the role of the employees

• Determine the strategy to be done
• Provide shareholders with a clear idea of the business in which they have invested
• Provide a sense of direction for the business
• Provide a basis for decision making
• As a measurement for achievement

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AO2 - Vision statement and mission statement

 Vision statement:

Meaning of vision statement: a statement outlining the desired position of company in

distant future.

“Where do we want to be?”

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“To be the leading sports brand in the world.”

Describes a desired position for the company in the far future (“Where do we want to be?”)

Mission statement:

Meaning of a mission statement: statement outlining the underlying purpose of an

organization
+ sense of purpose to employees
+ sense of direction to employees
+ communicate to stakeholders about company’s purpose.
“ How do we achieve the vision?”
“provision of wide opportunities for all”
“Healthiest products provision.”

 Purpose of business, states what the business is and does

 How the vision statement will be achieved (“How do we get
there?”)
 Vision and mission statement
 Positive, ideal goals that direct the business in the right direction.
 Parallel to business
 Customer centric
 Answers:
 Where are we now?
 Where do we want to be?
 How do we get there?
 How do we know we are there?

AO3 - Aims, objectives, strategies and tactics, and their relationships

https://youtu.be/voZI75TyeHI

 Aims, objectives, strategies, and tactics

 Aims – long term goals of what the company wants to achieve.

Vague and unquantifiable. “Provide high quality education to all.”
 Objectives – shorter term goals that are specific and measurable.
“To achieve a 95% pass rate within two years”

Merits of Aims and objectives:

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 Individual targets, departmental objectives, divisional objectives,

corporate objectives, mission, aim (pyramid, base to height is left to right).
 Provide sense of direction and purpose to organisation.
 Guides and unifies management and workforce and motives them.
 Basis for strategic planning
 Builds trust and goodwill

Strategies – Long term plans of action to achieve the organizational objectives.

Tactics – Short term plans of action to achieve the short term objectives.

Strategic objectives – profit maximization, growth, image and reputation.

Tactical objectives – Sales maximization for financial year.

AO3 - The need for organizations to change objectives and innovate in response to changes in internal
and external environments

 Changing objectives and innovations (due to changes in internal and external

environment)

 Companies’ changes in internal and external factors require innovative

changes in the company’s organizational objectives.
 Context of company must be considered to evaluate whether they are able
to adapt to the change.

 Internal factors
 Corporate culture – Should be flexible and adaptable
organizational culture.
 Type and size of organization – Many stakeholders would mean
individual objective must be considered before changing objectives. Small or
big businesses run differently.
 Age of organization – change must be consistent with times
 Financial status – Financial situation determines if firm can change
objectives and on what scale. profit goals, how much money the business has to
use
 Risk profile of shareholders – If investors are risk-averse or risk-
loving

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 Private/Public sector:
 Private sector = profit, would change objectives to adapt
and maximize profits.
 Public sector = serve, would change objectives to serve
public better.

 External factors:
 State of economy – strong or depressed economy affects the
company too. This can change objectives of a firm growth or recession.
 Government constraints – government telling you not to expand
somewhere.
 Presence and power of pressure groups – (e.g. not to expand in the
endangered locations)
 New technologies

Remember: External changes are not always negative. They can be positive.

AO1 - Ethical objectives and corporate social responsibility (CSR)

 Corporate social responsibility (CSR)

 A concept whereby organizations consider the interests of society by

taking responsibility for the impact of their activities on other stakeholders.

(For CSR & Being ethical)

Benefits: (For CSR & Being ethical)

 Better employee recruitment and retention Sense of value

and purpose for employees that may not be there in other firms.
 Boosts company’s image/reputation
 Risk management against scandals, accidents, etc.
 Appeases pressure groups
 Brand differentiation and smoother operations
 Customer loyalty & goodwill

Limitations: (For CSR & Being ethical)

 High compliance costs can lower profits

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 Forced to use ethically produced raw materials, which increase

production costs and may reduce profit
 Ethics are not universal or unchanging anyway. They are based on
subjectivity.
 Lower profits demotivates managers as remuneration/bonuses is
low.
 Attitudes change over time; acceptable practices before are unacceptable today.
 CSR objectives adapt to changes in social norms/not issues (i.e. tattoos, dyed
hair, jeans, single parents, gender bias, child labor, smoking, obesity, global
warming, etc.)

AO3 - The reasons why organizations set ethical objectives and the impact of implementing them.

Ethical – the more values and principles that guide the decision-making process in an
organisation.

AO3 - The evolving role and nature of CSR

Ethics have an evolving nature:

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1. What is considered ‘right’ or ‘wrong’ is largely dependent on public opinion,

which changes overtime. Hence, these changes in societal norms force firms to
review their CSR policies frequently.
2. Media pressure in countries means that large multinationals must donate part of
their profits to charity.
Example: Climate change & environmental damage.

AO3, AO4 - SWOT analysis of a given organization

 SWOT analysis: It is a useful decision-making tool used to assess current and future
implication of a business decision. Based on internal and external factors. Provide guidance
for future strategies.

 Qualitative form of assessment

 Guides management for future strategies
 Used alongside STEEPLE, which helps to further identify
opportunities and threats
 Internal factors
 Strengths – advantages that are basis for developing
competitive advantage against competitors.
 e.g. Strong brand loyalty, skilled workforce, good
corporate image.
 Weakness – negative factors that are unfavorable compared
to rivals. To remain competitive, business must reduce or remove its
weaknesses.
 e.g. unskilled workforce, limited capacity, obsolete
equipment, etc.

 External factors:
 Opportunities – potential areas for expansion of the
business and future profits. For future development.
 Eg1: China has large customer base. This is an opportunity
for firms. Also, policeis and trends etc.
 e.g. political/Economic policies, social statistics &
trends, etc.
 Threats – Hindrances to the business. They cause problems
for the business.

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 e.g. Changes in Fashion, oil crises, economic

environment, market condition competitors etc.

AO3, AO4 - Ansoff matrix for different growth strategies of a given organization

Ansoff matrix - Analytical tool that helps managers choose and devise growth strategy for
products and markets.
1. Existing product + Existing market = Market penetration ( low risk)
Eg: price adjustments. Increase promotion, minor product improvements. Aims to increase
market share.
2. New product + Existing Market = Product development (Medium risk)

 Innovation to replace existing products.

 Focusing on consumer needs
 Capitalize on technology

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+ Brand extension
- Customers may not like the new product.

3. Existing product + new market = Market Development (medium risk)

+ New distribution channel
+Expanding geographically
+Attract new market segments
-New consumers may not like the product
-Extensive market research required.

4. New product + new market = Diversification (high risk)

+ If successful, higher gains can be reaped from various industries

+ Spreads out risks and safeguards against economic shocks over diverse product
portfolio
- High chance of failure.
 Related diversification (same industry – e.g. McDonalds and
McCafe)
 Unrelated diversification (different industry – e.g. Zesto and Zest
Air)

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References:

https://prezi.com/dympgzkgymso/13-organizational-objectives-2014/

https://www.businessmadeeasy.xyz/business-basics/1-3-organizational-objectives/

https://www.mrbevan.com/13-organizational-objectives.html
https://slideplayer.com/slide/7256272/

https://www.slideshare.net/blackwell3/bm-13-organizational-objectives-presentation
http://share.nanjing-school.com/dpbusinessmanagement/business-organisation/1-3-
organisational-objectives/

https://www.youtube.com/watch?v=KtG6PaCW75s

https://sites.google.com/site/brackensibbusiness/units/business-organizations-and-
environment/1-3-organizational-objectives

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