Aims, objectives and tactics

Aims are what the company wants to achieve.

Long term aspirational goals of an organization, usually stated in the mission statement, brief statements of
purpose.

Objectives are clearly defined and measurable targets of a business, used to achieve its aims.
Strategic: targets what the whole organization wants to achieve, often related to what the owners of the
business want to focus on.
Tactical: easier to change or reverse than strategic objectives, specific targets with definite timelines.
Operational: day to day targets of departments within an organization.

Strategies state the course of action to meet the objectives.

Common Business Objectives;

1. Growth
2. Profit
3. Stability
4. Protecting the Shareholder Value

1. Growth: increase in the size of a business and its operations. It can be measured by its sale revenue,
market share, customer loyalty, profits.
Benefits:
higher sales revenue and profits- as the firm grow larger its sales revenue increases, which enables
higher profits.
Economies of scale- cost saving benefits for firms as they grow larger.

2. Profits: the positive difference between a firm’s sales revenue and total costs of production.
It is an important objective since, it boosts the employee morale and provides internal source of
finance to further develop the business.
It is also an incentive for the entrepreneurs to take risks to start up a new business and to remain in the
business sector.

3. Protecting the Shareholder Value: done by giving periodic and reassured returns on shareholders’
investments.
It leads to increased investments and its done by the CEO and the board of directors

4. Stability: ability to withstand temporary problems such as the loss of a key employee, decrease in sales
and lack of capital.
It is important for the business to operate at the optimum level.
It is achieved by gaining the loyalty and confidence of customers and employee satisfaction.
Corporate Social Responsibility

the principle that in addition to pursuing profit generation, corporates should strive to act in a way that
positively effects the society.

It empowers the employees to use corporate resources at their disposal to do good.

Bolsters the company’s image.
Boosts the employee morale which leads to greater productivity, it has an impact on how profitable the
company can be.
Makes the business stand out from the competition since they develop a superior brand recognition.
Increase customer retention/loyalty.
Cons;
It has expenses to adhere industry regulations.
The presence of bureaucracy may delay decision making.
Stakeholders may become upset due to the costs.

Stakeholders
Any group or individual who can affect or is affected by the achievement of the organization’s objectives.
Internal Stakeholders: individuals or groups that are part of the organization such as employees, managers,
and stakeholders.

External Stakeholders: individuals or groups that are not part of the organization but have a direct interest in
its actions or performance such as the pressure groups, government, local community, and customers.

Conflicts Between the Stakeholders

Different stakeholder groups have different interests which can cause conflict between the stakeholders.
If it is not managed, it can lead to extended disagreements.

Employees demand higher wages, which raises the production cost.

Senior management demand large bonuses, which can reduce the profits to distribute to shareholders.
Customers demand lower prices, which can reduce profit margin that upsets the shareholders.
Demand of efficiency

Growth and Evolution

Growth;
All businesses strive to grow in terms of sales revenue, profits, number of stores, employees customers and
market share.

Why?
They want to benefit from economies of scale,
They want to gain larger market share to gain better market standing.
They can survive against their rivals in the industry.
They can spread risks by diversifying into new markets and industries.

Evolution;
Businesses have to evolve their practices or products in order to survive in the industry.
Economies and Diseconomies of Scale

EoS
Lower average costs due to an improvement in productive efficiency as a firm operates on a larger scale.

Can help businesses gain competitive cost advantage since lower costs can mean lower prices are charged to
customers, higher profits margins are earned on each unit sold.

Internal;
Generated within a business by operating on a larger scale.
The saving occurs inside the firm and within its control.
By operating on a larger scale, a business can reduce its average cost of production.
Financial; larger businesses receive lower interest rates.
Marketing: larger businesses can spread the cost of marketing by advertising greater range of products.
Technical: larger companies can utilize complex machinery.
Purchasing: large firms can gain huge cost saving by buying vast quantities of stocks
Risk bearing: larger firms can spread the risk of failure.
Specialization: larger firms can afford to hire specialist workers.

External;
Occur when a firm’s average cost of production fall as the industry grows.
All firms in the industry can benefit.

DeO;
Occurs when an organization becomes inefficient due to the scale of its operations being too large to manage
effectively.
Leads to higher average costs of production.

Internal;
Occur due to the problems within the organization which causes productivity to fall and inefficiencies to occur.
Most of these problems arise because larger businesses make communication and coordination more difficult.

External:
Occur when issues outside of the organization raises the average costs of production for all businesses in one
industry.

Internal and External Growth

Internal (organic);
When an organization expands without the help of an external partner or firm by using its own resources

However, due to the finite reasons available for internal growth, it takes much more time than external
growth.

Large companies can sell their shares on stock exchange.

New companies can share capital from an initial public offering (IPO)
Why?
To increase brand awareness and loyalty,
To increase market share,
To maintain its corporate culture,
To maintain its ownership and control,
To avoid the high expenses and risks associated with external growth.

External:
When an organization needs the support of a partner organization to grow
Its faster than the internal

Mergers and Acquisitions

Merger: two or more companies agree to form a single larger company thereby benefiting from operating on a
larger scale.

Acquisition: one company buying the controlling interest(majority stake) in another company with an
agreement

1. Horizontal: when a merger or acquisition occurs between two or more companies operating within the
same industry.
The process of taking over another firms brands rather than the entire company is brand acquisition.

2. Vertical: when an acquisition occurs between two or more companies operating in different stages of
the production process.

If the producer buys a company closer to the consumer its forward vertical
If the purchaser buys a company further away from the consumer its backwards vertical

3. Conglomerate: when two unrelated companies engage in a merger, it’s the riskiest method of external
growth