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CHAPTER 3: ORGANIZATIONAL

OBJECTIVES, GROWTH AND SCALE


A. THE OBJECTIVES OF ORGANIZATIONS

Organizational goals can be classified into a


number of categories:
 Those that aim to make a profit for their owners

 Those that aim to maximize benefit to society

 Those that aim to maximize benefits to their


members
MAKING A PROFIT FOR THEIR OWNERS

MARKET SHARE MAXIMIZATION


 Domination of a particular market may give
stability and security to the organization.
 Companies increase market share through
innovation, strengthening customer
relationships, smart hiring practices, and
acquiring competitors. A company's market
share is the percentage it controls of the total
market for its products and services.
SATISFICING
 Organizations that adopt satisficing as a
strategy might seek to meet the minimal
expectations for revenue and profit set by the
board of directors and other shareholders.
 By aspiring to targets that are more attainable,
the effort put forth may be equitable with the
final results.
SURVIVAL
 To survive is a business objective. It can
influence business decisions.

PERSONAL OBJECTIVES
 Many small businesses are created to satisfy a
variety of personal objectives.
MAXIMIZING BENEFIT TO SOCIETY

 Occasionally, commercial organizations have


overt social objectives of one form or another,
usually alongside a financial objective, for
example a requirement that the organization must
at least break even.
 This is connected to an organization’s corporate
social responsibility (CSR).
 For example, companies’ social objectives may
result in buying supplies from disadvantaged
groups, even though it may not be commercially
profitable.
MAXIMIZING BENEFITS TO CONSUMERS

 The co-operative movement was originally


conceived to eliminate the role of the outside
shareholder, allowing profits to be passed back
to customers through a dividend which is
related to a customer's spending rather than
their shareholding.
B. THE GROWTH OF ORGANIZATIONS

 “If a business doesn’t grow, it dies!”


An organization (esp. a small business) can grow for a number of
reasons:
1) You will increase your own earning power
2) You’ll be able to pay your best employees more to make them feel
valued and rewarded for their work.
3) You’ll also continue to challenge your employees who want to
grow professionally with you and are excited to take on new
opportunities.
4) You’ll be able to help your customers with even more products
and services that meet their needs as they grow.
5) You’ll be able to reach new customers who will also greatly
benefit from your products and services.
B. THE GROWTH OF ORGANIZATIONS

6) You’ll create additional jobs, which fuels overall economic


growth
7) You’ll stay ahead of your competition
8) You’ll position yourself as an industry leader—and better yet, a
thought leader in your areas of expertise, which can open doors to
new opportunities.
9) Stability - A bigger, stronger business is more likely to fight any
economic, environmental (or even political) threats successfully.
10) The potential for where you and your employees can go is
unlimited when you have a growth mindset.
STAGES IN THE LIFE CYCLE OF ORGANIZATIONS

1. Stage 1: Seed And Development


- consider the feasibility of your business idea,
and also ask if you have what it takes to make
your business idea a success.
2. Stage 2: Entrepreneurial (Start-up)
- the riskiest stage of the entire lifecycle
- market need and product offering to small group
of people
STAGES IN THE LIFE CYCLE OF ORGANIZATIONS

3. Stage 3: Growth and Establishment


- company’s concept has become a profitable business idea
- actively expanding (purchase of competitors, franchising, etc.)
4. Stage 4: Maturity
- challenge to keep employees motivated (and happy!)
- greater operational challenges
- less agility (leading to slow, clunky processes)
- loss of momentum
5. Stage 5: Decline/Regeneration
- firms become complacent
- unless new products are developed or new markets found, decline soon
follows
TYPES OF ORGANIZATIONAL GROWTH:

A. Product/Market Expansion
B. Organic Growth
C. Growth by
Acquisition/Merger/Partnerships/Horizontal
and Vertical Integration
D. Globalization
ORGANIC GROWTH

 Organic growth focuses on producing more


products, services, and space for business
success. This provides a foundation for future
growth and success.
JOINT VENTURES
JOINT VENTURE
 Joint venture, within the concept of Philippine law, is
organized or established only for some transient or
temporary business objective. It is often characterized as
being similar to a partnership in the sense that there
exists among the joint venturers, commonality of interest
and mutual right of control, not to mention the mode by
which profits or losses are shared.
 Joint ventures are usually resorted to by corporations -
domestic or foreign-based - which are not allowed to form
partnerships or become partners in a partnership. Only
individual, natural persons are permitted to form
partnerships.
MANAGEMENT BUY-OUTS

 A buy-out is an autonomous company which is


created by the management and/or employees of
an organization buying part or all of the business
of their former employers.
HORIZONTAL AND VERTICAL INTEGRATION

 Horizontal integration occurs where firms involved


in the same stage of manufacture of a product
amalgamate to achieve greater economies of scale
and (subject to Competition Commission approval)
to reduce the level of wasteful competition in a
market.

 Vertical integration occurs where a company


acquires either its suppliers (backward integration) or
its distributors (forward integration).
C. SOURCES OF FINANCE FOR GROWTH

There are two major sources of finance for


meeting the financial requirements of any
business enterprises, which are as under:-
 Owners Fund: issue of equity shares and
retained earnings
 Borrowed Fund (Loan): debentures; bank
loans and other loans from financial institutions
4. ORGANIZATIONAL SCALE

 There is continuing debate about whether there is


an "ideal" size for business organizations. In fact,
there are advantages and disadvantages of large
firms and they can be found coexisting with much
smaller firms in most sectors.
ECONOMIES OF SCALE
In many sectors, large organizations have advantages over smaller
ones.
LIMITS TO GROWTH
There are limits to how far and how fast a company can grow.

 Use of relatively cheap debt capital may be attractive while the firm is
profitable, but can leave the firm dangerously exposed when conditions
deteriorate

 The ability of the management structure of a company to respond to growth sets


a further limit to growth.

 Legislative/legal constraints are increasingly limiting the ability of firms to


grow.

 The need to compete from a position of strength needs to be balanced against


regulators' increasing concern that the competitiveness of markets should be
maintained.
THE RESURGENCE OF SMALL BUSINESSES

 Advocates of small business argue that they are


important to the economy for a number of reasons:
 They generally offer much greater adaptability
than larger firms. Decisions can be taken rapidly.
 Small businesses tend to be good innovators.
 Most large firms started off as a very small
business, so it is important to the health of the
economy that there is a continuing supply of
growing companies to replace those larger firms
that die.
THE RESURGENCE OF SMALL BUSINESSES

In the Philippines, 99.1% of the businesses are


small and medium enterprises (SMEs) and only
0.99% are large enterprises Republic Act No.
9501, The Magna Carta for Micro, Small and
Medium Enterprises (MSMEs), signed by
President Gloria Macapagal Arroyo on 23 May
2008 defines micro enterprises as entities with
total assets of not more than Php 3,000,000.
SMALL AND MEDIUM ENTERPRISES IN THE PHILIPPINES

 In the Philippines, 99.1% of the businesses are small and medium


enterprises (SMEs) and only 0.99% are large enterprises. Republic Act
No. 9501, The Magna Carta for Micro, Small and Medium Enterprises
(MSMEs),was signed by President Gloria Macapagal Arroyo on 23 May
2008. It defines micro enterprises as entities with total assets of not
more than Php 3,000,000.
 In the Philippines, SMEs are acknowledged to have the following major
roles:
 Substantial contribution to national economic activity
 Major source of economic dynamism, economic and social functions
at all levels of society
 Major source of provision of outsourcing products and services
 Major contribution to regional, local and community economic
development.
THANK YOU VERY MUCH!
RESOURCES:
 The Business Environment by Adrian Palmer and Bob
Hartley
 https://www.nawbo.org/blog/10-reasons-want-grow
 https://blog.synerion.com/4-types-of-business-growth
 http://blog.fcon21.biz/141/10-reasons-why-your-
business-needs-to-grow-continuously/
 https://www.thebalance.com/economies-of-scale-
3305926
 http://fusephase.com/four-stages-business-growth/