MANAGEMENT OF

BUSINESS
BUSINESS OBJECTIVES
DEFINITION OF OBJECTIVES

• Objectives can be defined as specific targets of performance.

They are an organisation’s performance targets – that is, the
results and outcomes it wants to achieve in a particular time
frame. 
CHARACTERISTICS OF OBJECTIVES

• Specific – objectives should be quantifiable and precise: for example, ‘To

increase retail sales by 15 per cent’. This objective is precise and states
exactly what management wants to accomplish. Compare it with this
example: ‘To achieve healthy growth in sales’ (this is not meaningful as
‘healthy growth’ is too wide and can easily be misconstrued). Broad and
ambiguous objectives can lead to chaos as their interpretations may vary
among employees.
CHARACTERISTICS OF OBJECTIVES (CONT’D)

• Measurable – managers should be able to plot the organisation’s progress

toward its objectives. This requires a well-defined reference point from
which to start and a scale for measuring progress – for example, ‘To
increase retail sales by 15 per cent by the end of this financial year’. With
this objective, the managers can measure the business progress over the
12-month period until the financial year has ended.
CHARACTERISTICS OF OBJECTIVES (CONT’D)

• Attainable (or Achievable) – Objectives should be not so extreme that they

are impossible for the firm to attain. When writing objectives, firms must
take into consideration their ability to achieve them within the expected
time frame. While being achievable, objectives must also be challenging.
This will motivate and encourage employees to work hard and propel the
business forward.
CHARACTERISTICS OF OBJECTIVES (CONT’D)

• Relevant (or Realistic) – many businesses have failed because they set
unrealistic and irrelevant objectives, especially in their earlier years. As a
result, a large amount of money is spent irrelevantly, perhaps to take on
investments or a large advertising campaign which could have been
delayed until the company is established. The objectives must be relevant
for the firm given its market share, resource base and employees’
capabilities.
CHARACTERISTICS OF OBJECTIVES (CONT’D)

• Timely – earlier we stated that the business should track the achievement
of its objectives over a period of time. With this in mind, objectives must
specify not only what is to be achieved but also a time frame for its
achievement.
IMPORTANCE OF OBJECTIVES

• The importance of objectives are, but not limited to:

o Objectives act as a guide for employees and the employer to follow in order to
propel the business forward and thus attain its goal.
o They are important in the decision-making process, as they provide a guide and
framework for management to make decisions. They are used to help
management to explore different courses of action or try different business
strategies
o Objectives are also used as a tool to analyse the performance of the business and
its employees over a period of time.
TYPES OF OBJECTIVES

• Objectives can be categorized as short-term, medium-term

and long-term based on the time frame in which they should be
achieved.
SHORT TERM OBJECTIVE

Short term objectives are referred to as

specific objectives. These are the outcomes
that a business wants to accomplish within
a short period of time - usually a year to 18
months
MEDIUM-TERM OBJECTIVES

• Medium-term objectives form the basis on which short-term

objectives are written and the stepping stone for the
achievement of long-term objectives. Medium term are
usually written for a period of one to four years.
LONG TERM OBJECTIVE

• These are general objectives that are developed from the

firm's mission statement and describe where the business
wants to be at some point in the future, usually five years or
more.
 HIERARCHY OF OBJECTIVES

• Aims / Vision The basic purpose of the organisation especially for the external audience
• Mission

• Corporate objectives Senior management, the organisation as a whole

• Strategic objectives

• Tactical objectives Middle management, major division, function

• Operational objectives Lower management (departments and individuals)

AIMS/VISION

An aim or vision is where the business wants to go in the

future. It reflects the ideas and philosophies of all personnel
involved in establishing the firm. It is a statement of purpose.
The vision of the firm is often broad, with very few specifics as to
when it will be achieved. .
A MISSION STATEMENT

A mission statement gives a clear outline of the business aspirations and

values. It enables all the stakeholders (employees, managers, customers,
and suppliers) to understand the underlying reasons for the actions that are
taken by the business.
While the firm's vision outlines where it hopes to be in the future, the
mission statement usually says what the firm sets out to do during its
operation
A MISSION STATEMENT (CONT’D)

A well-written mission statement should:

• Give a clear indication of the purpose of the organisation
• Outline the legitimacy of the organisation
• Clearly describe the organisation’s values, objectives or targets and reason for
existence
• Be customer focused or oriented and at the same time catering to the needs of
the employees and other stakeholders
• Outline the products that are being offered and its desire to maintain these
CORPORATE OBJECTIVES

• Corporate objectives can therefore be defined as specific,

realistic and measurable aims which an organization plans
to achieve within a given period of time. These objectives are
usually written as long-term objectives with a time frame of five
years or more.
STRATEGIC OBJECTIVES

• Strategic objectives are usually medium to long term and

relate to outcomes that strengthen an organizations overall
business position and competitive vitality. They refer to an
organization's articulated and or responses to address major
change, improvement or competiveness and outline how the
firm plans to accomplish its corporate objectives
TACTICAL OBJECTIVES/STRATEGIC OBJECTIVES

• They are performance targets established by middle

management (departments heads) for achieving
specific organizational outcomes. Tactical objectives are
usually short- to medium-term targets which the firm is
expected to achieve within a year or close to a year
OPERATIONAL OBJECTIVES

• Operational Objectives are short-term organizational objectives necessary

to achieve longer-term tactical and strategic objectives. They are usually
managed by lower-level management such as supervisory personnel
who are concerned with immediate results. They are detailed costs and
timed plans of what the organization will do to meet each tactical or
strategic objective
THE MAJOR DIFFERENCES BETWEEN THESE OBJECTIVES

Objectives Target Group Time Period Examples

Strategic Top Management Long-term  To create new product in five years

 
 To increase exports by 3% in four years.

Tactical Middle Management Medium-term  To increase production levels by 2% in six months.

 
 To keep advertising costs at 3% of sales over the next 8
months

Operational Lower level Management Short-term  To meet weekly sales quota of 1000 items.
 
 To prepare reports within 2 days of requests.
 ACTIVITIES

1. Miss Dressy is planning to start a fashion designing business. She was advised that the
first step in setting up a business is to establish the ‘business objectives’.
(a) Explain what is meant by the term ‘business objective’. [ 3 marks]
(b) Discuss THREE reasons why it is important for Miss Dressy to establish objectives for
her business. [12 marks]
(c) Identify TWO business objectives that Miss Dressy should aim to achieve and discuss
the importance of EACH objective to the business. [10 marks]
Total 25 marks
 ASSIGNMENTS

1. Define the term ‘mission statement’ and outline THREE reasons why a mission
statement is important to a business. [ 8 marks]
(b) (i) Identify FOUR criteria that can be used to measure the size of a business. [ 4 marks]
(ii) Evaluate the effectiveness of THREE of the criteria identified in (b) (i) above [13
marks] Total 25 marks
RESEARCH QUESTION

• An investigation to determine the importance of

setting business objectives and how they impact
on the successful operation of the business.