AS LEVEL BUSINESS (9609)
Chapter 4: Business Objectives
• Importance of Business Objectives
• SMART Criteria
• Benefits of Business Objectives
• Hierarchy of Business Objectives
• Corporate Aims
• Mission Statement
• Corporate Objectives
• Relationship between mission statements, objectives, strategies and tactics
• Business Objectives and Decision Making
• Management by Objectives
• Ethical influences on business objectives and decisions
Business Objectives
Business Objectives: Aims are the long-term goals of a business. They
act as a framework for a business to create further objectives and set a
purpose of the business.
Importance of Business Objectives:
• An objective helps to direct, control and review any business activity.
• For any aim to be achieved successful, there have to be strategies in
place which will guide the business to achieve the goal. Every
business’s aims and strategies change over time.
Smart Criteria
Every business must meet the smart criteria:
S = Specific
M = Measureable
A = Achievable
R = Realistic and Relevant
T = Time-specific
Benefits of Business Objectives
• They provide a sense of direction
• Helps improve focus of individual employees and departments
• Provides a framework for decision making
• Acts as a motivation tool
• Acts as a means of assess performance, progress and identify training
needs
• Helps plan for future in terms of resources required
Hierarchy of objectives
Hierarchy of Objectives: This shows the balance and dependencies
between the different stages of setting aims and objectives.
Corporate Aims
Corporate Aims: These are long terms business goals and provides the
central purpose of the business.
These are objectives that translate the aims into achievable targets.
Advantages of Corporate Aims:
• Help develop a sense of purpose and direction for the business
• Help check progress
• They help development of successful tactics and strategies
Vision Statements and Mission
Statements
Vision Statement: Vision statement is the desired future of the
company.
Mission Statement: Mission statement is a statement of a business’s
core aims, phrased in a way to motivate employees and to stimulate
interests by outside groups.
Advantages and Disadvantages of
Mission Statements
Advantages of Mission Disadvantages of Mission
Statements Statements
• Helps inform the external • Can be easily adopted by any
stakeholders about the aims and business of any size
vision quickly.
• It is not specific to a business
• It helps attract employees,
potential investors, shareholders, • They are too vague and general
etc. • Used as a PR activity
• Help motivate employees • Impossible to analyse
• Help guide and direct individual
employee behaviour and conduct.
Corporate Objectives
Corporate Objectives: These are specific to a business and provide a much clearer
guide for management.
• Profit Maximisation
• Profit Satisfising
• Growth
• Increasing market share
• Surivival
• Corporate Social Responsibility: This concept applies to those businesses that
consider the interests of society by taking responsibility for the impact of their
decisions and activities on stakeholders
• Maximising short-term sales revenue
• Maximising shareholder value
Advantages and Disadvantages of Corporate
Objectives
Advantages of Corporate Disadvantages of Corporate
Objectives Objectives
• They provide a level of guidance • If short term profits are high,
and direction for your company. competitors may enter
• Goals and objectives are also jeopardizing the long-term
important because they survival
facilitate planning. • Issues of independence and
• Goals and objectives are also retaining control maybe of
important because they higher importance
motivate and inspire your • maximised profit has reached
employees. • Negative impact on customers
Relationship between mission statements,
objectives, strategies and tactics
• Aims and objectives provide basis for business strategies as they are
the long-term plans for the company.
• Strategies and tactics are derived from a company’s corporate
objectives.
• Strategy provides the path a business needs to follow in order to
achieve a organisations corporate objective
• Tactics are more concreate and specific smaller steps for shorter time
durations to achieve a strategy.
Objectives and decision making
Stages in decision making framework:
1. Set objectives
2. Assess the problem/situation
3. Gather data about the problem and find possible solutions
4. Consider all solutions and decisions
5. Make a strategic decision
6. Plan and implement the strategy
7. Review its success against original objectives
Factors that determine the corporate
objectives of a business
1. Corporate Culture
2. Size and legal form of the business
3. Public Sector or Private Sector
4. The number of years the business has been operating
5. Economic conditions
6. Ethics
Management by Objectives
Management by Objectives: A method of coordinating and motivating
all staff in an organisation by dividing its overall aim into specific targets
for each department, manager and employee.
Benefits of communicating the aims of the business with employees:
• May achieve more
• Know how their individual goals fit into the overall plan
• Creating shared employee responsibility
• Easier for managers to stay in touch with employees’ progress
Ethical influences on business
objectives and decisions
• It is a document detailing a company’s rules and guidelines on staff
behaviour that must be followed
• It may be expensive in the short term
But, in the long term:
• Avoid legal problems
• Avoid bad publicity
• Avoid pressure groups
• May receive grants and subsidies
• May attract skilled workers and investors