unit 1.3 ORGANISATIONAL OBJECTIVES

1. unit 1.3ORGANISATIONAL OBJECTIVES READING FOCUS: Hall, Jones, Raffo, Business Studies, 3rd Edition – Units 4 & 5,15,16,17 Stimpson Peter, Business Studies, Unit 4 Business StudiesDepartment

2. Learning Outcomes • Explain the importance of objectives in managing an organisation. • Distinguish between objectives, strategies and tactics, and describe how these interrelate. • Explain how business culture shapes and determines corporate objectives. • Explain the significance of objectives as a basis for strategy. • Assess the importance of communicating objectives through corporate plans and statements. • Evaluate the impact differing objectives have on the behaviour and decisions of the firm. • Construct and interpret business plans. • Use SWOT Analysis to assess an organisation’s position, and to define and refine its objectives. Business StudiesDepartment

3. Content Organizational Objectives • The nature, role and importance of objectives. The hierarchy of objectives • Mission statements • Aims • Strategic objectives • Operational objectives • Business Plans • SWOT Business StudiesDepartment

4. Context The annual report for Cadbury Schweppes for 1998 stated that there were 8,374 employees. As they arrive to work each day, the employees know their jobs and how to do it. This is because each of the employee has a clearly defined job description which has been carefully written to ensure that the job is done in an appropriate manner. This situation has not been achieved by accident; on the contrary, careful attention has been given to the needs of the business in order for it to operate successfully. Each department will have certain requirements to fulfill which will have been generated from the company objectives which clearly state what the business is hoping to achieve both in the short and long term. If Cadbury’s did not have any objectives, there would be nothing for the company to work towards. The objectives determine the role of the employees within the business. Business StudiesDepartment

5. Context On occasions when the business is faced with a difficult decision, reference to its objectives will help in the decision making process. Objectives provide a sense of direction for the business and its employees; the objectives can be assessed by reference to targets which in turn can be measured. Business StudiesDepartment

6. YOUR REACTION ‘All aspects of human activity are made clearer and more focused if there is a distinct objective to aim for. An aim helps to direct and control activities. In addition, for any aim to be successfully achieved, there has to be an appropriate strategy – or detailed plan of action – in place to ensure that resources are correctly directed towards the final goal’. Business StudiesDepartment

7. Mission Statements • More than “What we want to do” • Use the following examples to brainstorm the advantages and disadvantages of a strong mission statement. Business StudiesDepartment

8. To bring inspiration and innovation to every athlete* in the world. * if you have a body, then you are an athlete. To enable people and businesses throughout the world to realize their full potential To bring inspiration and innovation to every athlete* “Greenpeace exists because this fragile earth deserves a voice. It needs solutions. It needs change. It needs action. Greenpeace is an independent, campaigning organisation that uses non-violent, creative confrontation to expose global environmental problems, and force solutions for a green and peaceful future. Greenpeace's goal is to ensure the ability of the Earth to nurture life in all its diversity. “in the world. * if you have a body, then you are an athlete. To bring inspiration and innovation to every athlete* in the world. * if you have a body, then you are an athlete. At least it used to be!..... BEAT COKE! Business StudiesDepartment

9. The Nature of Objectives Objectives are the goals of the business. They represent the outcomes or targets that the business wants to gain in order to achieve its aims. The objectives of a business are derived from its aims. Well defined objectives are important. They will help the business to be clear about what it wants to achieve. The performance of a business could be assessed by how effectively it achieves its objectives. Characteristics of business objectives Businesses must have objectives which are SMART • Specific – stating exactly what it is trying to achieve. • Measurable – able to be measured to decide if they have been achieved. • Agreed – have the approval and understanding of everyone involved. • Realistic – able to be achieved by the business taking into account its resources, competition, market, etc. • Time Specific – state a time by which they should be achieved. Business StudiesDepartment

10. Factors Which Determine the corporate objectives of a business • The size and status of the business. • The power of stakeholders. • Ownership. • Long and short-term objectives. • External and internal pressures. • Risks • Corporate and business culture. • Number of years the business has been operating. Business StudiesDepartment

11. The Importance of Objectives Objectives are important in order to • Determine strategy • Provide a guide to action • Provide a sense of direction and units • Provide a framework for decision making • Coordinate activities • Facilitate prioritization and resolve conflicts between departments. • Measure and control performance • Encourage a concentration of long – term factors • Motivate employees • Provide a basis for decision making. • Provide shareholders with a clear idea of the business in which they have invested. Business StudiesDepartment

12. THE HIERARCHY OF OBJECTIVES The business over all purpose. The long-term goals which a business hopes to achieve. No two companies will have the same corporate aims. Management By Objectives (MBO) AIMS A statement of the business’s core aims, phrased in a way to motivate employees and to stimulate interest by outside groups. Its an attempt to condense the purpose of the business’s existence into one statement. MISSION These are the goals of the business. They are the outcomes or targets the business want to gain in order to achieve its aims. The objective of a business can be derived from its aims CORPORATE OBJECTIVES Specific targets for separate divisions. DIVISIONAL OBJECTIVES Targets for each department DEPARTMENTALOBJECTIVES Individual goals/targets INDIVIDUAL TARGETS Business StudiesDepartment A Hierarchy of Objectives

13. THE HIERARCHY OF OBJECTIVES TO MAXIMISE SHAREHOLDERS VALUE AIMS Management By Objectives (MBO) TO INCREASE PROFITS OFF ALL DIVISIONS BY 10% PER YEAR CORPORATE OBJECTIVES WITHIN ONE REGION, TO INCREASE MARKET SHARE BY 10% AND CUT OVERHEADS BY 5% DIVISIONAL OBJECTIVES MARKETING: Increase Profits by 10%; FINANCE : Reduce Long-term borrowing by 5%; R&D: Develop one innovative product each year. DEPARTMENTAL OBJECTIVES • E.G IN THE MARKETING DEPARTMENT • Increase Sales by an average of 5% per client. • Introduce five more clients to the business each year. INDIVIDUAL TARGETS How Corporate Aim is divided at every level of the organisation Business StudiesDepartment

14. A case of Corporate Aims ‘A Mini Galaxo by 2010’ Vijay Patel is a self-made millionaire. He is the founder and chairman of Waymade Health Care, a drugs company. Although he has achieved considerable wealth already he is not ready to give up: “I’ve got a long way to go. It isn't about making more wealth. It’s about achieving the goals I have set for my business. My ambition to become a mini Galaxo by 2010’. (Galaxo is one of the world’s leading pharmaceutical companies) This case demonstrate a typical corporate aim. Vijay Patel tells us that he wants the business to remain in the same industry but to develop and grow to achieve the same degree of recognition, albeit, on a different scale to one of the market leaders. Business StudiesDepartment

15. Corporate Aims • Concentrate on Business Development and Growth. • Concentrate on customer based goals – such as meeting customers’ needs. • Concentrate on Shareholders- based goals – such as ‘increasing value for our shareholders’. • Corporate aims are all embracing – they are designed to provide guidance to the whole organisation and not just part of it. • Corporate aims are statements of goals, not strategies as they give no indication of how these aims might be reached. Business StudiesDepartment

16. What Benefits Flow From Establishing Corporate Aims? • They become the starting point for the entire set of objectives on which effective management is based. • They can help develop a sense of purpose and direction for the whole organisation if they are clearly and unambiguously communicated to the workforce. • They allow an assessment to be made, at a later date, of how successful the business has been in attaining these goals. • They provide the framework within which the strategies or plans of the business can be drawn up. Business StudiesDepartment

17. Unilever Corporate Purpose Our purpose in unilever is to meet the everyday needs of people every where – to anticipate the aspirations of our consumers and customers and to respond creatively and competitively with branded products and services which raise the quality of life. Our deep roots in local cultures and markets around the world are our unparalleled inheritance and the foundation for our future growth. We will bring our wealth of knowledge and international expertise to the service of local consumers – a truly multi-local multinational. Our long-term success requires a total commitment to exceptional standards of performance and productivity, to working together effectively and to a willingness to embrace new ideas and learn continuously. We believe that to succeed require the highest standards of corporate behaviour towards our employees, consumers and the societies and world in which we live. This is unilever’s road to sustainable, profitable growth for our business and long-term value creation for our shareholders and employees. Business StudiesDepartment

18. Mission Statements This is the attempt to condense the central purpose of a business’s existence into one statement. A statement of the business’s core aims, phrased in a way to motivate employees and to stimulate interest by outside groups. Communication of mission statements is almost as important as establishing them . There is little point in establishing the central vision for a business – and then not letting anyone else know about it. Question: In what ways do businesses communicate their mission statements Business StudiesDepartment

19. What is A Mission Statement? • Its not specific and does not contain performance measures. • It’s a statement of fundamental purpose of the organisation so as to inspire those who work for it. • A vision of what the organisation wants to be. • Boundaries for the organisation. • Guidance for decision making. • A statement of values to guide individual behaviour. • A statement of the character of the organisation and the customers it seeks to serve. Business StudiesDepartment

20. What are the features of a well produced mission statement? • It outlines clearly the way ahead for the organization. • Identifies the business the organisation will be in in the future. • Provides a definition of success. • Provides information and inspiration to their employees. • Provides a living statement that can be translated into goals and objectives at each level of the organisation. Note: Objectives which are specific and quantifiable are designed to assist in the achievement of goals set out in the mission statement. Business StudiesDepartment

21. Railtrack’s Mission Statement Railtrack is the heart of Britain’s railway – the tracks, signals, bridges, tunnels and stations – and we are committed to delivering the world-class network our customers, the passengers and freight train operating companies, want for the 21 century. We provide access to our tracks and stations, manage timetabling and operate signaling, and have responsibility for maintaining , renewing and upgrading the rail infrastructure. Railtrack’s aim is to achieve continuous improvement in every aspect of the business; develop efficient solutions to the needs of our customers; to provide growing returns for our shareholders; to work in partnership with our maintenance contractors and to act responsibly with regard to the community and the environment. We are revitalising our organisation to raise the challenges of the next decade of a major national asset. Question: What is the Corporate Mission of Railtrack? Business StudiesDepartment

22. How Useful are Mission Statements? • They inform groups outside of the business what the central aim and vision is. • They can provide motivation to employees and help to guide and direct employee individual behaviour at work. • They are not meant to be detailed working objectives but they help to establish in the eyes of other groups ‘what the business is about’. Business StudiesDepartment

23. Mission Statements are often criticized for Being: • Too vague and general so that they end up saying little which is specific about the business or its future plans. • Based on public relations exercise to make stakeholder groups ‘feel good’ about the organisation. • Virtually impossible to really analyse or disagree with. • Often rather general, so it is common for two completely different businesses to have very similar mission statements. Business StudiesDepartment

24. ‘Our purpose it to meet the needs of the motoring public’ Enthusiasm and commitment are the distinctive characteristics of Reg Vardy, a company which has grown from one garage in North Eastern mining town into one of the country’s leading quoted motor groups. Our company enjoys an extra ordinary level of loyalty and dedication amongst its management and staff, now totaling almost 5,000. Together we are working to build Reg Vardy into a national force within the retail motor industry. Whilst aiming to continue the group’s dynamic growth, we will all recognise the challenge of maintaining and improving standards of customer satisfaction. We are determined that, as we strive for commercial success, our company motto ‘InPursuit of Excellence’will not be compromised. Business StudiesDepartment

25. Communicating the Mission Statement Communicating the mission statement is almost as important as establishing them. There is little point in identifying the central vision of a business- and then not letting anyone else know about it. Businesses communicate their mission statements in a number of ways: • Published Accounts and other communications to shareholders. • Internal company news letters and magazines may draw their title from part of the mission statement. • Advertising slogans or posters are frequently based around themes of the mission statement. Business StudiesDepartment

26. Group Task • Using either a company web site or printed published accounts, discover the ‘missions’ of three well known public limited companies. • Analyse how these mission statements tell you about the vision and operations of the businesses. • Suggest how the statement that you have researched might be communicated to three different stakeholder groups. • Discover the mission statement of your school, by asking staff, students and parents, whether this statement has had any impact on their view of the school. Business StudiesDepartment

27. Mini Cases Cases Questions:1,2,3,4 Source: Business Studies, Jones, Hall and Raffo, Unit 4, pages,28,29,30, 34 Case: Wm Morrison Ambitious to Expand Source: Peter Stimpson, Business Studies, unit 1, page 50 Business StudiesDepartment

28. Corporate Objectives The aim and mission statement of the business share the same problem; they lack specific details for operational decisions and they are rarely expressed in qualitative terms. They need to be tuned into goals or targets which are quite specific to each business and which themselves, can be broken down into specific departmental targets. Corporate Objectives are designed to do just this. They are based on the central aim of the business but they are expressed in terms that provide a much clearer guide for management action or strategy. Business StudiesDepartment

29. CORPORATE OBJECTIVES These are the outcomes or targets the business wants to gain in order to achieve its objectives: Survival,Profit, Image, reputation and social responsibility Growth , Market share,Core Activities sales Revenue,Shareholder Value, STRATEGIC OBJECTIVES This relates to the organisation’s responses to major change or improvement, competitiveness or social issues, and business advantages. They are generally focused internally and externally and relate to significant customer, market, product, service or technological opportunities and challenges. They are what the organisation must achieve to remain or become competitive and ensure its long – term sustainability. It sets the organisation’s long – term directions and guide resource allocation and redistribution. Examples: Strategic Objectives A bigger market share. Quicker design-to-market times than rivals. Higher product quality than rivals. Better customer service than rivals Recognition as a leader in technology Business StudiesDepartment

30. Tactical Objectives These objectives are less far reaching than strategic objectives. They are short term departmental performance targets . For example, A company may have a corporate objective of becoming a global operator in ten years, getting established in Europe within one year may be a tactical objective. Operational Objectives These are low level objectives which are addressed to small groups and individuals. They carry little risk, require less planning and can be achieved fairly quickly. For example, completing a customer order by the end of the day might be an operational objective. Signing up ten new dealers by the end of the month is another operational objective 1. You are the CEO of a company which produces a special line of gents clothing and you are seeking a bigger market share for your products. Using the SMART acronym, establish your Corporate,Strategic,Tactical and Operational objectives. 2. What possible corporate objective your business can have with regard to the following groups of stakeholders? Customers;Suppliers;Employees Business StudiesDepartment

31. The Main Issues relating to objectives • They must be based on the corporate aims. • They should be achievable and measurable if they are to motivate people. • They need to communicate to employees and investors in the business. • They will form the framework of ore specific departmental or strategic objectives. • They should indicate a time scale for their achievement. IN THE BOX: Read the case of Cadbury Schweppes, page 49, Business Studies by Peter Stimpson, and discuss the extent to which these features are evident in its corporate objectives. Business StudiesDepartment

32. Conclusion Once corporate objectives have been established they need to be broken down into specific targets for separate divisions, departments and ultimately individuals. Corporate objectives relate to the whole organisation. They cannot be used by each division of the business to create strategies for action until they are broken down into meaningful targets focusing on divisional goals. These divisional objectives must be set by senior management. Peter Stimpson (2002) Business StudiesDepartment

33. TO MAXIMISE SHAREHOLDERS VALUE AIMS Management By Objectives (MBO) TO INCREASE PROFITS OFF ALL DIVISIONS BY 10% PER YEAR CORPORATE OBJECTIVES WITHIN ONE REGION, TO INCREASE MARKET SHARE BY 10% AND CUT OVERHEADS BY 5% DIVISIONAL OBJECTIVES Strategic DEPARTMENTAL OBJECTIVES MARKETING: Increase Profits by 10%; FINANCE : Reduce Long-term borrowing by 5%; R&D: Develop one innovative product each year. Tactical • E.G IN THE MARKETING DEPARTMENT • Increase Sales by an average of 5% per client. • Introduce five more clients to the business each year. INDIVIDUAL TARGETS - Operational Business StudiesDepartment How Corporate Aim is divided at every level of the organisation

34. Case Studies Case: Iceland spends $8 million a year to sell organic food at no extra cost. Source: Stimpson Peter, Business Studies, unit 1, page 53. Case: Northern Foods. Source: Jones, Hall and Raffo, Business Studies, 3rd Edition, Unit 4 page 35-36. Business StudiesDepartment