Mission, Aims & Objectives

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This revision presentation provides an overview of the core strategic topic of business mission, aims and objectives. The main focus of the presentation is to outline the theory of the use of mission, aims and objectives rather than provide examples of these in context.

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Mission, Aims & Objectives

  1. 1. UnderstandingMission, Aims & Objectives
  2. 2. Focus on objectivesObjectives
  3. 3. What are business objectives?• The specific intended outcomes of business strategy• The anticipated end results of a programme of activities• Targets which the business adopts in order to achieve its primary aims
  4. 4. A hierarchy of objectives Increasingly detailedIncreasingly strategic
  5. 5. How the hierarchy works• The objectives cascade down from the mission getting progressively more specific• Overall objectives are translated into more specific objectives for different parts of the business• The hierarchy ensures that at each level the objectives are consistent with the objectives that are above them in the hierarchy
  6. 6. Corporate v Functional Objectives Master Servant Corporate Functional
  7. 7. Mission…aim…objective• Mission – A qualitative statement of the business’s aims• Aim – A long term plan from which business objectives are derived• Objective – A target which must be achieved in order to realise the stated aim – A time assigned targets derived from the goals and set in advance of strategy
  8. 8. Main functions of objectives• A clear statement of what needs to be achieved• A focus for all activity• Targets for individual and group achievement• A means of measuring performance
  9. 9. How objectives can be used• Implement the mission• Provide a clear focus for decision making• Provide a target• Motivate employees• Facilitate control of actual performance• Provide a criteria for evaluating performance• Reduce uncertainty• Provide a sense of unity
  10. 10. Objectives are central to strategy• Objectives have a central role in strategic decision-making• Decisions are taken with objectives in mind• A strategy is a course of action which enables the business to meet its objectives• The first part in a strategic plan is always “where do we want to go”• What follows is “how are we going to get there”
  11. 11. What is corporate strategy?• Corporate strategy is concerned with deciding what business the organisation should be in, where it wants to be, and how it is going to get there• Strategy is the game plan for… – Satisfying customers – Running the business – Beating the competition – Achieving corporate objectives
  12. 12. Corporate objectives are often stated in terms of…• Profit (value, margin)• Return on investment (ROCE)• Growth (profit, earnings per share)• Market share• Cash flow• Sales revenue• Shareholder value• Corporate image & reputation
  13. 13. Factors influencing objectives• Age of the business • State of the• Size and legal status economy • Competition• Ownership • Risk and attitude to• Views of owners risk and managers • Corporate culture• Market conditions • Political factors• Legislation • Social attitudes
  14. 14. Primary & secondary objectives• Primary – The ultimate, long term goals of the business – These are the key strategic objectives such as profit growth or shareholder returns• Secondary – Make a direct contribution to meeting primary objectives – E.g. sales growth will help business achieve profit target – Also known as tactical objectives
  15. 15. Strategic v Tactical objectivesStrategic TacticalFocused on long-term Focused on short-termSet by the Board Set by line managementInvolve higher risk & uncertainty Relatively low-riskLikely to involve significant Limited resources investedinvestment / business resourcesDifficult to change in the short- Relatively easy to change atterm minor financial costStretching & challenging Realistic & achievable
  16. 16. The Mission Statement is…• The overriding goal of the business• The reason for its existence• A strategic perspective• A vision for the future
  17. 17. The mission model• Purpose – Contained in the mission statement• Values and beliefs – Reflected in business culture• Strategy – The competitive position of the business• Standards and behaviour – Policies and behavioural patterns expected of employees – Influenced by organisational culture
  18. 18. Five characteristics of a good mission statement• Contains a formulation of objectives that enables progress towards them to be measured• Differentiates the business from its competitors• Defines the markets or business in which the firm wants to operate• Is relevant to all major stakeholders - not just shareholders and managers• Excites, inspires, motivates & guides
  19. 19. Other characteristics of a good mission statement• Brief in length• A very general statement• Flexible-should be able to accommodate change• Business specific and distinctive• Communicates key values• Realistic and achievable• Based on consultation• Supported by senior management
  20. 20. Criticisms of mission statements• Not always supported by actions of the business• Often too vague and general• Often merely statements of the obvious• Often seen as a PR exercise• Sometimes regarded cynically by staff• Sometimes not a true reflection of reality• To mean anything they must be supported wholeheartedly by senior management
  21. 21. StakeholderPerspectives
  22. 22. Defining stakeholdersGroups / individuals that are affected by and/or have an interest in theoperations and objectives of the business
  23. 23. Categories of stakeholderInternal Connected External Shareholders Government Customers Local Directors Suppliers communityManagers Advisers PressureEmployees Consultants groups Competitors Media
  24. 24. Stakeholders – main interestsStakeholder Objectives Power and influenceShareholders Share price growth, dividend Election of directorsLenders Interest and principal to be Can enforce loan covenants repaid, maintain credit rating,Directors and Salary ,share options, job Make decisions, have detailedmanagers satisfaction informationEmployees Salary, job security, job Staff turnover, strike satisfactionSuppliers Long term contract, payment Pricing, qualityCustomers Reliable supply, value for money Revenue / repeat businessCommunity Environment, local jobs, local Indirect via local planning and impact opinion leadersGovernment Operate legally, tax receipts, jobs Regulation, subsidies, taxation, planning
  25. 25. Stakeholder power?In the context of strategy, what is important is thepower and influence thateach stakeholder has over the business objectives
  26. 26. What determines stakeholder power?• For stakeholders to have power and influence the desire to exert influence must be combined with the ability to exert influence on the business• The power a stakeholder can exert will reflect the extent to which: – The stakeholder can disrupt the business’ plans – The stakeholder causes uncertainty in the plans – The business needs and relies on the stakeholder
  27. 27. The inequality of influence• Stakeholders do not have equality in terms of power and influence• Managers have more influence than environmental activists• A venture capitalist with a 40% of the share capital will have a greater influence that a small shareholder• Banks have a considerable impact on firms facing cash flow problems but can be ignored by a cash rich firm• A customer that provides 50% of a business’ revenues exerts more influence than several smaller customer accounts
  28. 28. Responding to stakeholder power High level of Low level of interest interestHigh level Key players Keep themof power Take notice of satisfied themLow level Communicate Can usually beof power regularly with ignored them
  29. 29. A business needs to make choices• Every business has scarce resources• Almost certainly cannot meet the needs of every stakeholder group• Some decisions are “win-lose”: i.e. supporting one stakeholder means another misses out• “Win-win” is best – but often not possible
  30. 30. Shareholder approach• The traditional approach• Business (management) acts in best interest of shareholders / owners• Principal aim is to maximise shareholder returns• Main focus is on growth & profit
  31. 31. Stakeholder approach• Increasingly popular• Business takes much more account of wider stakeholder interests• Approach based on consultation, agreement, cooperation• E.g. social and environmental concerns become more important
  32. 32. Examples of common stakeholder interests• Shareholders and employees have a common interest in the success and growth of the business• High profits lead not only lead to good dividends but also greater investment (retained) in the business• Suppliers have an interest in the growth and prosperity of the business• Local community, employees and shareholders benefit from business involvement in the community
  33. 33. Examples of conflicting interests• Wage rises might be at the expense of lower profits and dividends• Managers have an interest in organisational growth but this might be at the expense of short term profits• Expansion of production activity might cause extra noise and disruption in local community
  34. 34. Some popular solutions to stakeholder conflictsApproach DescriptionWorkers Councils Compulsory for some larger firms in the EU Brings worker representatives from across depts & activities for regular discussion of business issuesStakeholder Outside representatives who hold a non-executiveDirectors position on the BoardArbitration / Formal processes of resolving conflicts betweenConciliation employer and employees (e.g. ACAS)Share options & Widened participation of share ownership amongstother all employees, helps align interests of shareholdersperformance- and employeesrelated pay
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