Bm 1.3 Organizational Objectives


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IB Business and Management (Standard Level)
All material taken from the IB Business and Management Textbook:
"Business and Management", Paul Hoang, IBID Press, Victoria, 2007

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Bm 1.3 Organizational Objectives

  1. 1. Business and Management : 1.3 Organizational Objectives Lesson 1 Pages 41-44
  2. 2. 1. Focus Questions <ul><li>1. What are some important organizational objectives? </li></ul><ul><li>2. What is a mission statement? </li></ul><ul><li>3. What is a vision statement? Do they differ? </li></ul><ul><li>… </li></ul>
  3. 3. 2. An overview <ul><li>What is the core role of management? </li></ul><ul><ul><li>Starts with a D_____? Anyone? </li></ul></ul><ul><ul><li>Decision-making…right! </li></ul></ul><ul><li>There are four (4) key questions that management MUST ask in the decision-making process : </li></ul><ul><ul><li>Where are we now? </li></ul></ul><ul><ul><li>Where do we want to be? (we are going to focus on this) </li></ul></ul><ul><ul><li>How do we get there? </li></ul></ul><ul><ul><li>How do we know we are better? </li></ul></ul><ul><ul><li>… </li></ul></ul>
  4. 4. 3. Where do we want to be? <ul><li>This question answers this: </li></ul><ul><ul><li>The aims and objectives of business organization. </li></ul></ul><ul><li>How do organizational objectives guide a business ? </li></ul><ul><ul><li>Gives the business a sense of direction. </li></ul></ul><ul><ul><li>When you drive a car and get lost, what do you use to find your way? </li></ul></ul><ul><ul><ul><li>A road map. </li></ul></ul></ul><ul><li>Organizational objectives have three (3) functions : </li></ul><ul><ul><li>To control a firm’s plan (set up targets within a department. </li></ul></ul><ul><ul><li>To motivate or inspire people to reach a common goal. </li></ul></ul><ul><ul><li>To direct ; to provide an agreed and clear focus for everyone in the organization. </li></ul></ul><ul><ul><li>… </li></ul></ul>
  5. 5. 4a. The importance of objectives <ul><li>Why is target setting vital in all businesses? </li></ul><ul><ul><li>If you do not do this you will have no clear sense of direction. </li></ul></ul><ul><ul><li>No clear purpose. </li></ul></ul><ul><li>Aims and objectives are set for many important reasons : </li></ul><ul><ul><li>Give a business a sense of direction, purpose and unity . </li></ul></ul><ul><ul><li>Forms the foundation for business decision-making . </li></ul></ul><ul><ul><li>Encourages strategic thinking (planning for long term). </li></ul></ul><ul><ul><li>Provides a basis for measuring and controlling the performance of the workforce, the management, and the entire business. </li></ul></ul><ul><ul><li>… </li></ul></ul>
  6. 6. 4b. The importance of objectives <ul><li>What are the many groups affected by the performance and activities of a business? </li></ul><ul><ul><li>Stakeholder / shareholder groups </li></ul></ul><ul><ul><ul><li>What are they interested in? </li></ul></ul></ul><ul><ul><ul><ul><li>Profit….show me the money Jerry! </li></ul></ul></ul></ul><ul><ul><li>Local community </li></ul></ul><ul><ul><ul><li>What are they concerned about? </li></ul></ul></ul><ul><ul><ul><ul><li>Social responsibility of a business. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>… </li></ul></ul></ul></ul>
  7. 7. 5. Business objectives at different levels <ul><li>Corporate objectives: </li></ul><ul><ul><li>Deal the with whole organization . </li></ul></ul><ul><ul><ul><li>Goals, profit maximization, growth, over all survival. </li></ul></ul></ul><ul><li>Departmental objectives </li></ul><ul><ul><ul><li>Very specific objectives; departmental targets </li></ul></ul></ul><ul><li>Individual objectives </li></ul><ul><ul><ul><li>Targets set for you or by you . </li></ul></ul></ul><ul><ul><ul><li>Often used in performance appraisal </li></ul></ul></ul><ul><ul><ul><ul><li>Sales targets; if you are a salesperson. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>… </li></ul></ul></ul></ul>
  8. 8. 6a. Mission and Vision Statements <ul><li>A vision statement: </li></ul><ul><ul><li>Outlines a business’s aspirations ( where it wants to be ). </li></ul></ul><ul><ul><li>They relate to the attainment of success </li></ul></ul><ul><ul><ul><li>“ I have a dream…” </li></ul></ul></ul><ul><ul><ul><li>“To be the leading sports brand in the world” </li></ul></ul></ul><ul><ul><li>It is an image of an ideal situation in the future. </li></ul></ul><ul><ul><li>… </li></ul></ul>
  9. 9. 6b. Mission and Vision Statements <ul><li>A mission statement: </li></ul><ul><ul><li>Explains what the business is trying to achieve. </li></ul></ul><ul><ul><li>Outlines the organizations values. </li></ul></ul><ul><ul><li>It is a simple declaration that states the purpose of an organization’s existence. </li></ul></ul><ul><ul><li>It will outline how a vision statement will be achieved. </li></ul></ul><ul><ul><li>These statements do not have a time frame. </li></ul></ul><ul><ul><li>They should be clearly defined and realistically achievable. </li></ul></ul><ul><ul><li>It will serve to unify all people and corporate culture in an attempt to achieve the organization’s vision. </li></ul></ul><ul><ul><ul><li>As a manager you will need to ensure that decisions are consistent with the mission statement. </li></ul></ul></ul><ul><ul><ul><li>… </li></ul></ul></ul>
  10. 10. 6c. Mission and Vision Statements…still confused??? <ul><li>Vision Statements </li></ul><ul><ul><li>Focused on long term. </li></ul></ul><ul><ul><li>Not updated frequently. </li></ul></ul><ul><ul><li>No actual targets. (what could be) </li></ul></ul><ul><li>Mission Statements </li></ul><ul><ul><li>Focused on medium to short term. </li></ul></ul><ul><ul><li>Are updated frequently. </li></ul></ul><ul><ul><li>Have actual targets. (what will be) </li></ul></ul><ul><ul><li>Highlights the values of the business. </li></ul></ul><ul><ul><li>… </li></ul></ul>
  11. 11. Business and Management : 1.3 Organizational Objectives Lesson 2 Pages 44 - 50
  12. 12. 1. Focus Questions <ul><li>1. What are aims and objectives? </li></ul><ul><li>2. What is meant by short-term vs long-term objectives? </li></ul><ul><li>3. What ethical objectives do companies follow? </li></ul><ul><li>… </li></ul>
  13. 13. 2. Aims and Objectives <ul><li>Aims: </li></ul><ul><ul><li>Are the long term goals of an organization. </li></ul></ul><ul><ul><li>They give a purpose to the direction of the company. </li></ul></ul><ul><ul><li>Are often expressed in the mission statement. </li></ul></ul><ul><li>Objectives : </li></ul><ul><ul><li>Are the short term goals of an organization. </li></ul></ul><ul><ul><li>They are based on the company’s aims. </li></ul></ul><ul><ul><li>They are quantifiable (measurable) </li></ul></ul><ul><li>Remember : </li></ul><ul><ul><li>The main difference between the two is the time scale. </li></ul></ul><ul><ul><li>Aims are vague, objectives are more specific. </li></ul></ul><ul><ul><li>… </li></ul></ul>
  14. 14. 3a. Short-term vs Long Term Objectives <ul><li>What does strategy mean? </li></ul><ul><ul><li>A plan or scheme to achieve what? </li></ul></ul><ul><ul><ul><li>Long term aims of a business. </li></ul></ul></ul><ul><ul><li>It is used to achieve strategic objectives . </li></ul></ul><ul><li>What does tactics mean ? </li></ul><ul><ul><li>The short-term ways that firms use to achieve their aims and objectives. </li></ul></ul><ul><li>Both strategy and tactics will answer the question…what question will it answer ? </li></ul><ul><ul><li>3. How do we get to where we want to be ? </li></ul></ul><ul><ul><li>… </li></ul></ul>
  15. 15. 3b. Short-term vs Long Term Objectives <ul><li>What might be the several levels of strategy that a business can adopt? </li></ul><ul><ul><li>Operational strategies : </li></ul></ul><ul><ul><ul><li>The day-to-day methods used to improve the efficiency of a business. </li></ul></ul></ul><ul><ul><li>Generic strategies : </li></ul></ul><ul><ul><ul><li>Those that affect the business as a whole </li></ul></ul></ul><ul><ul><ul><ul><li>Such as differentiation </li></ul></ul></ul></ul><ul><ul><li>Corporate Strategies : </li></ul></ul><ul><ul><ul><li>Aimed at the long-term objectives of a business. </li></ul></ul></ul><ul><ul><ul><ul><li>Aiming for market dominance – seek ways in doing so. </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Mergers, takeovers of rivals etc. </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>… </li></ul></ul></ul></ul></ul>
  16. 16. 4. Tactical Objectives <ul><li>So what are tactical/operational/secondary objectives ? </li></ul><ul><ul><li>Are short-term objectives that affect a segment of the organization. </li></ul></ul><ul><ul><ul><li>For example, a sales department will set its own objectives. </li></ul></ul></ul><ul><li>The main tactical objective for many businesses is survival . </li></ul><ul><li>A second tactical objective might be sales revenue maximization . </li></ul><ul><ul><li>Maximize their sales. </li></ul></ul><ul><ul><li>Remember: sales revenue is not PROFIT . </li></ul></ul><ul><ul><li>… </li></ul></ul>
  17. 17. 5. Strategic Objectives <ul><li>What are strategic/primary objectives? </li></ul><ul><ul><li>Are long-term aims of a business organization. </li></ul></ul><ul><ul><ul><li>Targets for the next couple of years. </li></ul></ul></ul><ul><ul><li>1. Profit maximization : </li></ul></ul><ul><ul><ul><li>Making as much profit as possible. </li></ul></ul></ul><ul><ul><li>2. Growth : </li></ul></ul><ul><ul><ul><li>Measured by an increase in sales or by market share </li></ul></ul></ul><ul><ul><ul><li>Benefits of growth include: </li></ul></ul></ul><ul><ul><ul><ul><li>Economies of scale, lower average cost of production. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Market power, more monopoly, charge higher prices. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Reduced risks, diversification; helps reduce risk. </li></ul></ul></ul></ul><ul><ul><li>3. Image and Reputation </li></ul></ul><ul><ul><ul><li>Having a bad image may turn customers away. </li></ul></ul></ul><ul><ul><ul><li>Must also consider the NEEDS of the customer. </li></ul></ul></ul><ul><ul><ul><li>Having a good reputation, people will want to do business with you. </li></ul></ul></ul><ul><ul><li>4. Market standing </li></ul></ul><ul><ul><li>Refers to the extent which a firm has presence in the marketplace. </li></ul></ul><ul><ul><ul><li>Microsoft has high market standing for being number one in the computer software industry. </li></ul></ul></ul><ul><ul><ul><li>Walmart, the world’s largest retailer. </li></ul></ul></ul><ul><ul><ul><li>Toyota </li></ul></ul></ul><ul><ul><ul><li>The Body Shop. … </li></ul></ul></ul>
  18. 18. 6a. Ethical Objectives <ul><li>What are ethical objectives? </li></ul><ul><ul><li>They are the moral principles that guide decision-making strategy. </li></ul></ul><ul><ul><li>Morals are concerned with what is right and wrong, from a society’s point of view. </li></ul></ul><ul><li>Examples of ethical objectives : </li></ul><ul><ul><li>Reducing pollution </li></ul></ul><ul><ul><li>Increase recycling </li></ul></ul><ul><ul><li>Friendly waste disposal </li></ul></ul><ul><ul><li>Treating employees well. </li></ul></ul><ul><ul><li>Fairer trade conditions. </li></ul></ul><ul><li>Pressure from within or outside the business to act ethically may occur . </li></ul><ul><li>Some examples of Unethical business behavior : </li></ul><ul><ul><li>Financial dishonesty </li></ul></ul><ul><ul><li>Environmental neglect </li></ul></ul><ul><ul><li>Exploitation of workers </li></ul></ul><ul><ul><li>Exploitation of suppliers </li></ul></ul><ul><ul><li>Exploitation of customers … </li></ul></ul>
  19. 19. 6b. How to Achieve Ethical Objectives <ul><li>How can we achieve this? </li></ul><ul><ul><li>Well, a number of businesses have to adopt an ethical code of practice . </li></ul></ul><ul><ul><li>This should be published in the mission statement or annual report. </li></ul></ul><ul><ul><ul><li>What is this ethical code of practice ? </li></ul></ul></ul><ul><ul><ul><ul><li>Documented beliefs and philosophies </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Guidelines and expectations on employee behavior. </li></ul></ul></ul></ul><ul><ul><li>Let’s look at box 1.3a on pg. 49. </li></ul></ul>
  20. 20. 6c. Advantages / Limitations <ul><li>Advantages: </li></ul><ul><li>Improved corporate image. </li></ul><ul><li>Increased customer loyalty. </li></ul><ul><li>Cost cutting. </li></ul><ul><li>Improved staff motivation. </li></ul><ul><li>Improved staff morale. </li></ul><ul><li>Providing accurate information and labeling. </li></ul><ul><li>Active community work. </li></ul><ul><li>Having consideration for the environment. </li></ul><ul><li>Adhering to fair employment practices. </li></ul><ul><li>Limitations : </li></ul><ul><li>Compliance costs. </li></ul><ul><li>Lower profits. </li></ul><ul><li>Stakeholder conflicts. </li></ul><ul><li>Note: </li></ul><ul><ul><li>Ethical behavior is very subjective. </li></ul></ul><ul><ul><li>What is right or wrong? </li></ul></ul><ul><ul><ul><li>Depends on the individual. </li></ul></ul></ul><ul><ul><li>Laws have been put in place to correct this. </li></ul></ul><ul><ul><ul><li>Anti-discrimination laws. </li></ul></ul></ul><ul><ul><ul><li>Health and Safety at Work Laws. </li></ul></ul></ul><ul><li>Lets look at 1.3.3 pg 51 </li></ul>
  21. 21. Business and Management : 1.3 Organizational Objectives Lesson 3 Pages 44 - 50
  22. 22. 1. Focus Questions <ul><li>1. What does it mean to have corporate social responsibility? </li></ul><ul><li>2. What are social and environmental audits and how are they conducted? </li></ul><ul><li>… </li></ul>
  23. 23. 2. Corporate Social Responsibility (CSR) <ul><li>So what are socially responsible firms? </li></ul><ul><ul><li>Firms that act morally towards stakeholders, employees, and local community. </li></ul></ul><ul><ul><li>So how can firms be socially responsible? </li></ul></ul><ul><ul><ul><li>Post-tax profits to charity. </li></ul></ul></ul><ul><ul><ul><li>Help clean up the environment. </li></ul></ul></ul><ul><li>One benefit of practicing CSR is increased reputation. </li></ul><ul><ul><li>Why is this important? </li></ul></ul><ul><ul><ul><li>To obtain a competitive advantage . </li></ul></ul></ul><ul><ul><ul><li>… </li></ul></ul></ul>
  24. 24. 3a. Differing Views about CSR <ul><li>Free Market or Non-compliance : </li></ul><ul><ul><li>Is the role of business solely to generate profits for their owners? </li></ul></ul><ul><ul><li>Should governments, rather than businesses be responsible for sorting out social problems? </li></ul></ul><ul><ul><ul><li>This views reasoning is that by pursuing the profit motive , firms will be more efficient and prosperous, thus helping society indirectly (job creation and corporate taxes). </li></ul></ul></ul><ul><ul><ul><ul><li>Is this always the case ? </li></ul></ul></ul></ul><ul><ul><ul><ul><li>What has happened recently ?... </li></ul></ul></ul></ul>
  25. 25. 3b. Differing Views about CSR <ul><li>Altruistic CSR Attitude : </li></ul><ul><ul><li>What is altruism? </li></ul></ul><ul><ul><ul><li>Refers to acting in a humanitarian and unselfish manner. </li></ul></ul></ul><ul><ul><ul><ul><li>Do businesses really help society? </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Do they try to improve society? </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Which companies do what they can to improve the society, regardless of whether their actions help to increase their profits? </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Charities </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Local community projects… </li></ul></ul></ul></ul></ul>
  26. 26. 3c. Differing Views about CSR <ul><li>Strategic CSR Attitude : </li></ul><ul><ul><li>What does this view entail? </li></ul></ul><ul><ul><ul><li>Argues that businesses should be socially responsible ONLY if such actions help the business to become more profitable (used as a method of long term growth ). </li></ul></ul></ul><ul><li>So, how can we monitor companies to practice CSR ? </li></ul><ul><li>How can practice this in other countries ? </li></ul><ul><li>Is it possible ? </li></ul><ul><ul><li>What is considered acceptable in one country may be totally undesirable in others . </li></ul></ul><ul><ul><ul><li>In some Asian countries cigarette and liquor commercials are everywhere, where as in North America they are banned. </li></ul></ul></ul><ul><li>Do managers have a role in CSR? </li></ul><ul><ul><li>How so? </li></ul></ul><ul><ul><ul><li>Promote and encourage CSR in the workplace. </li></ul></ul></ul><ul><ul><ul><ul><li>Box 1.3b gives examples of other means. </li></ul></ul></ul></ul><ul><li>To what extent is a firm able to act socially responsible? (7 factors  )… </li></ul>
  27. 27. 4a. Social Auditing <ul><li>Let’s recap: </li></ul><ul><ul><li>Why do corporations get involved in CSR? </li></ul></ul><ul><ul><ul><li>To enhance their corporate image and reputation . </li></ul></ul></ul><ul><li>So…what is Social Auditing? </li></ul><ul><ul><li>Is a way to ensure that SR objectives are being implemented. </li></ul></ul><ul><ul><ul><li>Social audit : is an independent assessment of how a firm’s actions affect society. </li></ul></ul></ul><ul><li>The audit will review a firms : </li></ul><ul><ul><li>Environmental impact (pollution and waste levels) </li></ul></ul><ul><ul><li>Staff management (health and safety) </li></ul></ul><ul><li>What is an environmental audit? </li></ul><ul><ul><li>an independent review of a firms impact on the environment. </li></ul></ul><ul><ul><ul><li>What are 5 key parts of social auditing for a firm to devise policies that deal with its impact on society? </li></ul></ul></ul><ul><ul><ul><ul><li>See page 53. … </li></ul></ul></ul></ul>
  28. 28. 4b. Social Auditing…the limitations <ul><li>What are the limitations of Social Auditing? </li></ul><ul><ul><li>Auditor charge a fee </li></ul></ul><ul><ul><li>Contents of the review may not be positive; could affect the public image and reputation of the company. </li></ul></ul><ul><ul><li>… </li></ul></ul>
  29. 29. 5. Organizational Objectives and Business Strategy <ul><li>“ Successful businesses have a clear vision of their aspirations and a mission that outlines their ultimate purpose.” </li></ul><ul><ul><li>The performance of a business can be judged by the extent to which it achieves its objectives. </li></ul></ul><ul><li>Peter Drucker? Have you ever heard of this guy? </li></ul><ul><li>Stated that organizational objectives be SMART  </li></ul><ul><li>What does it mean to set SMART objectives? </li></ul><ul><ul><li>Read pg. 56-57 to find out more. :P </li></ul></ul><ul><li>Need to be: </li></ul><ul><ul><li>S pecific </li></ul></ul><ul><ul><li>M easurable </li></ul></ul><ul><ul><li>A greed </li></ul></ul><ul><ul><li>R ealistic </li></ul></ul><ul><ul><li>T ime constrained </li></ul></ul><ul><ul><li>… </li></ul></ul>