Here are the key points about objectives: - Objectives are specific, measurable targets that a business sets to achieve its overall aims. - They are more focused and quantifiable than aims. Objectives need to be SMART - specific, measurable, achievable, realistic and time-bound. - Objectives are set at different levels within a business - corporate, departmental and individual. Corporate objectives focus on the whole organization, departmental objectives are for specific functions, and individual objectives are personal targets. - Objectives help businesses achieve their aims by providing clear direction. They motivate employees and allow performance to be measured. Objectives must be consistent with a business's overall aims. - Setting objectives is important

1. Unit 1.3
Organizational Objectives

3. Definition
Mission Statement
Simple declaration
that broadly states the
underlying purpose of
an organization’s
existence.
Vision Statement
Outlines a business’
aspirations (where it
wants to be) in the
distant future.

4. Purpose
Mission Statement
To ensure some
transparency for
investors and
employees alike so
they can have some
confidence as to any
potential use of their
resources be they
capital investment or
labor.
Vision Statement
To describe the best
possible end result. In
reality (visualize
something more
desirable than what
you consider to be the
best possible
outcome).

5. Purpose
Mission Statement
To ensure that all
stakeholders are
clear on the
overarching
purpose of the
company so
everyone can be
focused on the same
goals and objectives.
Vision Statement
Designed to motivate,
energize, and create
a captivating image of
where you see your
business heading in
the future.

6. Purpose
Mission Statement
When someone reads
a mission statement in
a business plan they
are looking to get a
feel for the range of
activities that the
company will focus on,
in other words its core
purpose and what it
stands for.
Vision Statement
Helps to give you a
target for the mission of
the company.
To stretch the
expectations as well as
aspirations enabling
you to jump out of your
comfort zone.
As a framework for all
excellent planning.

7. Important Differences
• Vision statement addresses the question ‘what do
we want to become?’ whereas the mission
statement deals with the question ‘what is our
business?’
• Vision statements are focused on the very long
term, whereas mission statements can focus on the
medium or long term.
• Mission statements are updated more frequently
than vision statements

8. Important Differences
• Vision statements do not have to have actual
targets that must be realized (this is the purpose of
setting mission statements). Instead, vision
statements allow people to see what could be.
• The mission statement tends to outline or highlight
the values of the business, i.e. its beliefs and
guiding principles. This sets the tone for how
managers and employees behave on a day-to-day
basis.

9. Steps in setting mission
statements
• Defines the organization (ex. What it is)
• Outlines what the organization aspires to be (in
line with its vision statement)
• Limited enough to exclude certain ventures
• Broad enough to allow for growth in a creative or
innovative way
• Distinguishes the organization from others
• Serves to evaluate current business activities
• Phrased clearly so that it is understood by all

10. IBO Mission Statement
• “The International Baccalaureate aims to
develop inquiring, knowledgeable and
caring young people who help to create a
better and more peaceful world through
intercultural understanding and respect.”

11. Analyze the role of the
mission and vision statement
Satisfying customer needs
“Who” our customers are
“What” customer needs our company is trying to satisfy
“How” our company will serve its customers
Fits the current market environment
Our competitive advantage
Distinctive core competencies
Motivates and inspires employee commitment
Make a profit begs the question “What will we do to make a profit?”
Realistic
Specific, short and sharply focused
Clearly and easily understood
What we want to be remembered for

12. Satisfying customer needs
Focused on satisfying customer needs
rather than being focused on the
product. Products and technologies
eventually become outdated, but basic
market needs may last forever. A
market-oriented mission statement
defines the business in terms of
satisfying basic customer needs.

13. “WHO” our customers are
We target which group of customers
that we want to sell the products or
provide the service. These are relevant
because they indicate the market to be
served, the geographic domain to be
covered, and the types of buyers the
firm is going after.

14. “WHAT” customer needs our
company is trying to satisfy
A company should define the particular
needs of those customer groups it
wishes to satisfy. A product or service
becomes a business when it satisfies a
need or a want.

15. “HOW” our company will serve
its customers
A company must know the means or
technology by which it will serve the target
market and satisfy the customer’s needs.
By incorporating WHO, WHAT and HOW
the firm will be perceived and act more
customer and market-oriented, it will be
perceived as a customer-satisfying entity,
not a product-producing entity.

16. Fits the current market
environment
Missions should fit the current market
environment. We need new leaders so
now there are many service that provide
soft skills such as leadership program.

17. Our competitive advantage
Competitive advantage arises from
leveraging a firm’s unique skills and
resources to implement value-creating
strategy that competitors cannot
implement as effectively. Our company
should base its mission on a
competitively superior internal strength
or resource that the company performs
well in comparison to its competitors.

18. Distinctive core competencies
The organization should base its
mission on its distinctive competencies.
A distinctive core competency is a
competitively superior company
resource that the company performs
well in comparison to its competitors. It
needs to stay focused on specific traits;
quality, customer service, and on target
or niche market.

19. Motivates and inspires
employee commitment
Mission statements should be motivating. It
should not be stated as making more sales or
profits. A company’s employees need to feel
that their work is significant and that it
contributes to people’s lives. Visionary
companies set a purpose beyond making
money. Even though profits may not be part
of these companies’ mission statements, they
are the inevitable results.

20. Make a profit begs the question
“What will we do to make a profit”
To understand a company’s direction,
we must answer “to make a profit doing
what and for whom?”
We need to be creative and innovative
in creating new product and provide
service.
People are always eager to try
something unique.

21. Realistic
To avoid making the mission too narrow
or too broad.

22. Specific, short and sharply
focused
Must be specific. Vague or generic
mission statements lack resonance and
meaning. They won’t be remembered
by anyone, and will likely be dismissed
as too difficult to understand.
Many mission statements are written for
public relations purposes and lack
specific, workable guidelines.
It is a precise statement of purpose.

23. Clear and easily understood
Develop your mission statement to a
“party level”. A simple, clear, “party
level” mission statement can be used to
tell people you meet at a party or on
airplanes why your company exists. At
the same time it needs to give your
company team as a profoundly simple
focus for everything it does as a firm.

24. What we want to be
remembered for
A mission statement says what, in the
end, you want to be remembered for. It
is actually an epitaph in present tense.
What would you want your epitaph to
read some day? Your ideal can provide
a profoundly simple insight into your
purpose for existing today.

25. The Starbucks Mission Statement
Establish Starbucks as the premier purveyor of the finest coffee in
the world while maintaining our uncompromising principles
while we grow. The following six guiding principles will help us
measure the appropriateness of our decisions:
•Provide a great work environment and treat each other with
respect and dignity.
•Embrace diversity as an essential component in the way we do
business.
•Apply the highest standards of excellence to the purchasing,
roasting and fresh delivery of our coffee.
•Develop enthusiastically satisfied customers all of the time.
•Contribute positively to our communities and our environment.
•Recognize that profitability is essential to our future success.

26. • College offering IB and A Level qualifications – ‘To
provide an academic curriculum in a caring and
supportive environment’.
• BT – ‘To be the most successful worldwide
telecommunications group’.
• Nike, Inc. – ‘To bring inspiration and innovation to
every athlete in the world’.
• Microsoft – ‘To enable people and businesses
throughout the world to realize their full potential’.
• Google – ‘To organize the world’s information and
make it universally accessible and useful’.

27. "To be a leading entity to provide
training, knowledge and consulting
services all over the world in the fields of
self development and human resources
development for individuals and business
societies."
"Within ten years, support and process
ten million risk and error free investment
transactions per year for a million
customers"

29. Mission vs. Vision Stmts.
• http://www.youtube.com/watch?v=b2MyaR
0gMo0

30. Vision and Mission Statements
Exercise

31. Mission Statement
Talks about HOW you will get to where you
want to be. Defines the purpose and primary
objectives related to your customer needs
and team values.

32. Mission Statement
It answers the question, “What do we do?
What makes us different”

33. Vision Statement
Clarity and lack of ambiguity: Describing a
bright future (hope); Memorable and
engaging expression; realistic aspirations,
achievable; alignment with
organizational values and culture

34. Mission Statement
Talks about the present leading to its future.

35. Vision Statement
Where do we want to be going forward?
When do we want to reach that stage? How
do we want to do it?

36. Vision Statement
WHERE you want to be. Communicates
both the purpose and values of your
business

37. Mission Statement
It lists the broad goals for which the
organization is formed. Its prime function is
internal, to define the key measure or
measures of the organization's success and
its prime audience is the leadership team
and stockholders.

38. Mission Statement
May change, but it should still tie back to
your core values, customer needs
and vision.

39. Mission Statement
What do we do today? For whom do we do
it? What is the benefit? In other words, Why
do we do what we do? What, For Whom and
Why?

40. Vision Statement
It answers the question, “Where do we aim
to be?”

41. Vision Statement
It should remain intact, even if the market
changes dramatically, because it speaks to
what you represent, not just what you do.

42. Mission Statement
Purpose and values of the organization:
Who are the organization's primary "clients"
(stakeholders)? What are the
responsibilities of the organization towards
the clients?

43. Vision Statement
Talks about your future.

44. Vision Statement
It lists where you see yourself some years
from now. It inspires you to give your best. It
shapes your understanding of why are you
working here

45. Question 1.3.1
Vision and Mission Statements

46. Vision and Mission Stmts.
“To be the most successful premium manufacturer in the
industry” – BMW
“The company exists to benefit and refresh everyone it
touches” – Coca Cola
“To organize the world’s information and make it universally
accessible and useful” – Google
“Creating the finest ice cream” – Haagen Dazs
“To solve unsolved problems innovatively”- Mary Kay Cosmetics
“We work to help people and businesses throughout the world
realize their full potential” – Microsoft
“Connecting people has always been, and continues to be, our
reason for business” – Nokia
“To make people happy” – Walt Disney

47. 1. Define the term “mission statement”
Mission statement refers to the
declaration of an organization’s
overall purpose, such as Nokia’s
“connecting people…”. It forms the
foundation for setting the
objectives of a business.

48. 2. Using the examples given, examine the role of
vision and mission statements in business
organizations.
The role of vision and mission statements in a
business organization includes:
• To have a clear purpose, ie. what the business is
trying to achieve
• Outlines the organization’s values
• States the underlying purpose of an organization’s
existence
• Serve to unify all people and corporate
• cultures within the workforce

49.  Decision making is the core role of
management
 Businesses ask themselves 4 key
questions:
1. Where are we now?
2. Where do we want to be?
3. How do we get there?
4. How do we know we are there?

50. What are AIMS?
 Are the general and long term goals of an
organization.
 Expressed as vague and unquantifiable
statements.
 Serves to give a general purpose and
direction for an organization and are often
expressed in a mission statement.
 Set by the senior directors of the
organization.

51. What are OBJECTIVES
 Are the short-to-medium term and specific
targets an organization sets in order to
achieve its AIMS.
 More specific and quantifiable
(measurable).
 Objectives must be consistent with the
firm’s aims.

52.  Businesses of any size can benefit from
setting clear objectives.
 In small businesses, such as sole traders,
these objectives are often not written down
or formalized in any way, but the owners
will often have a clear idea of what they are
trying to achieve.
 In partnerships, it is important for partners
to agree on the direction their business
should take to avoid future disagreements.

53.  Limited companies must state the overall
objectives of the business in their
Memorandum and Articles of Association,
but this often lacks much strategic detail.
 This chapter focuses on the importance of
business objectives, the different forms that
these can take, including ethical and social
targets, and how they can be used to direct
the work of all staff in an organization.

54. Organizational Objectives
 Serve to guide a business and give it a
sense of direction
 Will be formed by the various
stakeholders of a business (Unit 1.4)
 Answer the key question:
“Where do we want to be?”

55. 3 Key Functions of
Organizational Objectives
 To Control
– objectives can help control a firm’s plan;
they set the boundaries for business activity
 To Motivate
– objectives can help inspire managers and
employees to reach a common goal
 To Direct
– objectives provide an agreed and clear focus for
all individuals and departments of an
organization

56. The Importance of Objectives
• They serve to give businesses a sense of
direction, purpose and unity. This can help to
unify and motivate management and workers.
• They form the foundation for business decision-
making. Organizations can then create
strategies to achieve these goals.
• They can help to encourage strategic thinking
i.e. planning for the long-term.
• They provide the basis for measuring and
controlling the performance of the workforce, the
management and the business as a whole.

57. Effective Business Objectives
• S- Specific:
 Objectives should focus on what the business
does and should apply directly to that
business
 Example: a hotel may set an objective of 75%
bed occupancy over the winter period
 The objective is specific to this business

58. Effective Business Objectives
• M- Measurable:
 Objectives that have a quantitative value are
likely to prove to be more effective targets for
directors and staff to work towards
 Example: to increase sales in the south-east
region by 15% this year

59. Effective Business Objectives
• A- Achievable:
 Objectives must be achievable.
 Setting objectives that are almost impossible
to achieve in a given time will be pointless.
• They will demotivate staff who have the task of
trying to reach these targets.

60. Effective Business Objectives
• R- Realistic and Relevant:
 Objectives should be realistic when compared
with the sources of the company and should
be expressed in terms relevant to the people
who have to carry them out.
 Example: informing a factory cleaner about
‘increasing market share’ is less relevant than
a target of reducing usage of cleaning
materials by 20%.

61. Effective Business Objectives
• T- Time Specific:
 A time limit should be set when an objective is
established.
 Example: by when does the business expect
to increase profits by 5%?
 Without a time limit it will be impossible to
assess whether the objective has actually
been met.

62. Aims Objectives
• What the business wants to
achieve
• Not necessarily time-bound
• Vague and abstract goal
• What a business wants to happen
• Set by senior leaders
• Long term goals of an organization
• Unquantifiable statements
• Serve to give a purpose to the
general direction of an organization
• Often expressed in a mission
statement
• What the business has to do to
achieve the aims
• Time-bound
• Specific and measurable target
• What a business needs to happen
• Set by managers or their
subordinates
• Short term goals of an organization
• Quantifiable / measurable
statements

63. Levels of Business Objectives
Corporate Objectives
Deals with the whole organization’s goals
(i.e. business survival, growth and profit
maximization)
Departmental Objectives
Specific objectives for the various sections of
a business.
Individual Objectives
Targets that are set for and/or by individual
employees.

64. Objectives
Short term Long term
• Tactics – are short
term ways that firms
can use to achieve
their aims and
objectives
• Tactical Objectives
(Operational
Objectives or
Secondary Objectives)
• Strategy – refer to any
plan or scheme to
achieve the long term
aims of a business
• Strategic objectives or
primary objectives
“How do we get where we want to be?”

65. Levels of strategy that a business can adopt:
Operational strategies
Day to day methods used to improve the efficiency of an
organization
Aim to achieve the tactical objectives of a business
Generic strategies
Affect the business as a whole
Looks at ways in which a business can gain a
competitive advantage in order to meet its goals
Corporate strategies
Aimed at the long term objectives of a business
Achieve the strategic objectives of an organization

66. Levels of strategy that a business can adopt:
Operational strategies
Day to day methods used to improve the
efficiency of an organization
Aim to achieve the tactical objectives of a
business
Example:
A restaurant might investigate how to reduce
customer waiting time without compromising
the quality of its service.

67. Levels of strategy that a business can adopt:
Generic strategies
Affect the business as a whole
Looks at ways in which a business can gain a
competitive advantage in order to meet its
goals
Competitive adv. Occurs when an
organization acquires or develops an
attribute or combination of attributes that
allows it to outperform its competitors

68. Generic Strategy

69. Levels of strategy that a business can adopt:
Corporate strategies
Aimed at the long term objectives of a business
Achieve the strategic objectives of an
organization
Example:
A firm might aim for market dominance
through mergers and takeovers of rivals in the
industry.

70. OBJECTIVES
• Short term goals of an organization

71. AIMS
• Long term goals of an organization

72. AIMS
• Vague and Unquantifiable Statements

73. OBJECTIVES
• More specific
• Quantifiable / measurable
statements

74. AIMS
• Serve to give a purpose to the
general direction of an organization

75. Aims and Objectives
• http://www.youtube.com/watch?v=rnrBFgm3B
zs

76. Exam Tip!
Students often misuse the terms
‘aims’ and ‘objectives’ opting to
use the words interchangeably. This
reveals a lack of understanding and
application of these concepts.
Remember, the main difference
between aims and objectives is the
time scale; with a longer time frame
for corporate aims. Another
difference between the two concepts
is that objectives tend to be more
specific whereas aims may be quite
vague.

77. 3 types of Objectives
• Strategic Objectives
• Tactical Objectives
• Operational Objectives

78. Strategic Objectives
• Sometimes referred to as GLOBAL
OBJECTIVES
• These are the medium-to long-term
objectives set by senior managers to guide
the company in the right direction to
achieve the aims

79. Tactical Objectives
• Are the medium to short-term objectives set
by middle managers to achieve the strategic
objectives.

80. Operational Objectives
• Are the day-to-day objectives set by floor
managers (and sometimes workers
themselves) so that the company can reach
its tactical objectives.

81. Vision (summary of aims)
Long-term and highest aspiration
Strategic Objectives
Long-term goals
Tactical Objectives
Medium or short-term goals
Operational Objectives
Day-to-day goals

82. Tactical Objectives
 Short term objectives that affect a segment
of the organization, such as a department
 They refer to specific goals that guide the
daily functioning of certain operations that
are in line with the primary objectives of the
business
 Short term objectives tend to refer to targets
set for the next 6-12 months

83. Tactical Objectives
 Survival
- new and established business are likely to
encounter a number of problems such as limited
recognition by customers or intense competition
from existing firms. Hence, survival becomes a
key priority
 Sales Revenue Maximization
- maximize sales to establish themselves in the
marketplace

84. Strategic Objectives
 Long term aims of a business organization
(i.e. targets for the next few years)
 Profit Maximization
 Growth
 Image and Reputation
 Market Standing

85. Strategic Objectives
 Profit maximization
– Profit = Total Revenue - Total Costs
– Profit acts as an incentive for entrepreneurs to
take risks in setting up and running a business
– Short-term profit maximization goals – where
businesses maximize their profits during busy
periods in order to survive during the off-peak
periods
– Long-term profit maximization goals – develop
corporate strategies to achieve the
organization’s aims; greater benefits for the
owners, employees, suppliers and customers

86. Strategic Objectives
 Growth
– Usually measured by an increase in sales
or by market share (the percentage of the
industry’s sales made by the business)
– Essential to business survival
– Failure to grow may result in a loss in
competitiveness

87. Strategic Objectives
Benefits of Growth include:
 Economies of Scale
– Larger firms are able to enjoy lower average costs of
production, such as being able to borrow money from
banks at a lower cost.
– Having lower costs helps a firm to improve its price
competitiveness.
 Market Power
– By being larger, the business is able to enjoy more
monopoly power such as being able to charge higher
prices.
 Reduced Risks
– Through diversification can help to reduce the risks of
doing business.

88. Strategic Objectives
 Image and reputation
– Business may aim to enhance their image and
reputation
– Businesses are delivering better levels of customer
service, better facilities, after sales care etc.
 Market Standing
– Refers to the extent to which a firm has presence in the
marketplace
– Example: Microsoft has high market standing for being
number one in the computer software industry; Wal-
Mart – world’s largest retailer

90. Exam Tip!
Students should ensure that they
understand the link between aims,
objectives, strategies and tactics:
 Aim state what an organization wants (e.g.
to become the number one supplier of a
product)
 Objectives state what an organization
needs to achieve in order to get what they
want (e.g. increase in market share)
 Strategies are the actions that facilitate an
organization to meet its objectives (e.g.
expanding into overseas markets)
 Tactics are short-term actions used to
achieve an organization’s tactical
objectives (e.g. survival)

91. The need for changing
objectives
• Internal factors: (within the control of
the organization)
 Corporate culture
 Type and size of organization
 Private vs public sector organizations
 Age of the business
 Finance
 Risk profile
 Crisis management

92. The need for changing
objectives
• External factors: (beyond the control of
the organization)
 State of the economy
 Government constraints
 The presence and power of pressure groups
 New technologies

93. Exam Tip!
While there is little, if anything, that a
business can do about changes in
the external environment, successful
businesses alter their practices and
operations to adapt to such changes.
Also, remember that positive
changes can occur from the external
environment, thus creating business
opportunities.

94. Question 1.3.2
Lenevo

95. Reasons could include:
• Provides a focus for its staff
• Can be used to measure the
performance of the business
• Informs strategic planning

96. Reasons (barriers) could
include:
• Conflict, e.g. “accuracy and truth
seeking” might limit Lenovo’s ability
to earn high profits. Alternatively,
shareholders might demand high
dividends, but management seek to
invest profits for the long term.

97. Reasons (barriers) could
include:
• Culture clash, e.g. compatibility of
Chinese and American cultures.
• Financial constraints, e.g. sponsorship
could harm cash outflow in the short
term; any benefits are only reaped in
the long run.

98. Ethical Objectives
 Ethics are the moral principles that guide
decision-making and strategy
 Morals are concerned with what is
considered to be right or wrong, from
society’s point of view
 Business ethics are the actions of people
and organizations that are considered to
be morally correct

99. Ethical Objectives
 Ethical business is likely to be
responsible for its treatment toward its
workers, customers, shareholders and the
natural environment
 Socially responsible actions, such as
treating and paying employees fairly,
would be considered as being ethical

100. Other Examples of
Ethical Objectives
 Reducing pollution by using more
environmentally friendly production
processes
 Increased recycling of waste materials
 Disposal of waste in an environmentally
friendly manner
 Offering staff sufficient rest breaks during
their work shift
 Fairer conditions of trade with less
economically developed countries

101. Examples of unethical business
behavior include:
 Financial dishonesty
 Environmental Neglect
 Exploitation of the workforce
 Exploitation of suppliers
 Exploitation of consumers
 Read Box 1.3.c page 35

102. Advantages of Ethical Behavior
 Improved corporate image
 Increased customer loyalty
 Cost cutting
 Improved staff motivation
 Improved staff morale
 Page 37

103. Limitations of Ethical Behavior
 Compliance costs
 High costs of acting ethically
 Lower profits
 If compliance costs cannot be passed onto the consumer
in the form of higher prices
 Ethical dilemma for a business exists when ethical
decision-making involves adopting a less profitable course
of action
 Stakeholder conflict
 Managers may be pressured into pursuing goals other
than ethical ones
 Ethics and CSR are subjective
 Views about what is considered right or wrong depend on
the beliefs and principles held by individuals and society.

104. Corporate Social Responsibility (CSR)
Refers to the consideration of
ethical and environmental issues
relating to business activity.
A business that adopts CSR will
act morally toward its various
stakeholder groups.

105. Differing views of social
responsibility
 The self-interest (non-compliance) attitude
 Economists believe that businesses is to
generate profit and government to take care
of the social problems
 Businesses pursuing profit will become more
efficient and prosperous, thereby helping
society indirectly (through employment,
wealth creation and corporation tax
payments)

106. Differing views of social
responsibility
 Altruistic CSR attitude
 Altruism refers to acting in a humanitarian and
unselfish manner (ex. Donating money to charity,
investing in local community projects)
 Businesses do what they can to improve the society
regardless of whether their actions help to increase
their profits
 It can be difficult to determine in reality whether
businesses help society due to altruism or because
they believe that such action would (selfishly) help to
improve their corporate image

107. Differing views of social
responsibility
 Strategic CSR attitude
 Businesses ought to be socially responsible
only if such actions help the business to
become more profitable
 Firms see CSR as a method of long-term
growth

108. Ways in business meet its
social responsibilities
 Providing accurate information and
labeling
 Active community work
 Having consideration for the environment
 Adhering to fair employment practices

112. Examples of Ethical and
Unethical Objectives
 See page 35

113. Theory of Knowledge
Some people argue that by targeting children,
especially in an era of growing child obesity in
many parts of the world, parents face
unnecessary pressure to buy their children fast-
food products. Do you consider McDonald’s
marketing of its ‘Happy Meal’ as unethical?
Justify your answer.

114. Question 1.3.3
McDonald’s versus Burger King

115. Define the meaning of ethical
business behavior in the
context of the case study.
Ethical business behavior means that
McDonald’s and Burger King operate in a
moral manner, rather than acting purely
for commercial gains. Ethical actions, such
as improving the wellbeing of children or
using humanely-sourced meat, would be
considered as being ethical and socially
responsible behavior.

116. Discuss with reference to the case study
whether acting ethically can provide
McDonald’s and Burger King with commercial
and competitive advantages
Whether acting ethically can provide McDonald’s and
Burger King with commercial and competitive advantage will
depend on the relative strengths of taking such action.
Potential advantages of such behavior include:
• Easier to recruit staff and improved staff retention since
employees feel that they work for to a socially responsible
employer
• Greater employee satisfaction, morale and motivation
• Improved corporate and brand image; particularly important
since the image of fast food chains have been tarnished by
health concerns such as obesity

117. Potential advantages of such behavior include:
• Ethical behavior is a potential source of
differentiating products and services from rival
firms, thereby possibly promoting customer
loyalty
• Local communities are more likely to welcome the
companies and pressure groups are less likely to
oppose them
• Ultimately, these factors can, in the long run, lead
to improvements in competitiveness, sales and
profits for McDonald’s and Burger King

118. However, the potential drawbacks of introducing ethical and
socially responsible activities include:
• Compliance costs mean that there are additional items of
expenditure to both companies, e.g. McDonald’s donating
funds to help ill children and their families and Burger King
having to source their suppliers
• Higher costs mean that profits margins will fall, unless
prices are increased (which is perhaps unlikely in highly
competitive markets such as fast food); as price is a
fundamental deciding factor in this market, the commercial
advantages are therefore reduced
• Since Burger King has also decided to act in an ethical way,
albeit by alternative actions, McDonald’s might lose any
initial competitive advantage that it might have had (but the
higher costs remain)

119. Potential drawback cont….
• It is not known whether consumers genuinely care
about a firm’s ethical policies – what is more
important to diners: price and taste of the food
or whether the restaurants donate money to
charitable organizations?
• Ultimately, these factors are likely to increase
the costs to McDonald’s and Burger King, thereby
possibly leading to lower profits for both firms
• Some stakeholders, such as shareholders, may
therefore oppose these activities if they believe
that there will be reduced profits

120. Question 1.3.4
Walmart

121. SWOT Analysis
• Strength
• Weakness
• Opportunities
• Threats

122. SWOT Analysis
• Internal Factors:
– Strength: positive compared to competitors
– Weakness: negative when compared to
competitors
• External Factors:
– Opportunities: external possibilities and
prospects for future development
– Threats: external factors that hinder the
prospects for an organization (cause
problems to the business)

123. Advantages of SWOT
• Simple and quick
• Used for a wide range of decisions
• Helps to determine the organization’s position in
the marketplace and therefore aids the
formulation of corporate strategy for its long-term
survival
• Encourages foresight and proactive thinking
• Help reduce the risks of decision-making by
demanding objective and logical thought
processes

124. Limitations of SWOT
• Too simplistic and does not demand detailed
analysis
• Model is static whereas business environment is
under constant change
• Only useful if decision-makers are open about
the weaknesses and willing to act upon them
• Not typically used in isolation; better decisions
are made if more information is available, so
other strategic tools are also used (ie PEST
analysis)

125. STRENGTHS
• Unique selling point
• Brand awareness and brand loyalty
• Experience, knowledge and skills
• Market share/market dominance
• Corporate image and reputation
• Accreditation, endorsement or official support
• Core competencies (ex. Product quality)
• Geographical location
• Value for money (price in relation to quality)

126. WEAKNESSES
• Limited sources of revenue
• Escalating costs of production
• Poor cash flow / liquidity problems
• Higher prices than competitors
• Demotivated and/or unproductive workforce
• Limited sources of finance
• Lack of spare capacity
• Restricted product range
• Poor location

127. OPPORTUNITIES
• Economic growth / upswing in trade cycle
• Trade liberalization
• Weakening exchange rate
• Technological developments / innovations
• Market growth
• New markets and locations
• Demographic and social lifestyle changes
• Government spending programmes
• Mergers and acquisitions of rival firms

128. THREATS
• New entrants in the market place
• Economic downturn (recession)
• Inflation (causing higher production costs)
• Pressure group action (ie. protests)
• Social, environmental and legal constraints
• Negative media coverage and publicity
• Unfavorable changes in seasons and weather
• Adverse changes in fashion and tastes
• Outbreak of infectious diseases

129. EXAM TIP!
 When carrying a SWOT
analysis, remember that
strengths and weaknesses are
the internal factors that an
organization currently faces.
Opportunities and threats are
the external factors that the
organization is likely to face in
the near future.

130. EXAM TIP!
 When using a SWOT analysis in the
exam, do not present the SWOT in
tabular form. Using such a format
can encourage candidates to try and
squeeze their answers to fit inside
the table. Examiners tend to prefer
written explanations and
justifications. Instead, it is
reasonable to write in bullet format
under each SWOT heading so long
as the examiner can understand the
reasoning behind the student’s
arguments.

131. EXAM TIP!
 A typical exam question will
require students to analyze the
position of a business by using a
SWOT framework. Be sure
therefore to learn how to use a
SWOT properly. Remember
that the strengths and
weaknesses refer to the current
internal position of the firm. The
opportunities and threats should
stem from a STEEPLE analysis
(Unit 1.5).

132. Question 1.3.5
Kidzplay Bouncy Castles

133. IKEA case study

134. The Ansoff Matrix
 Analytical tool that helps managers to
choose and devise various product and
market growth strategies.
 4 product-market growth strategies:
– Market Penetration
– Product Development
– Market Development
– Diversification

135. Ansoff Matrix
LO
W
HIGH

136. Market Penetration
Here we market our existing products to our existing
customers. This means increasing our revenue by, for
example, promoting the product, repositioning the brand, and
so on. However, the product is not altered and we do not seek
any new customers.

137. Market Development
Here we market our existing product range in a new
market. This means that the product remains the same,
but it is marketed to a new audience. Exporting the
product, or marketing it in a new region, are examples
of market development.

138. Product Development
This is a new product to be marketed to our existing customers.
Here we develop and innovate new product offerings to replace
existing ones. Such products are then marketed to our existing
customers. This often happens with the auto markets where
existing models are updated or replaced and then marketed to
existing customers.

139. Diversification
This is where we market completely new products to new
customers. There are two types of diversification, namely related
and unrelated diversification. Related diversification means that we
remain in a market or industry with which we are familiar. For
example, a soup manufacturer diversifies into cake manufacture (i.e.
the food industry). Unrelated diversification is where we have no
previous industry nor market experience. For example a soup
manufacturer invests in the rail business.

140. Colorado Ricardo Mountain Bikes was founded by Ricardo Francisco in
1999. He was a keen cyclist who spent his weekends with many friends
cycling and having fun in the mountains of Colorado. He was very
competitive and loved to take his bike off-road to test his strength and
endurance.
However, he found that the bikes themselves kept on breaking-down under
the strain. So Ricardo designed and built a number of bikes to overcome
this problem. Many failed but eventually he came up with the ultimate in
off-road bike, which he called the 'Colorado Ricardo’.
People liked Ricardo's bike and he was asked to build and sell them to
other cyclists in the Colorado region. It went so well that soon he was able
to give up his own job as a DJ to focus on the construction of the bikes. As
the mountain bike sport took off, Ricardo's business grew to produce
10,000 units in 2003.
However, sales have fallen annually since then and forecasted sales for
2008 are only 4,000 units. Ricardo's company needs strategies for growth
before it is too late. Use Ansoff's matrix to examine the options for
Colorado Ricardo

142. Question 1.3.6
Page 45

143. Read organization
objectives and the
CUEGIS concepts
Pages 45-46

144. Key Terms
REVIEW

145. AIMS
• Are the long-term goals of a
business, often often expressed in
the firm’s mission statement. They
are a general statement of a firm’s
purpose or intentions and tend to be
qualitative in nature.

146. Ansoff Matrix
• Is an analytical tool to devise various
product and market growth
strategies, depending on whether
businesses want to market new or
existing products in either new or
existing markets.

147. Corporate Social
Responsibility (CSR)
• Is the conscientious consideration of
ethical and environmental practices
related to business activity. A
business that adopts this acts
morally toward its various
stakeholder groups and the wellbeing
of society as a whole.

148. Ethical code of practice
• Is the documented beliefs and
philosophies of an organization.

149. Ethics
• Are the moral principles that guide
decision-making and strategy. Morals
are concerned with what is
considered to be right or wrong,
from society’s point of view.

150. Mission Statement
• Refers to the declaration of an
organization’s overall purpose. It
forms the foundation for setting the
objectives of a business.

151. Objectives
• Are the relatively short term targets
of an organization.

152. SMART Objectives
• Are targets that are specific,
measurable, achievable, realistic and
time constrained.

153. Strategies
• Are plans of action that businesses
use to achieve their targets, ie. the
long-term plans of the whole
organization.

154. SWOT analysis
• Is an analytical tool used to assess
the internal strengths and
weaknesses and the external
opportunities and threats of a
business decision, issue or problem.

155. Tactics
• Are the short-term plans of action
that firms use to achieve their
objectives.

156. Vision statement
• Is an organization’s long-term
aspirations (ie. where it ultimately
wants to be).