Chapter 4 - Business Objectives
Learning Objective: Hierarchy of Objectives
Objectives are also of key importance because they allow strategies to exist - set of tactics that will guide the business to reach its objectives.
Objectives and strategies, however, are not static and are prone to change.
The SMART framework increases the odd of successful objectives.
Companies also have so called corporate aims, very long-term objectives that provide purpose to the business activities and its workforce. These can be either customer focused (e.g. “meet customer needs”) or market based (e.g. “become the world leader”). Aims are important since:
They are the basis for the upcoming objectives;
They are the pillars for strategies and plans.
There are different factors that determine what business objectives a company will follow. They include:
Let's discuss each of them in more details and how they impact business objectives:
Business Culture is the codes of behaviors and attitude which can directly influence decision-making and therefore influence on objectives;
Examples of different approaches to culture:
Aggressive profit-pursuing;
People-centered culture;
Society-centered focus.
The business size and its legal form have direct impact over corporate objectives. The same goes for whether the business is in the public or private sector:
Small businesses (sole traders) may focus on profit satisficing;
Public limited companies, on the other hand, may look for growth;
Public organizations may focus on providing services whereas private organizations on profit maximization.
How old a business is can also influence on its objectives:
New businesses - growth or survival;
Old and more established businesses - profit maximization.
Businesses usually have more than just their objectives. They have a hierarchy of objectives:
Mission Statements examples:
Mission Statements are worthwhile for public relations purposes but insufficient for formulating strategies:
Benefits | Limitations |
Informs internal and external stakeholders the business aims; | Cannot be used as actual targets as they are too broad and general; |
It is motivating to employees; | It may only be a superficial statement without real meaning; |
Helps guide employees behavior and ethics; | Because they are too vague, complete different businesses may have similar mission statements. |
Helps to establish what the business is all about. | |
Corporate Objectives solve the biggest problem with aims and mission statements:
They offer quantitative details to serve as basis for operational decisions;
They are the guidance principle of the company’s functional strategy and tactics;
There is a need to provide clear guidance to action and so they are less subjective than aims and mission.
It is important to understand the SMART Objectives can be broken down further:
Objectives, therefore, are the starting point of decision-making:
- Having a direction is a must for effective decisions;
- One cannot decide on the strategies (plans) if uncertain of the direction to follow.
To-Do-List:
Term 1, Chapter 4 - Activity 4.3 (Is STS Plc. Successful?)
Chapter 4- Business Objectives
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