BUSINESS AND BUSINESS AND MANAGEMENTMANAGEMENT

MODULE 1MODULE 1

BUSINESS ORGANIZATIONS BUSINESS ORGANIZATIONS & ENVIRONMENT& ENVIRONMENT

ORGANIZATIONAL ORGANIZATIONAL OBJECTIVESOBJECTIVES

“If you don’t know where you are going, you’ll end up someplace else.”

Yogi Berra, former MLB player

IntroductionIntroductionThe annual report for Cadbury Schweppes for 1998 The annual report for Cadbury Schweppes for 1998 stated that there were 8,374 employees. As they arrive to stated that there were 8,374 employees. As they arrive to work each day, the employees know their jobs and how work each day, the employees know their jobs and how to do it. This is because each of the employee has a to do it. This is because each of the employee has a clearly defined job description which has been carefully clearly defined job description which has been carefully written to ensure that the job is done in an appropriate written to ensure that the job is done in an appropriate manner.manner.

This situation has not been achieved by accident; on the This situation has not been achieved by accident; on the contrary, careful attention has been given to the needs of contrary, careful attention has been given to the needs of the business in order for it to operate successfully. Each the business in order for it to operate successfully. Each department will have certain requirements to fulfill which department will have certain requirements to fulfill which will have been generated from the company objectives will have been generated from the company objectives which clearly state what the business is hoping to which clearly state what the business is hoping to achieve both in the short and long term.achieve both in the short and long term.

If Cadbury’s did not have any objectives, there would be If Cadbury’s did not have any objectives, there would be nothing for the company to work towards. The objectives nothing for the company to work towards. The objectives determine the role of the employees within the business.determine the role of the employees within the business.

ContextContext On occasions when the business is faced with a On occasions when the business is faced with a

difficult decision, reference to its objectives will difficult decision, reference to its objectives will help in the decision making process.help in the decision making process.

Objectives provide a sense of direction for the Objectives provide a sense of direction for the business and its employees; the objectives can business and its employees; the objectives can be assessed by reference to targets which in be assessed by reference to targets which in turn can be measuredturn can be measured. .

The Nature of ObjectivesThe Nature of Objectives Objectives are the Objectives are the goalsgoals of the business. They of the business. They

represent the outcomes or targets that the represent the outcomes or targets that the business wants to gain in order to achieve its business wants to gain in order to achieve its aims. aims.

The objectives of a business are derived from its The objectives of a business are derived from its aims.aims.

Well defined objectives are important. Well defined objectives are important. They will help the business to be clear about They will help the business to be clear about

what it wants to achieve. what it wants to achieve. The performance of a business could be The performance of a business could be

assessed by how effectively it achieves its assessed by how effectively it achieves its objectives.objectives.

Characteristics of Characteristics of SMARTSMART Business ObjectivesBusiness Objectives

SpecificSpecific– stating exactly what it is trying to achievestating exactly what it is trying to achieve..

MeasurableMeasurable– able to be measured to decide if they have been able to be measured to decide if they have been

achievedachieved.. AgreedAgreed

– have the approval and understanding of everyone have the approval and understanding of everyone involvedinvolved..

RealisticRealistic– able to be achieved by the business taking into account able to be achieved by the business taking into account

its resources, competition, market, etc.its resources, competition, market, etc. Time SpecificTime Specific

– state a time by which they should be achievedstate a time by which they should be achieved..

Formative Case Study - LenovoFormative Case Study - Lenovo This Chinese multinational technology firm, bought out the personal This Chinese multinational technology firm, bought out the personal

computers division of IBM in 2005. computers division of IBM in 2005. The aim was to establish itself outside of the Asian market by owning The aim was to establish itself outside of the Asian market by owning

IBM’s globally recognized brands such as ThinkPad laptops. IBM’s globally recognized brands such as ThinkPad laptops. The company is committed to four key values:The company is committed to four key values:

– customer servicecustomer service– innovative and entrepreneurial spiritinnovative and entrepreneurial spirit– accuracy and truth-seekingaccuracy and truth-seeking– trustworthiness and integritytrustworthiness and integrity

Recently, Lenovo has also tried to increase its market dominance by Recently, Lenovo has also tried to increase its market dominance by sponsoring key sporting events. sponsoring key sporting events. – Examples include its sponsorship deals with Williams Formula One (Grand Examples include its sponsorship deals with Williams Formula One (Grand

Prix) racing team and the National basketball Association signed in 2007, Prix) racing team and the National basketball Association signed in 2007, and being a key corporate sponsorship of the Beijing Olympic games.and being a key corporate sponsorship of the Beijing Olympic games.

Explain why it is important for Lenovo to specify its organizational Explain why it is important for Lenovo to specify its organizational objectives.objectives.Examine the reasons why Lenovo might not be able to meet its Examine the reasons why Lenovo might not be able to meet its objectives.objectives.

Factors Which Determine the Factors Which Determine the Corporate Objectives of a BusinessCorporate Objectives of a Business

The size and status of the business.The size and status of the business. The power of stakeholders.The power of stakeholders. Ownership.Ownership. Long and short-term objectives.Long and short-term objectives. External and internal pressures.External and internal pressures. RisksRisks Corporate and business culture.Corporate and business culture. Number of years the business has been Number of years the business has been

operating.operating.

AIMS

MISSION

CORPORATE OBJECTIVES

DIVISIONAL OBJECTIVES

DEPARTMENTAL 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.

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.

INDIVIDUAL TARGETS

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

Specific targets for separate divisions.

Targets for each department

Individual goals/targets

Managem

ent By O

bjectives (M

BO

)

THE HIERARCHY OF OBJECTIVES

INDIVIDUAL TARGETS

TO MAXIMISE SHAREHOLDERS VALUE

TO INCREASE PROFITS OFF ALL DIVISIONS BY 10% PER YEAR

WITHIN ONE REGION, TO INCREASE MARKET SHARE BY 10% AND CUT

OVERHEADS BY 5%

MARKETING: Increase Profits by 10%; FINANCE : Reduce Long-term borrowing by 5%; R&D:

Develop one innovative product each year.

E.G IN THE MARKETING DEPARTMENT

•Increase Sales by an average of 5% per client.

•Introduce five more clients to the business each year.

AIMS

CORPORATE OBJECTIVES

DIVISIONAL OBJECTIVES

DEPARTMENTAL OBJECTIVES

Managem

ent By O

bjectives (M

BO

)

THE HIERARCHY OF OBJECTIVES

Other Types of ObjectivesOther Types of Objectives Short term vs Long termShort term vs Long term Tactical (Operational)Tactical (Operational) StrategicStrategic EthicalEthical CSRCSR

Tactical (Operational)Tactical (Operational) Short term objectives that are mainly Short term objectives that are mainly

departmentalizeddepartmentalized– More sales; lower costs etcMore sales; lower costs etc

Survival – especially in tough Survival – especially in tough economic timeseconomic times– For example, a company may have a For example, a company may have a

corporate objective of becoming a corporate objective of becoming a global operator in ten years, getting global operator in ten years, getting established in Europe within one year established in Europe within one year may be a tactical objectivemay be a tactical objective

Strategic ObjectivesStrategic Objectives Long term plans that usually affect Long term plans that usually affect

the entire businessthe entire business– GrowthGrowth– Image and reputationImage and reputation– Market shareMarket share

In reality, businesses may have In reality, businesses may have several strategic objectives taking several strategic objectives taking place during the same timeplace during the same time

Examples: Strategic ObjectivesExamples: Strategic Objectives

A bigger market share.A bigger market share. Quicker design-to-market times Quicker design-to-market times

than than rivals.rivals. Higher product quality than rivals.Higher product quality than rivals. Better customer service than rivalsBetter customer service than rivals Recognition as a leader in Recognition as a leader in

technologytechnology

Ethical ObjectivesEthical Objectives Ethics are the moral principles that Ethics are the moral principles that

guide decision-making and strategyguide decision-making and strategy An ethical business is likely to treat An ethical business is likely to treat

its workers, customers, shareholders its workers, customers, shareholders and the environment in a responsible and the environment in a responsible mannermanner

– Exercise - WalmartExercise - Walmart

Exercise – Peter DruckerExercise – Peter Drucker Complete the Peter Drucker Complete the Peter Drucker

assignment found on the “S” driveassignment found on the “S” drive

Strategic Questions Involving Ethical Strategic Questions Involving Ethical ObjectivesObjectives

Is it ethical to reduce costs by exploiting cheaper Is it ethical to reduce costs by exploiting cheaper labour in less economically developed labour in less economically developed countries?countries?

Is it ethical to sell products that are legal, but Is it ethical to sell products that are legal, but known to harm those who use them?known to harm those who use them?

Is it ethical to target children in advertising?Is it ethical to target children in advertising? Is it ethical to manufacture products that are Is it ethical to manufacture products that are

used to kill?used to kill?

– These are “big” questions that elicit strong viewsThese are “big” questions that elicit strong views

Class DiscussionClass Discussion– You are the CEO of a company which You are the CEO of a company which

produces a special line of men’s clothing produces a special line of men’s clothing and you are seeking a bigger market and you are seeking a bigger market share for your products. share for your products.

– Using the SMART acronym, establish your Using the SMART acronym, establish your Corporate, Strategic, Ethical and Corporate, Strategic, Ethical and Operational objectives.Operational objectives.

– What possible corporate objective your What possible corporate objective your business can have with regard to the business can have with regard to the following groups of stakeholders?following groups of stakeholders?Customers; Suppliers; EmployeesCustomers; Suppliers; Employees

Formative Case StudyFormative Case Study

Case: Case: McDonalds vs Burger KingMcDonalds vs Burger KingSource:Source: Business & Management, Paul Business & Management, Paul

Houng, Unit 1.3, Pg 51Houng, Unit 1.3, Pg 51

DECA ConnectionDECA Connection You are to assume the role of a plant employee, who’s You are to assume the role of a plant employee, who’s

company is experiencing a serious problem with company is experiencing a serious problem with productivity.productivity.

Much of the problem can be traced to employees with Much of the problem can be traced to employees with young children.young children.

When their care-giver arrangements don’t work outWhen their care-giver arrangements don’t work out