BUSINESS AND MANAGEMENT MODULE 1 BUSINESS ORGANIZATIONS & ENVIRONMENT ORGANIZATIONAL OBJECTIVES “If you don’t know where you are going, you’ll end up someplace else.” Yogi Berra, former MLB player Introduction The annual report for Cadbury Schweppes for 1998 stated that there were 8,374 employees. As they arrive to work each day, the employees know their jobs and how to do it. This is because each of the employee has a clearly defined job description which has been carefully written to ensure that the job is done in an appropriate manner. This situation has not been achieved by accident; on the contrary, careful attention has been given to the needs of the business in order for it to operate successfully. Each department will have certain requirements to fulfill which will have been generated from the company objectives which clearly state what the business is hoping to achieve both in the short and long term. If Cadbury’s did not have any objectives, there would be nothing for the company to work towards. The objectives determine the role of the employees within the business. Context On occasions when the business is faced with a difficult decision, reference to its objectives will help in the decision making process.  Objectives provide a sense of direction for the business and its employees; the objectives can be assessed by reference to targets which in turn can be measured.  The Nature of Objectives Objectives are the goals of the business. They represent the outcomes or targets that the business wants to gain in order to achieve its aims.  The objectives of a business are derived from its aims.  Well defined objectives are important.  They will help the business to be clear about what it wants to achieve.  The performance of a business could be assessed by how effectively it achieves its objectives.  Characteristics of SMART Business Objectives  Specific – stating exactly what it is trying to achieve.  Measurable – able to be measured to decide if they have been achieved.  Agreed – have the approval and understanding of everyone involved.  Realistic – able to be achieved by the business taking into account its resources, competition, market, etc.  Time Specific – state a time by which they should be achieved. Formative Case Study - Lenovo    This Chinese multinational technology firm, bought out the personal computers division of IBM in 2005. The aim was to establish itself outside of the Asian market by owning IBM’s globally recognized brands such as ThinkPad laptops. The company is committed to four key values: – – – –  customer service innovative and entrepreneurial spirit accuracy and truth-seeking trustworthiness and integrity Recently, Lenovo has also tried to increase its market dominance by sponsoring key sporting events. – Examples include its sponsorship deals with Williams Formula One (Grand Prix) racing team and the National basketball Association signed in 2007, and being a key corporate sponsorship of the Beijing Olympic games. Explain why it is important for Lenovo to specify its organizational objectives. Examine the reasons why Lenovo might not be able to meet its objectives. Factors Which Determine the Corporate Objectives of a Business The size and status of the business.  The power of stakeholders.  Ownership.  Long and short-term objectives.  External and internal pressures.  Risks  Corporate and business culture.  Number of years the business has been operating.  THE HIERARCHY OF OBJECTIVES Management By Objectives (MBO) AIMS MISSION CORPORATE 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. 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. DIVISIONAL OBJECTIVES DEPARTMENTAL OBJECTIVES INDIVIDUAL TARGETS Targets for each department Individual goals/targets THE HIERARCHY OF OBJECTIVES TO MAXIMISE SHAREHOLDERS VALUE Management By Objectives (MBO) AIMS CORPORATE OBJECTIVES DIVISIONAL OBJECTIVES DEPARTMENTAL OBJECTIVES 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 Longterm borrowing by 5%; R&D: Develop one innovative product each year. E.G IN THE MARKETING DEPARTMENT INDIVIDUAL TARGETS •Increase Sales by an average of 5% per client. •Introduce five more clients to the business each year. Other Types of Objectives  Short term vs Long term  Tactical (Operational)  Strategic  Ethical  CSR Tactical (Operational)  Short term objectives that are mainly departmentalized – More sales; lower costs etc  Survival – especially in tough economic times – For example, a company may have a corporate objective of becoming a global operator in ten years, getting established in Europe within one year may be a tactical objective Strategic Objectives  Long term plans that usually affect the entire business – Growth – Image and reputation – Market share  In reality, businesses may have several strategic objectives taking place during the same time Examples: Strategic Objectives      A bigger market share. Quicker design-to-market times than rivals. Higher product quality than rivals. Better customer service than rivals Recognition as a leader in technology Ethical Objectives  Ethics are the moral principles that guide decision-making and strategy  An ethical business is likely to treat its workers, customers, shareholders and the environment in a responsible manner – Exercise - Walmart Exercise – Peter Drucker  Complete the Peter Drucker assignment found on the “S” drive Strategic Questions Involving Ethical Objectives Is it ethical to reduce costs by exploiting cheaper labour in less economically developed countries?  Is it ethical to sell products that are legal, but known to harm those who use them?  Is it ethical to target children in advertising?  Is it ethical to manufacture products that are used to kill?  – These are “big” questions that elicit strong views Class Discussion – You are the CEO of a company which produces a special line of men’s clothing and you are seeking a bigger market share for your products. – Using the SMART acronym, establish your Corporate, Strategic, Ethical and Operational objectives. – What possible corporate objective your business can have with regard to the following groups of stakeholders?  Customers; Suppliers; Employees Formative Case Study Case: McDonalds vs Burger King Source: Business & Management, Paul Houng, Unit 1.3, Pg 51 DECA Connection    You are to assume the role of a plant employee, who’s company is experiencing a serious problem with productivity. Much of the problem can be traced to employees with young children. When their care-giver arrangements don’t work out