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A2 Strategic objectives.
Transcript of A2 Strategic objectives.
Sets out the purpose of the organization to all Stakeholders.
Aspirational and therefore unachievable due to ambiguous wording. Why is this the case?
Market Share Increase (Growth)
The Aims/Goals of an organisation will depend upon:
Type of Market
Private or Public company
Match the Mission Statement to the Organisation.
..........'s mission is to organize the world's information and make it universally accessible and useful.
"....... Means Quality"
"Continually increasing value for customers to earn their lifetime loyalty."
"Our mission and values are to help people and business throughout the world realise their full potential"
"To bring inspiration and innovation to every athlete* in the world. *"If you have a body, you are an athlete."
An objective for the whole business for the long term, determined by senior management directors.
Traditionally these were often directed by the desires of who?
In more recent times a new approach has developed which has required organisations to take into consideration the opinions of........
To achieve these strategies a number of tactical objectives will be employed.
Implemented at department level by middle management.They are short term objectives. They maybe numerous and have a direct impact upon the "shop floor workers".
Name the stakeholder groups for the Holbrook Co-op.
Highlight areas in which conflict could arise.
Demand for Profit vs Ethical business practices.
Customers demand for low prices vs workers requiring a fair treatment and wage.
Health and Safety vs the need for low cost production.
Shareholders influence the board of directors at an organizations AGM. Shareholders are able to vote off a CEO and directors if they feel that they are under performing.
The formation of objectives at tactical and strategic levels.
Short term tactics and long-term strategy.
The significance to business of communicating objectives through corporate plans and mission statements.
What does it mean to be strategic?
Strategy is the direction and scope of an organization over the long term: which achieves advantages for the organization through it's configuration of resources within a challenging environment, to meet the needs of markets and to fulfill stakeholder expectations.
Today we will be:
Understanding what strategy is.
Understanding the relationships between mission statements, Aims and Goals, Strategic objectives and tactics.
Board of Directors
Over the Coming lessons we will explore the following.
Risk & Reward
The attitude, ethics and culture of a business will influence the content of it's mission statement and its behaviour in the market.
What do we mean by behaviour? Some organisations have a very aggressive attitude towards its business operations. Ryanair are renowned for being ruthless with competitors, customers and suppliers. Tesco is well known to be difficult to work with from the perspective of suppliers. Others however are known to be fair and compromising.
Factors that influence behaviour
Nature of the market - how competitive is the market? How do competitors act? How big are competitors? How significant are the barriers to entry?
As previously mentioned the culture of the business is a significant influence. Within this is the organization views upon acting ethically. Although in today's society being seen to be ethical is a necessity but this doesn't mean that all aspects of a businesses operations are ethical.
Risk cannot be eradicated but it can be reduced. Organisations in the pharmaceutical and technology markets have to take significant risks to survive.
This requires a no blame culture for its employees as to foster an environment in which employees feel able to take risks in attempt to make discoveries. Failure is therefore seen as something that is necessary on the road to success.
However other organisation are risk averse. These are in less creative industries more often than not. New untested projects will not be undertaken. However this often means that they are less successful in terms of profit.
High Risk therefore
Advantage over competitors
Business wide - as a whole
At the opposite end in terms of scale to tactics
Financial stability - gearing
Ability to borrow
Economy - Economic cycle - disposable income of target market
Market - growth, new entrants
Social - domestic unemployment/unemployment in country of market
Other long term plans
Competitors actions - ability to respond
If an MNC currency fluctuations
Product portfolio - product life cycle
Scale of the business/size - assets,employees, turnover, sales in turnover.
Leadership - style - charisma of leader and his/her influence.
Culture of the business - ethos, attitude towards risk
Suppliers - ability to produce required service or products
Stakeholders - shareholder influence, Bank
Legal - LTD or PLC
External categories that influence strategy
1. Management/Shareholders - Profitability but in a sustainable and responsible manner appears to be their main concern. Growth is also apart of their strategy as highlighted by the desire to spread risk by reducing reliance on the domestic market. This is all aimed to improve the return on their initial investment.
2.Employees - job security but with an increasing desire to increase wages although they will be aware that net profit has reduced making this unlikely in the short term. The possibility of more hours will be a positive. A good relationship between management and the workforce is highlighted by many deciding that joining a union is not necessary.
3.Local Community - continued worries regarding the dumping of plastic from the factory farmer Mr Gilman. They may encourage APSL to find another contractor or to make waste disposal an in house operation. Noise pollution from a 24/7 factory and the increased traffic. Employment opportunities provided by the third shift will be seen as a positive.
4. Suppliers - traditional suppliers will be concerned about the possible move into using Flaxiboard. On the other hand increased production due to 24/7 factory will increase orders. The company continues to be financial healthy increasing trust.
5. Customers - Albion aerospace are interested by the new eco-friendly "flaxiboard" as highlighted by the order of 60 doors. Further demand is likely as the economy continues to grow. This is particularly relevant to the caravan company as demand for luxury goods such as caravans will start to increase as people start to feel the benefit of increased economic growth. Export markets such as the Turkey motor company provide a profitable opportunity whilst reducing the risk related to be being overly reliant upon one market.
6.Government - recent reduction in tax of £26,000 however increased jobs and the permanency of them will benefit local economy. local council will be disgusted by recent fly tipping incidents.
The factors to be considered in the decision making process
Heat Recycling Machine
Increased capacity Option A - Third Shift
Option B - New Factory
Gearing is a financial ratio directly related to risk - the level of long term borrowing of the organization.
High up front cost - however this could still afforded without borrowing as the retained profits for 2013 are £514,000.
Increased capacity - significant up front costs of moving to a new site such as significant transport costs due to the size and weight of the press machinery. Upon this the inevitable interruption to production may lead to some customers finding alternative suppliers whilst the new factory is established leading to a loss of revenue. Further costs will include the renting of a new factory site as well as other possible costs that may include relocation of key staff as the new site is 40 miles away near Hull. New delivery requirements for suppliers may reduce efficiency or require new suppliers to be used. This is a significant problem as they use JIT as the accuracy of delivery is very important to ensure a reduction in the 380 minutes downtime.
The blue collar workers such as those 165 production staff will not be able to move nor would the 80 mile round trip be viable on the wages. The shift hours (0600-1400, 1400-2200) also makes this prospect less than desirable. As result extensive external recruitment will be required upon this cost, extensive training will be required to ensure new staff can maintain the quality standards that have now become synonymous with APSL.
High initial cost - yes
Low return in terms of 4% energy savings
Opportunity cost- due to high initial investment it may reduces investment choices elsewhere. In particular the decision regarding moving to a new site.
Ongoing maintenance of the machine.
Putting the environmental credentials of the business at risk by not investing.
Environmental credentials highlighted - can be used to entice new customers. Environmental nature of the production process is clearly an issue as Albion aerospace order highlights.
Energy costs are expected to increase to the extent that by may 2014 it will 50% higher than in Jan 2011 therefore savings in this area will aid the company in reducing its cost of sales otherwise known as variable costs.
Kate is keen from an operational point of view whilst peter is less keen from a financial point of view. John however believes that it is a decision that should be based upon qualitative factors in conjunction with financial information.
Risks - moving to nr Hull
Ethical - environmentally friendly as it is made of renewable sugar beet waste and is biodegradable. toxic fumes.
Initial introductory price -
Lighter - Albion aerospace - significant benefit to a plane manufacturer.
First to market due to it being produced in the Netherlands. This allows to them to set the price and therefore they could use either a premium or skimming price strategy. This is further justified by APSL being synonymous with the production of quality products. The fact that flaxiboard has a number of significant USP's allows these strategies to be selected, these include being biodegradable, made of renewable materials and has an excellent strength to weight ratio.
Would JIT be possible with a dutch supplier? Problems already exist 6hrs 20 mins of down time was created by delivery problems.
To store the increased buffer stock new storage will be required. This may not be possible at the current site.
Market research may be required to fully understand the level of demand for products made of flaxiboard.
Quality is a significant issue as the reputation is based upon it, having only recently suffered quality issues related to agency workers any issues regarding the precision of the new flaxiboard products would be a major blow to the reputation of APSL. An implication of the 90% compliance rate is an increase in waste. This adds to the cost of waste disposal, VC will also increase as more raw materials, labour and energy will be used to satisfy orders. As raw material costs are already higher than plastic this will significantly reduce the profit margin of the products.
The product range able to be produced using flaxiboard is narrower as it cant be worked into complex shapes.
Move to hull advantages/rewards
Larger factory allows the the consolidation of all activities in one space this prevents JIT problems with deliveries going to the wrong unit. This will therefore reduce the down time suffered by ASPL and increase productivity as a result.
The possible implementation of Flaxiboard may require storage as the supplier is overseas in the Netherlands. The increase of 8,000 m2 will aid with this.
With the economy and demand expected to grow, manufacturers production will increase and therefore demand for APSL's products will increase. The new factory will provide an increase in production capacity which will prevent the problems associated with running too close to 100% capacity.