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1.3 Organizational Objectives SL&HL

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Deborah Kelly

on 27 September 2013

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Transcript of 1.3 Organizational Objectives SL&HL

1.3 Organizational Objectives
importance of setting objectives
mission and vision statements
objectives, strategies and tactics
conflicts with corporate objectives
ethical objectives
corporate social responsibility
HL - changing objectives over time
HL - social responsibility and change

"Objectives are not fate they are direction. They are not commands, they are commitments. They do not determine the future; they are the means to mobilize the resources and energies of the business for the making of the future."

Peter Drucker
Common Business Objectives
All firms will consider the following objectives important. They are termed traditional as they form the natural starting point for all organizations whether large or small.

These objectives will depend on the age of the firm and the prevailing external environment.

Survival/ Breakeven
Cost minimization
Growth (market share)
Profit maximization
Profit satisficing - achieve enough profit to make owners happy but not making as much profit as possible.

Strategic and Tactical Objectives
Goals are general statements of what a business intends to achieve or wants.

Objectives
are statements of specific outcomes that need to be achieved to reach the goal.

A
strategy
is a plan of what a business is trying to achieve.

A
tactic
is more short term and is the "how" to achieve the strategic objective.
Tactics - getting the job done
Strategies - the path to success
Objectives - bring goal to life
Goals, objectives, strategies, tactics:- What's the difference?
Goals
Mission and Vision Statements
A
mission statement
is a way of defining briefly and succinctly the reason for the business's
present
existence.

Nokia - Connecting people has always been and continues to be, our reason for business.
Google - To organize the world's information and make it universally accessible and useful.

A
vision statement
defines where the company sees itself moving to in the
future
.

Heinz - Our vision, quite simply is to be the world's premier food company, offering nutritious, superior tasting foods to people everywhere.
Ford - Our vision is to become the world's leading company for automotive products and services.
Why do companies create and utilize mission and vision statements?
It can help clarify in the minds of stakeholders the purpose of the business. This could have important considerations for both current and potential customers, investors and suppliers.
A vision can reassure shareholders that the business is forward looking and willing to create and pursue new opportunities.
However, the mission and vision must be credible and realistic in the minds of the stakeholders too. A common criticism is that they they can be too vague and imprecise.
Starbucks mission: to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.

"Our [Amazon's] vision is to be earth's most customer centric company; to build a place where people can come to find and discover anything they might want to buy online."
(Quoted from Amazon.com)
Homework:
Search for the vision and mission statements of two of your favourite companies.
Ethical Objectives
An ethical objective is a deliberate attempt on the part of the company to take a position which is viewed as morally correct and appropriate in the eyes of the stakeholders.
Ethical - reducing pollution by using more environmentally friendly processes, increased recycling of waste materials, fairer conditions of trade.
Most decisions have a moral or ethical dimensions such as:
Should a multinational firm operate in a country that imposes harsh working conditions on its citizens and encourages the use of child labour?
Should tobacco or alcohol producers be allowed to sponsor events where young children may be in the crowd.
The Body Shop was one of the first companies to take an ethical stance against animal testing, Fair Trade, the environment and ethical trading.
Evaluation
+ There is considerable stakeholder pressure to "do the right thing."
+ It is a way to differentiate itself from the competition and improve customer perception.
+ Employees are motivated and will stay longer.

However,
- It does tend to increase costs and therefore lower profits.
- It can be difficult to find suppliers who have the same ethical stance.
- Shareholders may not be happy to have less profits.

Corporate Social Responsibility
CSR applies to those businesses that consider the interests of society by taking responsibility for the impact of their decisions and activities on customers, employees, communities and the environment.

CSR is further complicated when dealing with businesses that operate on a global scale in different countries. What is acceptable in one country may be undesirable in others.
Unethical - environmental neglect, exploitation of the workforce, financial dishonesty...
Benefits and Drawbacks of CSR
Benefits:
image is improved with a green or socially responsible approach. (Competitive advantage)
attracting motivated employees who want to work for a socially aware business.
no bad publicity and pressure group action
could have better relations with workers, suppliers, customers and local community
higher profitability
Drawbacks:
costs could increase
shareholders may not accept lower profits in the short term.
loss of cost and price competitiveness if rivals are NOT CSR and have lower costs
consumers may pay higher costs for CSR but NOT during economic recessions
could be "back lash" if claims to be socially responsible are found to be false
Environmental and Social Audits
An audit simply means an independent check. This is more commonly known in connection with the accounts of a business

Environmental audit
- assesses the impact of a businesses impact on the environment. A firm can chose to carry out an environmental audit, given the growing concerns of climate change and threats to sustainability. An environmental audit can form part of an organizations commitment to a socially responsible objective.
Currently neither environmental or social audits are compulsory. They are also expensive to produce and publish which does not make it feasible for small businesses or those that are cash strapped.
Examples: The Body Shop http://www.thebodyshop.com.au/Content.aspx?Id=104
Social audit
- an independent report on the impact a business has on society. This can cover pollution levels, health and safety records, sources of suppliers, customer satisfaction and contribution to the community.
Do: 1.3 activities
short case study and review questions in text.
SCG Case study
TOK question re BP
Nike Exam practice question
Rating Mission Statements
http://www.strategicmanagementinsight.com/mission-statements.html
Changing Business Objectives - HL
Businesses can change their objectives over time.. These changes will be in response to internal factors such as resource constraints or external factors such as changes in the social and economic environment. Some of the more significant reasons for businesses changing their objectives include:

A business may have satisfied the survival objective and now needs to pursue objectives of growth o increased profit.
An important senior manager who was in charge of international expansion might leave and a temporary focus on the domestic market may be needed until a replacement is found.
The external competitive market or economic environment may change. If a powerful rival enters the market or an economic recession may lead a firm to switch from growth to survival.
A short-term objective of growth in sales may be replaced by a longer term objective of maximizing profits from higher sales.
Firms need to be flexible enough to be adapted to reflect internal or external changes but they should not be changed too dramatically or frequently. Before making a significant change to objectives, senior managers need to consider:

Is the change significant and long enough to warrant a change in objectives?
What would be the risk of not changing the objective?
What would be the cost and other consequences of new business objectives for the business and its staff.
How can change objectives - and the strategies needed to achieve them - be effectively managed withing the business?
Changes in corporate responsiblity
Attitudes towards corporate responsibility have changed over time. The standards that companies are expected to reach are determined by societal norms and in most countries, these now focus on stakeholders rather than shareholders.

The main reasons for changing corporate approaches to social responsibility include:
Increasing publicity from international pressure groups that use the internet to communicate, blog, raise funds and organize protests.
The UN Millennium Development Goals (agreed by 120 countries) include "environmentally sustainable growth".
Global concerns over climate change and the impact this could have on social and economic development is forcing companies to confront the climactic consequences of their actions and investments.
Legal changes at local, national and EU level have forced businesses to restrain from certain practices.
Changes in Corporate Strategies
The changing corporate strategies of the world's mining companies are an excellent example of how firms may adopt different strategies towards their social responsibility in response to pressure.

In the 1970s and 1980s many mining companies signed mineral extraction deals with undemocratic political regimes. Environmental concerns were given very low priority and the interests of local or indigenous peoples (displaced by the mine workings) ignored.

It is very different today.
CSR and changes in firm's behaviour
A survey ranking the most ethically perceived brands ( Russell-Walling 2007).
UK
1. Co-op
2. Body Shop
3. Marks & Spencer
4. Traidcraft
5. Cafe Direct
US
1. Coca-Cola
2. Kraft
3. Procter & Gamble
4. Johnsons & Johnsons
Kellogg's
Nike
Sony
Spain
1. Nestle
2. Body Shop
3. Coca-Cola
4. Danone
5. Corte Ingles
Two examples of the benefits of adopting a CSR approach:
Nike has adapted well to a UK-led campaign that accused it of employing child labour with very low wages and poor conditions in developing countries. It was proactive in coming out with a clear CSR strategy and the appointment of a director of sustainable development. However, perceptions do take a long time to change.
Stung by criticism after the release of the film Super Size Me, McDonald's has responded positively by taking certain sweet fizzy drinks off the menu and introducing low-fat and low-sugar options including fruit for its "Happy Meals" targeted at children.
Drawbacks of pursing a socially responsible approach:
There are statistics that purport to show the beneficial impact of CSR on a company's profits but they are not yet overwhelmingly convincing.
Second, the cost of compliance with environmental audits or preparing CSR strategies may take up valuable time and resources.
Below are examples of multinationals that that have demonstrated
corporate social responsibility in Canada by supported various
causes.

Tim Horton's – Children’s Foundation Camp for underprivileged children.

http://www.timhortons.com/en/goodwill/childrens_about.html

McDonalds – establishment of children’s charities such as Ronald McDonald House.

http://www.rmhc.com/

Body Shop – Campaigns for protection of the planet and against domestic violence & animal testing.

http://www.thebodyshop.ca/home.asp?Lang=EN&CName=Home

For further details go to the links provided.
Corporate Social Responsibility Examples
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