Corporate objectives and strategy

TOPIC 4.1

• An aim is what the business intends to do in the long term

• It could also be regarded as purpose of the business

Business aims

Business aims

• Profit• Shareholders value• Survival• Sales revenue• Customer welfare• Employee benefits• Benefiting the local community and the

environment

Vision statements

• Large companies may formulate a vision statement

• This is a statement about what the company wants to be both now and in the future. It is:– Aspirational because it describes the values of the

business working to its very best;– Inspirational because it is deliberately designed to

motivate staff to achieve the vision and for other stakeholders to work with the business

objectives

• An outcome which allows a business to achieve its aims.

• Business can have a wide variety of objectives such as:– To increase pre-tax profits by ten percent over the

next 12 months– To increase sales in the USA by five percent over

the next six months, etc

• Objectives should be practical outcomes from the operation of a business

• Firms should set aside smart objectives• Corporate objectives– Objectives set by the most senior management and

directors for the company as a whole.– These are mainly financial objectives

• Functional objectives– Functional objectives are departmental objectives

objectives

• Large businesses often have a mission statement. This is a statement, written by the business of its purpose and primary objectives.

• Its is about here and now, in contrast to a vision statement which is about the future and where the business would like to be.

Mission statements

1. Businesses have aims which they hope to achieve through their objectives.

2. But objectives are not achieved through chance.3. Many businesses plan how to achieve their

objectives. 4. Planning to achieve objectives is known as

strategy

Strategy

Hierarchy of strategy within a large company

Corporate strategy

Business unit or divisional strategy

Functional strategy

Strategy and tactics

• Strategies set out the long term objectives and the plan for how they will be achieved.

• tactics are short-term strategies to achieve limited objectives.

Corporate objectives for plcs

• Maximizing shareholder value

• Growth in the size of the firm

• diversification

Risk of diversification

1. The business will not understand the customers in a new market as well as in an existing one

2. The marketing strengths of an existing brand name and existing distribution channels may no longer apply.

Objectives for plcs

• Profit maximizing

• Profit satisfying

Corporate objectives any business might adopt

Marketing standing

Profit Growth

survival

Market standing

• Establishing an image that helps add value to the product range

• Barclay and Black and Decker case

• How is Apple able to charge £400 for its product?

Not-for-profit motives

• People start social enterprises to overcome bureaucratic nightmare of running a charity.

• Any business that you know running for this purpose.....?

Corporate strategy

• Medium to long-term plan about how to achieve the objectives they have established.

• It sets out the actions that will be taken in order to achieve the goals.

• The key to success when forming a strategy of this kind is relating the firm’s strengths to the opportunities that exist in the market place.

Hierarchy of strategies

1. Corporate strategies

2. Business unit (or divisional strategy)

3. Functional (or departmental strategy)

Porter’s five forces

• Michael Porter, develops a method by which an organisation can analyse the competitive environment within which it operates in order to create strategic policy.

• He suggests that firms need to analyse five factors within an industry in order to understand the marketplace.

• This will help managers understand how fierce or how favourable the competitive environment is.

five forces

• The five pressures on the business that Michael Porter says affect it success in the market place: near competitors, market accessibility to new entrants, possibility of substitutes, power of suppliers, power of customers.

Porter’s five forces

Industry competitors

Intensity of rivalry

New entrants

buyerssubstitutes

suppliers

Threat of new entrants

Threat of substitutes

Bargaining power of suppliers

Bargaining power buyers