Where is your business going?

A vision statement is inspiring or aspirational declaration of what an organization ultimately strives to be, or wants to achieve, in the distant future. 

A vision statement is a long-term goal, a dream or understanding of what the future should look like. 

• The vision statement expresses that goal or dream in order to inspire and motivate everyone involved with the company.

This usually includes, or at least indicates, the organization’s core values. 

The vision statement is intended to act as a clear guide for key stakeholders when planning and implementing current and future corporate strategies.

A mission statement is a succinct and motivating declaration of an organization’s core purpose (why it exists), identity (who they are) and focus (what they do).

Vision: “be the best student in the world” 

Mission: “to study hard”

Vision is something that is quite vague and hard to quantify, and yet a good thing to work towards. It’s a good aspiration to be the best student in the world, right? Mission “to study hard” is your purpose on the way to the vision, it is not something that can be achieved, it is something that you do, it’s the reason for your existence as the best student.

Vision: “To provide access to the world’s information in one click”. 

Mission: “Organise the world's information and make it universally accessible and useful”.

Business objectives (or simply objectives) are the clearly defined and measurable targets of an organization, used to to achieve its overall goals. 

1. Growth

   • to achieve sales growth of $500 million in the Asia Pacific region in 2022

2. Profit

   • to achieve a 10% profit margin

3. Protecting Shareholder Value

   • to generate greater shareholder value by targeting new market segments

4. Ethical Objectives

   • ensure the company's production processes are carbon neutral

• Business objectives are essential for all businesses so that people know where they are striving to go or what they are trying to accomplish. 

• They give people a sense of common purpose, thus promote a greater sense of belonging and team spirit (cohesiveness). 

• They also enable managers and entrepreneurs to measure progress towards to their stated vision or mission statement.

• Being environmentally friendly

• Customer loyalty / Brand loyalty

• Customer satisfaction

• Diversification

• Greater market share

• Improved competitiveness

• Improved corporate image / reputation

• Improved efficiency

• Improved quality

• Survival

The expansion of a business in terms of revenue, profit, number of employees, locations or another important metric.

Methods of measuring the growth of a business include:

• Sales revenue - the monetary value of the products that the business has sold, per time period).

• Sales volume - the number of products that the business sells, per time period).

• Profits - the financial surplus that remains after all costs of production have been deducted from a firm's sales revenue).

• Customers - the more customers that the business has, the larger it tends to be).

• Number of employees (size of the workforce) - the more people that are hired by the business, the larger it tends to be.

• Market share - this measures the firm's sales revenue as a proportion of the whole industry's sales revenue.

• Higher sales revenue and profit - as a firm grows, its sales revenue increases, thereby improving the changes of higher profits.

• Economies of scale - these are cost-saving benefits for firms as they grow larger, such as being able to purchase raw materials in bulk at a discounted price from their suppliers.

• Reduced risks - larger firms tend to be less vulnerable to changes in the external environment (STEEPLE analysis), such as an economic recession in the economy.

• Employees are more likely to motivated working for larger and growing businesses as they have a greater degree of job security as well as increased remuneration.

• Larger businesses are more likely to be able to attracts investors and represent lower risk to financial lenders.

Profit — the difference between revenues and costs.

Profit (or financial surplus) is the positive difference between a firm's sales revenue and its total costs of production, per time period. Profit as a business objective is important for two main reasons:

• It acts as a reward for the owners and investors of the business.

• It provides an internal source of finance to further develop the business.

Profit acts as an incentive for entrepreneurs to take risks and start up new businesses. It also provides incentives for them to remain in business and pursue growth in order to reap greater financial returns. Profit as an internal source of finance enable the business to grow further without the need to over rely on external sources of finance that incur interest and debt.

It is assumed that profit maximization is a top priority for traditional commercial (for-profit) businesses. For many businesses and their owners/shareholders, profit is the most important organizational objective. They strive to operate at the optimal size that enables them to sell their output where the difference between total revenue and total costs is maximised.

Discussion:

Key concept - Sustainability

Is it possible for an organization to remain in business without being profitable?

 Key concept - Change

Investigate real-world example of how and why business objectives might change over time.

 Theory of Knowledge (TOK)

How can business owners know just how much profit is enough?

 Theory of Knowledge (TOK)

To be successful and remain operational, both profit and growth are important and necessary for any business. How can we know if profit or growth is the most important business objective?

Key concept - Sustainability

Is it possible for an organization to remain in business without being profitable?

 Key concept - Change

Investigate real-world example of how and why business objectives might change over time.

 Theory of Knowledge (TOK)

How can business owners know just how much profit is enough?

 Theory of Knowledge (TOK)

To be successful and remain operational, both profit and growth are important and necessary for any business. How can we know if profit or growth is the most important business objective?

A company is owned by its shareholders. Protecting shareholder value is about safeguarding the interests of the owners of a limited liability company (one owned by shareholders either as a private or publicly traded company). Protecting shareholder value is ultimately the responsibility of the company's chief executive officer (CEO) and board of directors, based on their strategic plans to earn a healthy return on the capital invested in the business. 

Free market economists argue that above all else, businesses exist to protect the interests of their owners.  

Protecting shareholder value encompasses both short- and long-term objectives, including survival, profit, and growth in order to give owners a financial reward/return on their investments.

• Survival - This is the most basic of all business objectives as nothing else matters if the business cannot survive. Every business must earn enough revenue to keep it operating or else it will collapse. A business cannot protecting shareholder value if it cannot survive, perhaps due to a prolonged economic recession or fierce competition from larger companies.

• Profit - The profit motive provides a financial return for shareholders in the form of dividend payments. Most private sector, for-profit businesses have this as their main organizational objective in order to provide value for their owners.

• Growth - Enlarging the business can help to increase sales revenues, profits, and customer loyalty. These combined benefits of business growth help to generate improved shareholder value over time.

• Market share - Firms may aim to increase their market share (their sales revenue as a proportion of the entire market's sales revenue) in order to gain the benefits of being the market leader. These advantages include enhanced brand awareness, brand value, and brand loyalty, all of which help a company to protect the interests of their shareholders.

• Ethical objectives and corporate social responsibility - For a business to remain relevant, profitable, and competitive, it is not enough to only sell more goods and services. Changing social attitudes and expectations mean that businesses have to operate in a socially acceptable and responsible way, such as ensuring business activities do not cause damage to the planet or people. Doing so can also improve the corporate image of the company. Only then, can the business generate and protect shareholder value in the long term.

• improving the overall wellbeing of workers

• honesty and fair treatment with regards to dealings with customers and suppliers

• adopting green (clean / renewable) technologies

• pursuing sustainable growth strategies

• observing and respecting intellectual property rights of others

• using socially responsible advertising, and corporate governance (such as financial integrity and transparency).

• the exploitation of stakeholders (such as low-paid workers, child labour, suppliers being paid late, and poor delivery of services to customers)

• misleading marketing gimmicks, including direct advertising aimed at young children

• exploitation of the natural environmental and ecosystems, and

• fraudulent business activities (such as financial deception).

• Improved corporate image - Being known as an ethical business can help to enhance the corporate image and reputation of an organization. This can generate additional long-term gains for the business such as improved sales and consumer loyalty. By contrast, acting unethically (see ATL Activity 4 below) can certainly lead to negative publicity from the mass media, leading to serious damage to the organization’s reputation.

• Higher sales revenue -  Due to improvements in education and the growing use of social media platforms, customers tend to prefer to buy from businesses that act morally and have ethical goals. They do not tend to knowingly purchase products from businesses that cause significant harm to the natural environment or exploit child labour, for example. Hence, ethical businesses can gain from higher sales revenue in the long-term.

• Increased customer loyalty - Similarly, customers are more likely to be loyal to businesses that look after their customers, employees, suppliers, and local communities. For example, customers are likely to prefer to be loyal to cosmetics companies that do not test their products on animals but actively take actions to protect the natural environment.

• Reduced costs - Despite the costs of compliance, acting ethically can help a business to cut certain costs in the long-term. For example, acting in the best interest of the environment can help to reduce the costs of excessive packaging and waste.

• Higher staff morale - Employees feel better working for a business that does the "right" things, from society's point of view, beyond just obeying the laws of the country. Higher staff morale also helps to improve labour productivity and the level of employee motivation.

• Increased employee loyalty - Similarly, ethical business practices help to attract and retain highly motivated employees. In particular, highly qualified and skilled employees may not be willing to work for unethical businesses. Having a good corporate image and reputation for ethical business practices makes it significantly easier for organizations to attract, hire, and retain employees.

• Avoiding fines and penalties - Acting unethically can result in lawsuits (legal action taken against the businesses) and expensive fines as well as other penalties imposed by the courts.

• Ultimately, actively pursuing ethical business objectives can be beneficial for the organization's triple bottom line (people, planet, and profits).

• Compliance costs - There are costs associated with implementing ethical behaviours and corporate social responsibility. These costs are potentially extremely high. For example, supermarkets have to spend more on purchasing organic fruits, vegetables, and meats rather than genetically modified produce. The costs of production are also higher for ensuring employees are paid fair wages rather that exploiting workers.

• Higher prices - High compliance costs can lead prices having to be raised in order to maintain profit margins. Furthermore, rival businesses might not implement ethical objectives and could have lower costs as a result. This can reduce the price competitiveness of the business as it pursues its ethical objectives and corporate social responsibilities.

• Lower profits - The compliance costs of acting ethically, such as the adoption of green technologies or the sourcing of fair trade raw materials, means higher production costs for the business and hence lower profitability. This would then lead to lower dividend payments made to shareholder or business owners.

• Subjectivity - The notion and concept of ethics is subjective. People and businesses in different parts of the world may have varying views about what is and what is not considered ethical behaviour (refer to BMT 11 - Hofstede's cultural dimension).

• Stakeholder conflict - Although customer might prefer to purchase from businesses with ethical objectives and employees might prefer to work for ethical business, the directors and owners of the business might not be so keen due to some of the disadvantages outlined above. Many for-profit organizations aim to profit maximize in order to meet the needs of their shareholders and financiers or investors. Shareholders may be reluctant to accept lower profits, at least in the short term. Hence, this can put pressure on managers to pursue other business objectives other ethical objectives and CSR practices.

• Strategies are the actions in which a business plans to reach its long-term organizational aims and corporate-wide objectives.

• Examples of these strategic decisions include: diversification, overseas expansion, and mergers or takeovers (see Unit 1.5 Growth and evolution).

• Strategies used to achieve the strategic objectives are decided by the senior leadership team or board of directors.

• Strategies also affect and are affected by the functional areas of business: human resources strategies (see Unit 2), finance strategies (see Unit 3), marketing strategies (see Unit 4), and operations management strategies ( Unit 5).

• Tactics are the shorter term approaches / actions to implementing the strategy.

• They are the methods used by an organization to meet specific and measurable goals.

• They are used by the workforce to work towards achieving the strategic objectives of the organization.

1. Expand into new markets

2. Develop new products

3. Cut costs to improve efficiency