1

Unit 1

INTRODUCTION TO BUSINESS MANAGEMENT

1.3 BUSINESS OBJECTIVES

"If you are working on something exciting that you really care about, you don't have to
be pushed. The vision pulls you."
- Steve Jobs (1955 - 2011), Co-founder and former CEO of Apple

1.3.1 Vision statement and mission statement

●​ A vision statement is an inspiring or aspirational declaration of what an

organization ultimately strives to be, or wants to achieve, in the distant future.
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). It is, therefore, a written declaration that normally remains
unchanged over time.
●​ Whilst a vision statement tends to be a broad and abstract statement, a mission
statement tends to be narrow and more specific.
●​ Vision and mission statements give stakeholders of an organization a sense of
purpose and direction.
●​ Positive and inspirational mission and vision statements can help to motivate
employees, especially if the values of the organization are aligned with those of
the workers.
●​ A firm’s mission and vision statements serve to guide the organization’s
strategies and strategic objectives.
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The difference between vision and mission statements can be rather confusing and the
interpretations rather blurred. One useful way to remember the key difference is:

Vision statement = Some day

Mission statement = Every day
In other words, a vision sets out the ultimate dream of an organization; where it strives
to be some day / one day in the distant future (if it ever gets there).
A mission statement declares the purpose of the organization, and what it stands for.
These do not change on a day to day basis, so the mission statement is what the
business is in existence for, every day.

Vision statements

A vision statement describes where the company aspires to be in the future.

Without a clear vision statement, a business will not know what it is ultimately aiming for
and so may lack motivation to keep going. Hence, vision statements provide
organizations with clear long-term direction, and gives the business inspiration.
Examples of vision statements include:

●​ 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 - Amazon
●​ To stay connected with friends and family, to discover what's going on in the
world, and to share and express what matters to them - Facebook
●​ To create a better everyday life for the many people - IKEA
●​ To be our customers’ favorite place and way to eat and drink - McDonald’s
●​ A computer on every desk and in every home - Microsoft (original vision when it
was founded in 1975)
●​ To empower every person and every organization on the planet to achieve more
- Microsoft
●​ A just world without poverty - Oxfam
●​ Inspire the world, create the future - Samsung
●​ To be a world class corporation constantly furthering the interest of all its
stakeholders -Tata Motors
●​ To accelerate the world's transition to sustainable energy - Tesla
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Mission statements:

A mission statement is a declaration of the purpose of an organization. It often

includes a statement or description of the organization, its function, and its overarching
objectives.
Examples of mission statements include:

●​ We work hard every day to make American Express the world's most respected
service brand - American Express
●​ To refresh the world in mind, body and spirit - Coca-Cola
●​ To give people the power to build community and bring the world closer together.
- Facebook
●​ To organize the world’s information and make it universally accessible and useful
- Google
●​ Capture and share the world’s moments - Instagram
●​ Create economic opportunity for every member of the global workforce -
LinkedIn
●​ To inspire and nurture the human spirit - one person, one cup and one
neighborhood at a time - Starbucks
●​ To unlock the potential of human creativity - by giving a million creative artists the
opportunity to live off their art and billions of fans the opportunity to enjoy and be
inspired by it - Spotify
●​ Spread ideas - TED
●​ Make transportation as reliable as running water, everywhere, for everyone -
Uber
●​ To make people happy - Walt Disney Company
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Mission and vision statements are often criticized for being:

●​ Too vague, so therefore are rather meaningless and / or difficult to measure.

●​ Based on public relations (i.e. tp make the organization "look good" - what the
business aspires to and what it actually does on a regular basis may not align.
●​ Vision statements (and many mission statements) are very long term, so may
not ever materialize.
●​ Virtually impossible to really analyze or disagree with, so may be ignored or not
taken seriously by stakeholders such as employees.

Inspirational vision statements

TASK 1: Take a thorough look at the website and then answer the questions that follow
(15 min):

[Link]
ents/

●​ What similarities are there between these mission statements?

●​ Explain to someone else in the class three reasons why these mission
statements may be considered to be 'inspirational'?
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TASK 2: (10 min)

School vision and mission statements

●​ Define the meaning of a mission statement.

●​ What is your school's vision and / or mission statement?
●​ How well do you think it aligns with the mission statement of the International
Baccalaureate (see below)?

"The International Baccalaureate® aims to develop inquiring, knowledgeable and caring

young people who help to create a better and more peaceful world through intercultural
understanding and respect. To this end the organization works with schools,
governments and international organizations to develop challenging programmes of
international education and rigorous assessment. These programmes encourage
students across the world to become active, compassionate and lifelong learners who
understand that other people, with their differences, can also be right."
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TASK 3: (15 min)

●​ For an organization of your choice research and find the mission statement
and/or vision statement.
●​ Comment on the usefulness of the statement from the perspective of various
stakeholders, such as employees, customers, managers, shareholders,
suppliers, the government, and the local community.
●​ Investigate the extent to which the organization is achieving its aims and/or
organizational objectives.
●​ How do the key concepts (creativity, ethics, sustainability, and change) fit into the
organization's mission statements and/or vision statement.
●​ Report your findings to the class.

Exam practice:

Distinguish between a vision statement and a mission statement. [4 marks]

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1.3.2 Common business objectives:

Business objectives (or simply objectives) are the clearly defined and measurable
targets of an organization, used to to achieve its overall goals. Examples include "to
generate greater shareholder value by targeting new market segments" or "to achieve
sales growth of $500 million in the Asia Pacific region in 2022”.
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 promoting a greater sense of belonging and team spirit
(cohesiveness). They also enable managers and entrepreneurs to measure progress
towards their stated vision or mission statement.
They are often based on the Peter Drucker’s SMART objectives acronym:
Specific, Measurable, Agreed, Realistic, and Time specific. An example of a
SMART objective for a multinational company might be "to achieve sales of €10 million
in European markets by 2023."

●​ Alternatives for the 'A' and 'R' in SMART are: specific, measurable, achievable,
relevant and time-related.

Objectives can be long-term (strategic objectives) or short-term (tactical

objectives).

1.​ Tactical objectives are easier to change or reverse than strategic objectives.
They are specific targets with definitive timelines.
2.​ Strategic objectives are targets that the whole organization is striving to
achieve. It requires a greater investment in human and financial resources
than tactical and operational objectives. It is often related to what the owners
of the business want to focus on, such as business survival, growth, or profit
maximization.
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TASK 4: (20 min)

Investigate the mission statement and SMART objectives of Apple, an American

multinational technology company headquartered in Cupertino, California.

You can use the below links as starters:

[Link]

[Link]

Organizations will have varying objectives. For example, public sector organizations,
charities and cooperatives will not primarily strive for profit maximization, whereas
private sector firms are likely to do so. Organizational objectives also change due to
changes in the external business environment.
The syllabus states the following four common business objectives:

●​ Growth
●​ Profit
●​ Protecting shareholder value
●​ Ethical objectives
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1.3.3 Growth:

“Change is inevitable. Growth is optional.”

- John C. Maxwell (b. 1947), American leadership author

Many businesses strive to grow in order to gain from the benefits of growth. Growth
refers to an increase in the size of a business and its operations. These benefits
include:

●​ 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.

Growth can be pursued by internal and/or external methods. Internal growth (also
known as organic growth) takes place when an organization expands without the help of
an external partner firm. Instead, it uses its own resources to do so, such as using
retained profits to invest in production facilities in new locations.
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External growth (also known as inorganic growth) refers to the expansion and
evolution of a business by using third party resources and organizations rather than
relying on internal sources and activities.

Methods of external growth (or inorganic growth) include:

●​ Mergers and acquisitions (M&As) and takeovers

Horizontal M&A - when a merger or acquisition occurs between two companies

operating within the same industry (i.e. they are rivals), this is called a horizontal
M&A. An example is the purchase of The Body Shop by L’Oreal (the world’s
largest cosmetics and beauty firm) back in 2006. Another example is the merger
of US Airways with American Airlines in 2013, which created the world’s largest
airline. Other examples of horizontal integration include:

1.​ Tata Motors buying Jaguar Land Rover from Ford (2008)
2.​ Volkswagen buying Škoda (1994), Bentley (1998), Lamborghini (1998),
Bugatti (1998), and Porsche (2012)
3.​ The merger of Exxon and Mobil (1999), to form the world's largest
commercial energy company ExxonMobil
4.​ Facebook buying Instagram (2012) and WhatsApp (2014)
5.​ Google's acquisition of Android (2005), YouTube (2006), Motoral Mobility
(2011) and Fitbit (2021).

Vertical M&A - when an acquisition occurs between two companies operating in

different stages of the production process, this is called a vertical merger or
takeover. If the purchaser buys a company closer to the consumer in the chain of
production, this is known as a forward vertical merger or takeover. A typical
example is a manufacturer buying a retailer, such as a car manufacturer buying
car showrooms (retailers that sell cars directly to the general public).

Backward vertical takeover - if the purchaser buys a company further away from
the consumer in the chain of production, this is known as a backwards vertical
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takeover. An example is IKEA buying Romanian, Baltic Forests in November

2015 in order to control its supply of timber.

●​ Joint ventures
●​ Strategic alliances, and
●​ Franchising.

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 - 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.

An increase in any of the above measures suggests that the business will have grown.
It is common for managers to work out the percentage change in the variable being
measured in order to determine the size or magnitude of growth.
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TASK 5: (5 min)
Take the example below which shows the growth in the number of DP Business
Management candidates.

In 2005, there were just 3,622 students who took the Business Management course. By
the end of 2021, this number increased to 30,861 candidates. Hence, the growth in the
number of candidates for the course was:

●​ Percentage change = (New - Old) / Old × 100

●​ (30,861 - 3,622) / 3,622 = 7.52 = 752%

In 2020, there were 1,136 IB World Schools that offered the DP Business Management
course. In 2021, this had increased to 1,367 schools. What is the percentage growth
rate in the number of schools that offered the course?
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1.3.4 Profit:

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 enables 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.
There could be liquidity issues for a business that does achieve profit in the long-term,
which could possibly lead to bankruptcy and business closure.

TASK 6: Sustainability (20 min)

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

[Link]

[Link]
profitable-heres-how/371061

[Link]
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[Link]

1.3.5 Protecting shareholder value

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.
NOTICE:
Free market economists argue that above all else, businesses exist to protect the
interests of their owners. For example, Milton Friedman's (1912 - 2006) Shareholder
Value Theory, states that "The business of business is... business", that is, leave
businesses to get on with what they do best - business. Beyond that, said Friedman,
businesses should not concern themselves with corporate social responsibilities (CSR).
It is not, according to this school of thought, for businesses to decide and take
responsibility for the needs of society - so long as they operate within the law and the
customs of the country(ies) in which they operate.
This view is supported by Jack Welch (former Chairman and CEO of GE - General
Electric) who said: "Even in these uncertain times, every company should practice good
corporate citizenship post op but they also need to face the reality that you first have to
make money before you can give it away."
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 protect
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.
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●​ 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 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.

TASK 7: (20 min)

For any organization of your choice, investigate how the coronavirus pandemic
(COVID-19) caused changes to its organizational objectives (such as protecting
shareholder value and ethical objectives) as well as its business operations.
Be prepared to present your findings to the rest of the class.
Quite obvious examples are demonstrated below but try to consider possible positive
changes, rather than just the negative impacts or changes on the organization - some
businesses have managed to thrive during/since the global pandemic.

●​ Oil giant BP announced 10,000 job cuts following the global slump in demand for
oil (as people were stuck at home due to lockdown laws in most parts of the
world. This represented job losses for 15% of BP's global workforce.
●​ Rolls-Royce announced 9,000 job cuts around the world due to the global
decline in air travel, hurting demand for its jet engines and maintenance
services.
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●​ According to analysis from the New Economics Foundation (NEF), the

coronavirus pandemic could cause up to 124,000 job losses in the UK aviation
industry without direct government support.
●​ Frankie & Benny's (a bar and grill restaurant chain owned by the Wagamama
group) closed 125 restaurants in the UK, causing 3,000 people to lose their jobs.

TASK 8:
Examine how Ansoff’s matrix can support decision making about common business
objectives.

1.3.6 Ethical objectives:

"The one responsibility of business towards society is the maximisation of profits to

shareholders within the legal framework and the ethical custom of the country."
- Milton Friedman (1912 - 2006), American economist and 1976 Nobel Memorial Prize
in Economic Sciences
“Educating the mind without educating the heart is no education at all.”
- Aristotle (384BC - 322BC), Greek philosopher
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TASK 9: (5 min)
You are driving along in your two-seater sports car on a cold, wet, and stormy night.
You pass by a bus stop, and you see three people waiting for the bus:
1. An old lady who looks as if she is about to die.
2. An old friend who once saved your life.
3. The perfect partner you have been dreaming about.

Which one would you choose to offer a ride to, knowing that there can only be one
passenger in your two-seater sports car? And why?

Ethics are, essentially, about what is deemed to be right and what is considered to be
wrong, i.e. morality from society's point of view. They are based on the values of the
organization, in accordance with society's norms and beliefs.
Business ethics are the guiding principles that provide moral guidelines for the conduct
of business activities. Ethical objectives are organizational goals based on moral
guidelines in order to influence or determine business decision-making. Ethical
decision-making considers more than just calculating costs, benefits and profits. This
means such businesses act morally towards their various stakeholder groups, including
employees, managers, customers, shareholders, suppliers, financiers, local community
(including consideration for the natural environment), the government, and even
competitors.
Examples of ethical objectives include:

●​ 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).
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As part of its corporate social reasonability (CSR) strategy, businesses may establish an
ethical code of practice - a formal documented policy setting out the way the business
believes it should behave, including how to respond to situations that challenge its
integrity or social responsibility or accusations/situations of unethical business practices.

The importance of an ethical code of practice in business organizations

Typically, a business organization faces pressures to act ethically from internal and
external factors. For example, employees may demand better terms and conditions of
employment, such as more opportunities for professional development and progression,
whilst customers demand integrity and transparency (as they do not want to be
associated with any business that earns profit through immoral or illegal activities).
Due to the ever-growing awareness of ethical business practices and corporate social
responsibility (CSR) in the corporate world, a larger number of businesses have chosen
to adopt an ethical code of practice in order to achieve their ethical objectives. The
ethical code of practice is a formal document produced by the business which sets out
the ways it believes its employees, and managers should behave in order to act
ethically. For example, there should be guidelines about how to respond to situations
such as bribery, discrimination, and/or exploitation in the workplace, that do not align
with society's views on ethics, integrity, and social responsibilities. The ethical code of
practice is usually published in the annual reports and often on company websites.
Note that an ethical code of practice is not a legal requirement but provides a framework
for how a business should operate in order to fulfill its CSR goals and ethical objectives.
However, it does provide clear details and guidelines on the organization's rules and
policies on expected behavior and practices, as well as how business decisions are
taken. To work effectively, the ethical code of practice must be followed by all
employees, managers, and directors as it provides a framework for consistency and
uniformity across the organization.
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Also note that values and principles of each organization may differ (as there is no legal
requirement for businesses to have an ethical code of practice). Furthermore, moral
values and ethical objectives are different in different parts of the world; what is morally
acceptable or expected in one country is not necessarily the case in others. Therefore,
different businesses will have their own ethical codes of practice, although the guiding
principles of such written documents are the same.

Examples of unethical business practices include:

●​ 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).

There are both advantages and limitations of businesses pursuing ethical

objectives.

Advantages of ethical business objectives

●​ 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 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.
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●​ 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).

Limitations of ethical business objectives

●​ Compliance costs - There are costs associated with implementing ethical

behaviors 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 than exploiting workers.
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●​ Higher prices - High compliance costs can lead to 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 shareholders 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 behavior
●​ Stakeholder conflict - Although customers 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
maximize profit 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.

Overall, there is an ethical dilemma for managers if higher compliance costs

resulting from ethical business activities cannot be covered by higher prices
which customers are willing and able to pay for. Decision makers will need to decide
whether they can accept adopting ethical practices with the potential risk of lower
profitability, at least in the short-term.
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TASK 10 (5 min)

Case Study 1 The Coca-Cola Company

Coca-Cola is the world’s most successful consumer drinks company, with over $40
billion in sales revenue (which equates to $109,589,041 every day of the year!).
However, this also means the company is the planet’s largest plastic polluter. Although
the multinational giant is often associated with fuelling child obesity, the company is
increasingly being linked with plastic waste and pollution, with over 100 billion plastic
bottles produced each year – that’s the equivalent of 273,972,602 plastic bottles every
single day of the year!
In response to negative media exposure, the company’s global chief executive, James
Quincey, stated that the Coca-Cola Company aims to recover every plastic bottle that
the company sells, and to use 50% of this for new bottles, by 2030. The company also
announced that it would replace the plastic shrink wraps used in multipacks with 100%
recyclable cardboard.
Source: adapted from BBC News

TASK 11:

Ethical or Unethical, that is the question

Recommended time: 10 minutes

In groups of 2 - 4 students, debate whether you feel the following business practices are
ethical or unethical, and provide justified reasons for your arguments.
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1.​ Charging customers premium prices at the cinema (theater) for drinks,
popcorn and other movie snacks.
2.​ Airlines charge customers higher prices for air travel during school holidays,
such as Christmas or the summer break.
3.​ Using pesticides in agricultural food production (pesticides are the
manufactured chemicals used to control weeds and insects that cause
damage to farm crops).
4.​ Reducing portion sizes so as to avoid having to increase prices due to the
rise in the cost of raw materials (a practice known as "shrinkflation").

Exam practice:
Define the term ethical objectives (2 marks)

State two examples of ethical business objectives. (2 marks)

Explain two reasons why an organization might choose to set ethical business
objectives. (4 marks)

Key terms:
●​ Business ethics are the principles that provide moral guidelines for the conduct
of business activities.
●​ Ethics are about what is deemed to be right and what is considered to be wrong,
i.e. morality from society's point of view.
●​ An ethical code of practice is a formal documented policy that sets out the way
a business believes it should behave, including how to respond to situations that
challenge its integrity or social responsibilities.
●​ Ethical objectives are organizational goals based on moral guidelines in order
to influence or determine business decision-making.
●​ Growth refers to an increase in the size of a business and its operations, using
measures such as market share, sales revenue, or the number of customers.
●​ Objectives (or business objectives) are the clearly defined and measurable
targets of a business, used to to achieve its overall organizational goals.
●​ Profit is the positive difference between a firm's sales revenue and its total costs
of production, per time period
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●​ 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).
●​ SMART objectives are organizational targets that are specific, measurable,
agreed, realistic, and time specific.
●​ Strategic objectives are long-term goals that the whole organization continually
strives to achieve.
●​ Tactical objectives are short-term specific goals of a business with definitive
timelines for specific functional areas of an organization.

1.3.7 Strategic and tactical objectives:

"There is one and only one social responsibility of business - to use its resources and
engage in activities designed to increase its profits."
- Milton Friedman (1912 - 2006), recipient of the Nobel Prize in Economics in 1976

Like vision and mission statements, business objectives can give employees and
managers a genuine sense of direction and purpose. Hence, they can help to motivate
employees and raise productivity. While strategy and tactics originated as military terms,
their use has spread to the corporate world.
Strategy refers to the overarching plan or set of goals for the business as a whole and
takes effort, commitment, and resources over a prolonged period of time to accomplish.
Tactics are the specific actions or steps that are undertaken to accomplish the
organization's strategy.

Business objectives can be categorized as long-term (strategic objectives) or short-term

(tactical objectives).

Strategic objectives
They refer to the long-term goals that the whole organization continually strives to
achieve. They are used to achieve the overall strategic goal or vision or mission of the
business as an organization. They require a greater level of investment in human and
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financial resources than tactical objectives. Strategic objectives are often related to what
the owners of the business want to focus on, such as growth, profit maximization,
protecting shareholder value, or ethical objectives.
An example of a growth objective might be to improve the market share of a business
by expanding its product portfolio in a particular market. This will take a longer time to
achieve than tactical objectives. Strategic objectives are the responsibility of executive
directors (senior management) and are ultimately about results.

Strategy is ultimately about results

Tactical objectives
They refer to the short-term and specific goals of a business with definitive timelines for
specific functional areas of an organization. Therefore, they are easier to change or
reverse than strategic objectives. In general, tactical objectives have a predetermined
time frame of less than a year. Tactical objectives are usually delegated (entrusted) to
the others lower down in the organizational hierarchy. Examples of such objectives
relate to performance targets, such as to improve labor productivity or to reduce
operational waste within different functional areas or departments of the business.
Strategies

●​ 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
●​ 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 , finance strategies, marketing strategies , and
operations management strategies.
 26

Tactics

●​ Tactics are the shorter term approaches to achieving (tactical and operation)
objectives.
●​ 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.

TASK 14:
Examine the advantages and disadvantages of using a SWOT analysis in setting
strategic and tactical business objectives.

TASK 15:

Creativity

Watch this short news report (2 minutes) about businesses in British Columbia, Canada,
that once primarily served meals or coffee being creative in shifting their focus to selling
groceries. Many businesses, especially small independent operators, had to change
their tactical objectives in order to survive the prolonged COVID-19 pandemic.

COVID-19 forces B.C. businesses to adapt to survive

Change

“It takes 20 years to build a reputation and five minutes to ruin it. If you think about that,
you'll do things differently.”
- Warren Buffett (b. 1930), Chairman and CEO of Berkshire Hathaway
It is common for an organization to change its business objectives over time due to
changes in the internal and/or external business environment. The internal environment
refers to situations and settings within the business itself. Hence, the organization will
have some degree of control over these matters. The external environment refers to
situations and factors that are those beyond the control of a business. This includes
consideration of changes in any combination of the following aspects of the external
business environment (STEEPLE analysis):
 27

●​ Social factors
●​ Technological factors
●​ Economic factors
●​ Environmental factors
●​ Political factors
●​ Legal factors, and
●​ Ethical factors.

Think about how changes in both the internal and external environments can lead to a
change in business objectives. Use real-world examples to substantiate your
responses, and be prepared to share your findings with the rest of the class.

Exam practise:

Using relevant examples, distinguish between tactical objectives and strategic

objectives. [4 marks]

Key terms:

●​ Tactics are the actions required to achieve the short term objectives of an
organization.
●​ Tactical objectives refer to the short-term and specific goals of a business with
definitive timelines for specific functional areas of an organization.
●​ Strategies are the actions required to achieve the long term objectives of an
organization.
●​ Strategic objectives refer to the long-term goals or aims that the whole
organization continually strives to achieve.

1.3.8 Corporate social responsibility:

 28

"Honesty is the cornerstone of all success. Without honesty, confidence and ability to
perform shall cease to exist.”
- Mary Kay Ash (1918 - 2001), Founder of Mary Kay Cosmetics, Inc.
Corporate social responsibility (CSR) refers to the value, decisions and actions that
impact society in a positive way. It is about an organization’s moral obligations to its
stakeholders, the community, society as a whole and the environment. It is about an
organization using ethical objectives to commit to behaving in a socially responsible way
towards its internal and external stakeholders, not just to the owners or shareholders.

TASK 16: (20 min)

Read on Starbucks CSR project:
[Link]
4859105/

But:
[Link]

[Link]
ce-along-with-coffee/qchsf8m35

Business organizations are ever more aware of the need for firms to set ethical
objectives as part of their corporate social responsibility (CSR). Doing so helps
businesses to earn or sustain a positive corporate image in the eyes of external
stakeholder groups, such as pressure groups, the government, financiers, and
customers. It can certainly help to create greater customer loyalty as more people are
informed about and aware of the importance of social responsibilities towards others.
 29

Internally, it can also help to improve the morale of workers, staff motivation, employee
retention, and labor productivity.

The Internet and social media platforms make it very easy to expose organizations that
act unethically and go against a moral code of ethical practice. By contrast, pursuing
corporate social responsibilities and acting ethically can help the business to gain
competitive advantages and to improve its profitability in the long-term.
Nevertheless, as with pursuing ethical objectives, the pursuit and implementation of
CSR practices can have their drawbacks too. These limitations include:

●​ Compliance costs of always trying to act in a socially responsible way, i.e. the
costs of compliance with the firm's ethical code of conduct and society's
expectations of corporate social responsibilities.
●​ The added level of bureaucracy in following CSR codes of practice and formal
company policies can delay decision-making, especially in large business
organizations.
●​ Hence, this can cause stakeholder conflict, i.e. shareholders, financiers, and
investors may become upset due to the impact of higher production costs.

TASK 17:
With a partner you are going to research a business' corporate social responsibility
(CSR) and create an Infographic, or Flow Chart displaying your findings.
Your visual should include:
1.​ Your definition of Corporate Social Responsibility (CSR).
2.​ An explanation of the importance of CSR for your chosen business.
3.​ Examples of effective CSR from your chosen business.
●​ Summarize your findings of such examples
●​ Evaluate the benefits of adopting CSR for your chosen business
●​ Evaluate how CSR benefits others external stakeholders, such as the local
community and the environment.
 30

4. Identify a business that has faced ethical issues (this can be for another
organization of your choice).
●​ Summarize your findings
●​ Evaluate the effects of these issues on the business
●​ Explain what the business has done to resolve the issue.

Try to use contemporary examples wherever possible.

Evolution of CSR
Just as business objectives are not static, the role and nature of corporate social
responsibility also evolves over time.

●​ A key purpose is to create a positive impact on the reputation of the

organization. It is about building desirable products, practices and relationships
that generate this positive impact.
●​ Opinions change over time - what may have been considered socially
acceptable in the past may no longer be the case, e.g. animal testing, the use of
plastic carrier bags, sexist adverts, advertising of tobacco products, or targeting
children in television advertisements.
●​ Societal expectations and the growing popularity of social media have caused
CSR to become more integrated into today’s corporate cultures with businesses
playing a greater role in community relations.
●​ Increasingly, businesses are interested in CSR as a genuine way to have a
positive impact on their triple bottom line: ecological, social and economic
sustainability.

TASK 18:
Watch this short 4 minutes YouTube video review about Carroll's CSR Pyramid:
Carroll's Corporate Social Responsibility Pyramid
 31

NOTICE: Despite businesses having different corporate objectives, the goals are not
necessarily mutually exclusive. For example, an organization that chooses to pursue
and develop its corporate social responsibilities can benefit from having an improved
corporate image and brand reputation. Therefore, pursuing CSR objectives can enable
the business to grow and increase its market share. Essentially, this can help the
organization to maximize its profitability over time.