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1
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1.3 Business objecti ves

By the end of this chap ter, you should be able to:

➔ Explain the denitions and roles of vision statements and

mission statements

➔ Examine common business objectives, including growth, prot,

protecting shareholder value and ethical objecti ves

➔ Explain strategic and tactical objecti ves

➔ Describe corporate social responsibility (CSR)

Vision and mission statements

Key terms

Successful businesses have a clear identity, shared values, and a sense

Vision statement of purpose that all stakeholders identify with. To create or reinforce this

identity, communicate these values, and maintain focus on the purpose,

a philosophy, vision or set of

many businesses produce mission and vision statements. Some businesses

principles which steers the

will have one of these, others both. When done properly, both types of
direction and behaviour of

statement can help a business to reach its loftiest aims and stay focused day
an organization

to day.

Mission statement

Mission and vision statements are sometimes confused, but they have

states a company’s purpose

different purposes. The vision statement is more forward looking and

and explains why the

speaks to the long-term aims and highest aspirations of a business.

business exists. A mission

A mission statement is more grounded in the aim of accomplishing

statement generally includes

objectives to achieve the mission: an intermediate step on the way to

the business’s aims and,

the vision.

whether expressly stated or

The two statements should complement each other, with the vision

implied, indicates its most

statement being produced rst. Less specic than a mission statement,

impor tant values.

the vision statement serves as a guiding principle or principles.

Table 1.3.1 Comparison of vision and mission statements

Vision Mission

Concept What do we want? Why are we doing what we are doing?

Purpose A vision statement points to the future. It is what the A mission statement, based upon where the business is now,

business would like to see itself as. communicates what needs to be done in order to achieve

the vision.

Audience To internal stakeholders, the vision statement inspires To internal stakeholders, the mission statement provides a

and motivates employees. means for accountability by dening key performance indicators.

For external stakeholders, the vision statement binds For external stakeholders, the mission statement measures how

them to the business by giving a sense of shared beliefs. successful the business is at achieving its vision.

Change As an expression of the business’s core values, the vision A mission statement may change: in a world of dynamically

should never change. changing external environments, a mission statement may need

to be modied to meet new circumstances.

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1.3 Business objectives

Here are two examples of the vision statements of major corporations that

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you probably know (and whose products you might use):

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● Microsoft: “A personal computer in every home running Microsoft

software.”

● Toyota USA: “To be the most successful and respected car company

in America.”

In both cases, the vision statements are brief and express aspirations that

are high and long term. They are inspirational. Both statements convey a

sense of condence in their purpose. They also convey the sense that if the

companies are not at this lofty place yet (Microsoft running software in every

home or Toyota USA being the most successful and respected car company in

America), they will not give up until they have reached theiraspiration.

Student workpoint 1.6

Be reective

Here are the vision statements of two large organizations: Key terms

Oxfam: “A just world without poverty.”

Business objectives

Amazon: “Our vision is to be earth’s most customer centric company;

the ar ticulated, measurable

to build a place where people can come to nd and discover anything
targets that a business must

they might want to buy online.”

meet to achieve the aims

or long-term goals of the

What do the statements reveal about the aims and attitudes of the

business. It is critical that

organization? Look carefully at the words that each statement uses –

objectives are specic and

what affect do they have on you?

measurable.

Strategic objectives
Aims, objectives, strategies, and tactics

the long-term goals of a

Businesses may distinguish between aims and objectives and between

business that indicate how

strategies and tactics. All of these concepts are interdependent and all of

the business intends to

these terms (including vision and mission too) are linked in some way or

full its mission. Strategic

another. Figure 1.3.1 attempts to show their relationship with each other.

objectives usually include

performance goals, such as

vision
increasing market share or

improving protability.

Tactical objectives

shor t- to medium-term targets

that, if consistently met,

strategies

mission will help a business reach

its strategic goals. Whereas

tactics

strategic objectives are

typically set by the board of

strategies

directors with top executive

management, tactical

objectives are usually set

by executive management

objectives aims

working with middle-level

management.
Figure 1.3.1 The vision and mission statements – relationship between aims,

objectives, strategies, and tactics

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The aims of a business are its long-term goals – what it wants to achieve in
ssenisub ot noitcudortnI 1

Student workpoint
the future. An example of an aim might be: “We want to be protable every
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1.7
year through the production of tasty, high-quality meat products.” Another

aim might be more focused on the delivery of the service: “We aim to deliver

Be reective

consistently high-quality plant and garden products through a helpful sales

Think about your long-

staff.” The vision statement is a summary of these aims (sometimes literally

term life goals. Write a

the sum of these aims, at other times with modiedwording).

personal vision statement,

In contrast to aims, objectives are the medium- to short-term goals

and a personal mission

that clarify how the business will achieve its aims and reach its vision.
statement, linked to these

A mission statement summarizes these objectives.

life goals.

Common business objectives

Business objectives vary according to organization. For some organizations,

their most important aim is to grow. The board of directors and corporate

leadership believe that growing the organization, gaining market share and

increasing sales will, in the long run, enhance prots. Other organizations

focus on prots or protability, where the board and the corporate leadership

are more focused on prots in the immediate future. A middle path aims to

protect shareholder value by making prots now but looking sufciently to

the future to ensure shareholder value is there in the longrun.

Businesses often establish a different category of objectives: ethical objectives.

These are goals based on established codes of behaviour that, when met,

allow the business to provide some social or environmental benet, or at

least not to hurt society or the environment in the process of making a prot.

For example, a business might aim for all of its employees to be treated

without discrimination, harassment, or even favouritism. Another ethical

objective might be to treat customers with respect and honesty. Ethical

objectives can cover a whole range of activities and many businesses setthem.

Business objectives come in three types:

● Strategic objectives – sometimes referred to as “global objectives”–

are the medium- to long-term objectives set by senior managers to

guide the company in the right direction to achieve its aims.

● Tactical objectives are the medium- to short-term objectives set by

middle managers to achieve the strategic objectives.

● Operational objectives are the day-to-day objectives set by oor

managers (and sometimes workers themselves) so that the company

can reach its tactical objectives.

Table 1.3.2 Vision and the three types of objective

Vision (summary of aims)

Long-term and highest aspiration

Strategic objectives

Long-term goals
Tactical objectives

Medium or shor t-term goals

Operational objectives

Day-to-day goals

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1.3 Business objectives

Strategic and tactical objectives

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Businesses use the term “hierarchy of objectives” to describe the

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relationship between all of their goals. At the top of the hierarchy are the

aims, which are few in number and set by the entrepreneur or the chief

executive ofcer (CEO). The aims are (and should be) rather general.

How the business achieves these aims is through the next level of

managers– the senior managers (directors or executives). These strategic

objectives will be greater in number and concrete in nature. Ideally,

these objectives will also be SMART (see below for details). With SMART

objectives, the entrepreneur or CEO has some fair and measurable way

to assess the performance of the executives and their divisions. If SMART

objectives are not met, the CEO must ask: Were the objectives properly

set, or did the directors or executives not perform properly in meeting the

objectives? If the directors or executives vastly exceed the objectives, the

CEO may decide to set more ambitious objectives the following year.

Businesses achieve their strategic objectives through the next tier of

objectives: those that are tactical. Tactical objectives tend to be greater

in number than strategic objectives and are usually set by the next level of

managers – the middle managers (heads of department or supervisors).

At the lowest level, operational objectives will be set: oor managers will

determine specic objectives that, in sum, ensure that the tactical objectives

will be met.

Consider the hierarchy of objectives shown in Table 1.3.3.

Table 1.3.3 The hierarchy of objectives

Aim Strategic objective Tactical objective Operational objective

To be the most successful To have the highest market share To hire and retain enough To have the average amount of time

car dealership in the city. of car dealerships in the city. salespeople so that the that a customer waits to be greeted

dealership has sucient by a salesperson to be less than

salespeople to serve two minutes.

customers at all times.

In the example in Table 1.3.3:

● The CEO sets the aim that a particular car dealership should be the most

successful in the city.

● The head of sales determines that the best way to measure success is by

having the highest market share of any car dealership in the city.

● The sales managers realize that to have the highest market share

within a specied time frame means having more qualied sales staff to

servecustomers.

● The salespeople, realizing that their chance of making a sale increases

the sooner they greet the customer, agree as a group that no customer

will go more than two minutes without being greeted and offered

service by a salesperson – even if it means that salespeople will not

nish their coffee during their break.

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An important difference between aims and objectives is that objectives are

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concrete and can be translated into something specic and measurable.

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A vision such as “To be the most successful and respected car company in

America” is motivating, but it is also (purposely) vague. This vagueness

allows almost everyone to feel connected to it, but vagueness and

abstractness are not qualities that employees can act on in unison.

SMART objectives

Specic

Businesses are effective when they take their vision and transform it

Measurable
into specic objectives. The best business objectives are SMART. SMART

objectives are as follows:

Achievable

Relevant ● Specic – is the objective clear and well dened? Objectives should

relate to the nature of the business and be unambiguous. Rather than

Time-specic

set an objective that the business “should grow”, a smart objective

would clarify that it wants to “increase its membership” or “increase the

number of units sold” or “increase market share”.

● Measurable – can the objective be measured to see whether it has

been achieved or not? Not only should the objective be specic, it

should also be measurable, as each of the above examples are (number

of members, number of units sold, size of market share).

● Achievable – can the objective be achieved (is it realistic)? When

objectives are achievable, they can be motivational. Objectives that are

beyond the reasonable reach of a business or its employees can have

the opposite effect, with employees giving up because they think or

fear that they cannot reach the objective. Achievable goals also reduce

dissonance and distractions (when employees or managers wonder how

other aspects of the business are going to support these objectives).

● Relevant – is the objective actually of any use? Businesses can set

objectives that are distractions from the main purpose of the company

or, more commonly, set objectives for specic employees that are not

relevant to the employees’ area of responsibility. At a school, telling

a member of the custodial staff that the objectives are for students to

achieve high IB scores is not particularly relevant. Telling the custodial

staff that, to lower expenses, they need to reduce the amount of

cleaning supplies by 7% is relevant.

● Time-specic – has a sufcient time frame been set? If objectives

do not have a time frame or deadline, they are not meaningful. For

a car dealership to tell the sales staff that the number of cars sold per

salesperson must increase by 5% is meaningless unless the sales staff is

told the date by which the new sales target is to be met.

Business strategies

A business strategy is a plan to achieve a strategic objective in order to

work towards the aims of the business. This strategy will be medium to

long term and will require senior managers to make the decisions approved

by the owners and/or the CEO.

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1.3 Business objectives

Strategies are not unplanned or spur of the moment. They involve:

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● Careful analysis of where the business is.

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● The development of a plan (strategy) for how to get to where the

business wants to be (aims).

● Careful consideration of how to implement the strategy.

● A periodic evaluation process to determine whether the plan is working

or, after a specic period of time, has worked.

A business tactic is a plan to achieve a tactical objective to work towards

the strategies of the business, which themselves are the path to reaching

the aims of the business. This tactic will be short-term and will require

middle managers to make the decisions approved by the senior managers.

Tactics are easier to change. They are less closely tied to the long-term

health of the rm, instead focusing on how to achieve measurable targets

within the strategy.

A business can have a sound strategy but a poor tactical plan. A strategic

objective, for example, might be offering food that is perceived by

restaurant customers to be of the highest quality of its type in a market

area. One tactic for determining customers’ satisfaction might be customer

count or observing customers’ reactions as they eat the food. A better tactic

might be to obtain a more direct form of customer feedback on food quality

(but it might not be a better form if the direct feedback does not otherwise

t with the marketing mix of the restaurant).

The need for organizations to change objectives

Businesses often need to change objectives. Sometimes this requires C oncep t

changing strategic objectives. More commonly, it involves changing

tactical objectives and, day to day, oor managers and supervisors change
CHANGE

operational objectives. Regardless of the level, objectives change because of

Due to changes in their external

changes in either of these environments:

environment (such as new

● The internal environment, which refers to changes in the conditions

competitors) and changes in their

within the business.

internal environment (such as

restructuring), organizations may

● The external environment, which refers to anything outside the

need to modify their objectives

business that nonetheless has a bearing on its operation or performance.

and strategies.

Changes in the internal environment Do some research to nd examples

of such changes in objectives

Changes in the internal environment might include the following:

or strategies.

● Leadership – a change of leadership often can lead to a change in

aims and objectives. A famous example is when, in 1996, Steve Jobs

returned to Apple. Sometimes new leaders brought into a company

will have a different leadership style from their predecessors, which can

require signicant changes to objectives.

● HR – the term “human resources” covers a vast array of elements of a

business. Conditions related to HR can change and can alter objectives

all the way down the hierarchy. Industrial action, which refers to

actions taken by unions or other forms of organized labour, can often

precipitate change in an organization.

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● Organization – business organizations change. A merger or

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acquisition, such as when Kraft took over Cadbury, can have a ripple
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effect through an organization, causing the new organization to rethink

many of its objectives. In other instances, some internal pressures may

cause an organization to modify one aspect of its business. However,

given the interconnectedness of all the business functions, changes in

one area can require changes in another, including changes to strategic

or tactical objectives.

● Product – products are sold in a marketplace. Sometimes, the

performance of the product in the marketplace may require changes

in either the product or even an entire product line. In the 1980s, for

example, Lucozade reoriented itself as a sports drink because of market

pressures, and sales tripled. With this change in the branded identity

of the product, from an illness-curing beverage to an energy-providing

sports drink, many different aspects of Lucozade’s strategic and tactical

objectives had to change (which led to an even greater number of

changes in operational objectives).

● Finance – all business activity must be nanced. When the

circumstances of nance change, especially when sources of nance

become fewer and the amount of nance decreases, organizations have

to modify their strategies or change the emphasis of their business. For

example, in 2009, FIFA introduced the “Financial Fair Play” rule, which

modied how much money football teams could spend on players, and

teams had to respond.

Many other sets of circumstances can change nance. After the world

recession began in 2008, for example, many banks raised lending

standards and businesses had to make adjustments because they had

more limited access to capital to nance activity.

● Operations – ideally, most businesses are innovating constantly, not

just by offering new products but also by developing better methods

for producing or delivering their core service or product – that is, by

innovating their operations. Sometimes changes in operations occur

for more everyday reasons, such as relocating a factory. Either way,

changes in operations can necessitate other changes in objectives.

If any of the above internal factors are altered, then the business may well

have to respond or even pre-empt them by changing its objectives.

Changes in the ex ternal environment

Usually, a business has limited or no control over the external environment,

but often objectives have to change in response to changes in the external

environment. A “STEEPLE” framework is commonly used to frame issues

related to the external environment. Steeple factors are as follows:

● Social – this refers to changes in society or culture, such as

demographic change (social) or cultural change (such as an increased

preference for expensive coffees, like those supplied by Starbucks or

Coffee Aroma). Social changes such as these may force the business to

reappraise its objectives.

One example is the business of education. More women are attending

university and obtaining degrees than they did a few decades ago and, as

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1.3 Business objectives

a result, universities are modifying many of their objectives, from course

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offerings to residential practices, to suit the greater number of women.

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● Technological – today is an era of rapid technological change, which

can change the environment for business in any number of ways. A

product a business offers can be rendered obsolete or uncompetitive

because of technological innovation (think how quickly Blackberry

went from being a “hot” product to one that struggles to compete

with new smartphones). Technological innovation can force changes

in production techniques if a competitor develops new methods for

producing products more cheaply than other businesses.

Technological changes can also force a business to change for “softer”

reasons. All businesses need to be more aware of their environment and

their actions in it because information technologies allow communication

in ways previously unknown. Today, for example, Nike would have a

harder time manufacturing shoes in low-income economies and using

child labour compared to several decades ago, when companies could

often follow those tactics without being discovered.

● Economic – changes in the market conditions (such as the presence

of new competitors), or simply changes in the economy (such as the

global nancial crisis) can have a profound inuence on businesses and

force them to change strategic and tactical objectives.

For example, interest rates on loans can increase because of changing

economic conditions, raising the cost of capital for businesses and

preventing capital investment. If a company sells a product the demand

for which is income elastic (see more on this in Chapter

4.5), sales may fall in an economic downturn. For many

reasons, changing economic conditions can force a business

to change.

● Ethical – sometimes quickly, sometimes slowly, the values

of a society can change. Changes in ethical values in a society

encourage or even force a business to change its practices. Fifty

years ago, relatively few businesses were deeply concerned

about sustainable business practices– Paul Hawken’s concept

of “natural capitalism” was unheard of. Today, even if

the owners or executives of a business are not genuinely

concerned about sustainable practices, external stakeholders

will almost certainly expect their business to not harm the

environment, or at least to minimize that harm.

In a host of other ways – such as ethics in lending, diversity

in hiring, attentiveness to sexual harassment, and product

safety– changes in society’s values have led to changes in

many businesses’ objectives.

● Political – change to the political system very often forces

business to change its approach. Multinational businesses

plan for this possibility and will often carry out a “country

risk assessment” before investing in a particular country.

A country risk assessment attempts to determine the

Consumer demand for ethical products has

likelihood that drastic political change in a country could

increased greatly recently

put at risk the investment or operations of a business there.

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Political risk, however, can also occur at home. For example, if

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the outcome of a political election determines that the legislature

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of a country changes from centre-left to centre-right, the business

environment can change. Sometimes, though, political change can

occur unexpectedly and not from the results of an election. Legislatures

can decide to take action because of a scandal, a crime, or even an

accident, that in turn affects the business environment.

● Legal – when responsibility for legislation changes from one party to

the other, or one coalition to another, changes in the legal environment

often occur. Regulation, taxes, and a host of other factors can be

changed merely by statute, and businesses have to respond.

Resource
In the 1980s in the United States, for example, many individuals across

recovery models
the country grew tired of the number of fatal or traumatic injuries

occurring to young people due to excessive alcohol consumption. One

Resource recovery models

by one, most state legislatures raised the minimum drinking age in the

help to recycle waste into

United States from 18 to 21 years. Many taverns, bars, and clubs that

secondary raw materials,

targeted customers in the 18–20-year-old age range had to modify their

thus reducing the nal

business strategies.

disposal of waste and

● Ecological – growing environmental awareness and the “green”

reducing the extraction and

revolution have had a signicant effect on many businesses, for

processing of virgin natural

example with the emergence of hybrid cars. Ecological factors can

resources. The case study

affect businesses in ways other than the now-dominant focus on

below gives an example

sustainability. Ecological depletion, such as from sheries off the coast

of an organization using a

of Canada, or through some types of mining, can force a business

resource recovery model.

to change strategies. Large oil companies, sometimes notorious for

their ecological disasters such as huge oil spills, are nonetheless

highly innovative in their search for new sources of clean energy,

in anticipation of rising demand and declining traditional sources of

energy (such as oil).

yduts esaC

Bio-bean

Bio-bean is the UK’s largest recycler of coffee Bio-bean recycles

grounds and works with other companies in the

country to transform coffee waste into valuable from businesses at

products at an industrial scale. every scale: from

coffee shops, cafes

They provide a solution to the approximate half a

and restaurants

million tonnes of waste coffee grounds produced

to ofce blocks,

annually in the UK, helping businesses to save

transport hubs,

money while achieving greater sustainability.

universities and instant coffee factories. Segregated

Heavy, wet coffee grounds weigh down whichever

spent grounds are collected and delivered to their

waste stream they enter, typically increasing the

factory in Cambridgeshire, where their innovative

collection fees for most businesses that produce

proprietary processes condition and dry the

coffee. Bio-bean works with logistics and waste

grounds, renewing them for reuse in valuable

management infrastructure across the UK by

products to benet both people and planet.

taking segregated spent coffee grounds from these

Source: Adapted from [Link]

businesses, reducing the weight of their waste and

coee-recycling/

in turn the costs associated with disposal.

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1.3 Business objectives

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Corporate social responsibility
Key term

Corporate social responsibility (CSR) is an idea that has gained much

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attention since the 1960s. Part of this attention was in reaction to the many Corporate social

companies which, in focusing on maximizing shareholder value, either responsibility (CSR)

exacerbated existing problems (such as environmental degradation) or created

CSR is the view that

new problems (such as the elimination of dened benet pension plans).

businesses, rather than

focusing solely on increasing

The main thrust of CSR is that companies should do more than merely

shareholder value, should

make money for their shareholders, and more than just consider

contribute to the economic,

the perspectives of all relevant stakeholders when making decisions.

social, and environmental

Corporations should instead do positive good for society.

well-being of society

Companies can operationalize a commitment to CSR in many ways,

including philanthropy, generous salaries and wages, meaningful

benets such as exitime for working parents, or by doing more for the

Student workpoint
environment than the minimum legal compliance required by government

1.8
regulations.

Some would argue that the roots of CSR are much older than the 1960s Be a thinker

and that there have always been some companies that have acted in ways
Many businesses set

which were good for society. Regardless of when exactly the idea emerged,
ethical objectives. What

today CSR is a powerful force in companies all over the world.

are the three or four

most important ethical

Why organizations set ethical objectives

principles that you would

Businesses may set themselves ethical objectives for some very good
want in any organization

commercial reasons, including these:

that you work for or start

up yourself?

● Building up customer loyalty – repeat customers are vital to most

businesses. Customers are more likely to return to a business they trust

and respect, and ethical objectives and ethical action foster this.

● Creating a positive image – both existing and potential customers

are likely to shop at businesses with good reputations. The opposite is

also true: customers will avoid businesses with reputations for being

untrustworthy.

● Developing a positive work environment – businesses that have

well-motivated staff who enjoy working for the business have a

competitive advantage. Businesses with strong ethical objectives can be

attractive to many potential employees and serve to improve morale

and motivation.

● Reducing the risk of legal redress – being unethical can cost a

company money, both from dissatised customers not returning and

from the bad word-of-mouth reports generated by unethical behaviour.

Sometimes unethical behaviour can lead to legal redress by the

government, by other businesses or by the customers themselves. Even

if a business “wins” in court, the process can be expensive and cause

signicant damage to the rm’s reputation.

● Satisfying customers’ ever-higher expectations for ethical

This poster from the clothing company

behaviour – with improved ICT and the internet, business decisions

Matalan clearly states the business’s

and actions are more visible than ever before. Today, consumers are

ethical policy
aware of what is considered ethical and unethical behaviour. They often

“punish” unethical behaviours by not patronizing certain businesses.

Few businesses can disregard public opinion.

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● Increasing prots – opportunities for businesses to behave ethically

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are growing. Often banks will not lend to dubious businesses, clothes
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manufacturers will not use “sweatshop” workers, and coffee houses use

“fair trade” coffee. Many people seek out and purchase from businesses

that behave ethically, which can lead to higher prots.

The impact of implementing ethical objectives

When a business implements ethical objectives, many areas of the business

environment will be affected. The effects may be on the following:

● The business itself – although in the long run, the business may

experience benets from implementing ethical objectives, in the short

term, costs are likely to rise, and employees who are accustomed to

certain norms and practices may resist change.

● Competitors – in order to maintain their market position, competitors

may have to respond.

● Suppliers – if the business implementing ethical objectives includes the

policy of buying only from other ethical businesses, suppliers may have

to respond in order to protect their orders.

● Customers – they are likely to trust the business more and develop a

strong brand loyalty.

● The local community – businesses that have and follow ethical

objectives generally see an improvement in their relationship with

thelocal community, which can benet them in terms of employment

and goodwill.

● Government – feeling pressure from voters and other stakeholders,

local, regional, and national levels of government are increasingly

recognizing businesses with ethical objectives, overall creating a

government–business environment fostering ethical objectives.

How ethical objectives are linked to CSR

Ethical objectives are closely related to corporate social responsibility.

Ethical objectives are specic goals that a business may set for itself based

on established codes of behaviour. CSR is the concept that a business has an

obligation to operate in a way that will have a positive impact on society.

As part of its CSR policy, a business would want to assess its actions. As

a result of such an assessment, the business may wish to implement a

particular ethical objective. For example, a business might open a crèche

facility (an early childhood day-care centre) for its employees.

CSR is broader and less specic than ethical objectives. A company

committed to CSR is intending to act as a good “corporate citizen”: acting

responsibly and in a manner that benets society as a whole in all matters.

A business committed to CSR not only obeys laws but also interacts

responsibly and honestly with customers, and reduces its impact on the

environment.

By recognizing its CSR, a business is more than likely to have a sustainable

business model. By building strong links with society and the environment,

the business is more likely to be a valued part of the society.

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1.3 Business objectives

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yduts esaC

C oncep t
Timberland

tnemeganam
Timberland is an American company founded

ETHICS
in 1928 that manufactures outdoor wear,

especially shoes. The company has long had a

Corporate social responsibility

commitment to doing social good and does so

and ethics are closely related.

through of a variety of ways, some of which

Many organizations publish a

are encapsulated in the quote below, taken “CSR policy” or a “CSR strategy”

from the company’s webpage: on their website, where they

show and communicate their

“We are committed to the work of building a

ethical objectives. For example,

more inclusive company and being a force for

the case study here describes

social and environmental good.

how Timberland publishes a CSR

repor t every quar ter.

● Build an inclusive workspace

Do some research on the

● Strengthen communities of color

internet to nd examples of such

● Invest in design education

documents.

● Support black entrepreneurs”

Every quarter, Timberland publishes a CSR report, which is made

available to the public through its website. In this report, Timberland

provides details about its manufacturing processes, the materials used

in its products, its resource efciency, and its community service

initiatives. By providing metrics on these aspects of its corporate social

responsibility programme, anyone can see what environmental and

social impacts Timberland is making and its improvements in various

areas quarter on quarter and year on year.

These efforts at transparency suggest that Timberland is not merely

engaging in “greenwashing” (the process where a company tries

to create the impression that it is “green” when in reality it is not),

but rather that Timberland is genuinely committed to reducing its

environmental impact and creating a better world.

Source: Adapted from [Link]

Student workpoint

Many businesses, and increasingly big businesses, want to position

1.9

themselves as role models – as leading citizens – setting the standard for

everyone for responsible behaviour. In an international context this might Be reective

be more difcult because of different opinions about ethical values, but

Read the article

with globalization and the greater integration of the world’s economies

“Corporate social

through the actions of multinational companies, this can still be possible.

responsibility is shifting

as a result of 2020’s
Although many businesses do not reach their highest aspirations for CSR,

triple crisis” by Carolyn

since around 1980 the movement towards CSR has been signicant and

Berkowitz (you can nd

has led to dramatic changes in the attitudes and practices of businesses.

this online on the 3BL

CSRwire website).

SWOT analysis

What important

SMART objectives are part of a coherent strategic plan. In the 1960s, a

themes and ideas from

business tool called the SWOT analysis was developed to help businesses set

Chapter1.3 are evident in

these objectives. Although use of this tool has not been without criticism,

this article?

in general many businesses rely on SWOT analyses for planning purposes.

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1
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SWOT analysis
tnemeganam

“SWOT ” stands for strengths, weaknesses, oppor tunities, and threats.

Organizations often use this tool themselves during a strategic planning

process. Anyone else trying to understand an organization may also want to do

a SWOT analysis of it.

The focus of the tool is on the organization and its contexts. Those involved in

the strategic planning process think about their organization and identify its

current strengths and weaknesses, which are internal to the company. The

planners then look externally and determine the oppor tunities and threats

that the organization faces.

These four categories of items are then put into a table, often with the

format below:

Strengths Weaknesses

Oppor tunities Threats

SWOT analysis is meant to be the rst stage in the planning process.

It helps managers to brainstorm the perceived strengths, weaknesses,

opportunities, and threats facing the business. These elements are

combined in a matrix as shown in Table 1.3.4.

Table 1.3.4 The SWOT matrix

Positive factors Negative factors

Internal to the business Strengths Weaknesses

Ex ternal to the business Oppor tunities Threats

The SWOT matrix is based on perceptions. The wider the sources and

the more reliable the data, the stronger will be the analysis of the SWOT

factors. The opposite is also true. If a SWOT analysis is done in a poor,

sloppy, or uninformed fashion, it can actually mislead a business. Like any

business tool, it is useful only when thoughtfully and properly applied.

A SWOT analysis for a given organization

Table 1.3.5 shows an example of a SWOT matrix for Apple Inc (as of

January 2021).

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1.3 Business objectives

Table 1.3.5 SWOT matrix for Apple Inc

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Strengths Weaknesses

tnemeganam
● Well recognized among most consumers. ● Apple products lack compatibility

with much non-Apple software.

● Largest percentage of global market share in

the global cellphone market (23.4%, four th ● Limited distribution network .

quar ter 2020).

● Very dependent on Chinese

● Strong brand image provides an edge suppliers.

over competitors.
● Price – other similar products are

● Very protable – $90 billion cash and more aordable.

marketable securities.

● Focused research and development creating

stylish products.

● Provides integrated operating systems,

hardware, application software and service to

its customers.

● Major increase in share value over the last

5 years.

● Tablet sales remain solid.

Oppor tunities Threats

● Strong growth in smar tphone markets. ● Aggressive competition from

major rms like Samsung and

● Strong growth in tablet markets.

Amazon.

● Mobile adver tising market is forecast to reach

● Many low-cost rms imitate

approximately $240 billion by 2022.

Apple’s products.

● Increased scope in the educational market.

● Rising labour costs in China.

● Development of new products and product

● The Covid-19 pandemic has

lines in online services.

compromised supply chains.

Note that the purpose of a SWOT analysis is not to brainstorm the strengths

and weaknesses of a business strategy itself; it is the rst part of developing

the strategy by identifying the different strengths and weaknesses of the

business. Once these are known, the SWOT matrix can be analysed and so

a strategy can be formulated.

SWOT analysis and market position

Use of the SWOT matrix can be strengthened by “pairing” key factors from

each quadrant and then adopting a relevant strategy, as shown in Table1.3.6.

Table 1.3.6 Pairing key factors to determine the relevant strategy

Strengths Weaknesses

Oppor tunities S–O W–O

Growth strategies Re-orientation strategies

Threats S–T W–T

Defusing strategies Defensive strategies

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● Growth strategies are best achieved by combining the strengths of

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a business with the market opportunities, which produces the most

tnemeganam

positive short-term strategy available from the matrix. The business

should pursue growth strategies when it is condent that it has no big

issues in any other area.

● Defensive strategies are adopted when a business is at its most

vulnerable. When threats and weakness exist in combination, the

business needs to act defensively and quickly. Defensive strategies are

the most “negative” short-term strategies, but they may be necessary to

help the business survive.

● Re-orientation strategies are adopted when a business focuses on

addressing its weaknesses in order to use them for the opportunities

available in the market. Re-orientation strategies are positive and long

term. Their adoption assumes that the business will rst address its

weaknesses, then can re-orientate itself in a new direction.

● Defusing strategies are designed to eliminate threats in the market by

focusing on the strengths of a business. Defusing strategies assume that

the business does not need to look for new market opportunities but

can simply defuse the threats through a focus on core strengths. This is

a neutral and medium- to short-term strategy.

The Anso matrix

Another business tool to help businesses plan and set objectives

is the Ansoff matrix, which was designed by Igor Ansoff in 1957.

Manybusinesses use the Ansoff matrix to help plan their growthstrategies.

The Anso matrix

The Anso matrix looks at the growth potential of a business in terms of the

market and product. It considers both the existing markets and products, and

new markets and products:

P r o d u c t

Existing New
gnitsixE

Market Product

M
penetration development

e
weN

Market Diversication
t

development

Figure 1.3.2 The Anso matrix

There are four possible growth strategies: market penetration, market

development, product development and diversication. These are

explored below.

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1.3 Business objectives

Market penetration

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Market penetration occurs when a business grows by increasing its market

tnemeganam
share, selling more of its existing products in the same market. Market

penetration is considered the safest option for growth, but opportunities for

increasing market share may be limited by the competitors in the market.

Market penetration relies heavily on promoting brand loyalty in order

to encourage repeat customers, and on promotion in general to lure

customers away from the competition. For example, Netix has used series

like The Crown and The Queen’s Gambit to develop great brand loyalty to its

streaming services.

Key factors to increase the chance of success are:

● The growth potential of the market

● The strength of customer loyalty

● The power and ability of competitors

Market development

Market development expands the market by looking for new markets or

for new market segments in the existing market. Market development

is a riskier strategy than market penetration, as the business may not

understand the new markets.

For example, Starbucks was unsuccessful when it initially opened coffee

stores in Australia. Walmart was also unsuccessful when it expanded into

Germany. Walmart had underestimated the loyalty of the German public to

existing (German) superstores.

Successful market development requires different approaches from market

penetration.

Key factors to reduce the risks of market development are:

● Effective market research

● Having local knowledge on the ground

● Having an effective distribution channel

Product development

Product development is the development of new products for the existing

market. Sometimes it may be a genuinely and wholly new product. Often,

however, so-called “new” products are upgrades of existing products (such

as the iPad, iPad 2, iPad 3, iPad mini and all the different variations). At

other times, a “new product” is a variation on an existing product. For

example, this was the case when Singapore Airlines introduced their budget

airline “Scoot” to ght off competition from Australian budget airlines.

Product development is riskier than market penetration, with much

depending on how loyal customers are to the original products. Key factors

to reduce the risks of product development are:

● Effective market research

● Having a strong research and development system

● Having rst-mover advantage

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Diversication
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TOK discussion

Diversication is the riskiest growth strategy a business can pursue. When

tnemeganam

1. If the eects of mission diversifying – introducing a new product into a new market – a business

statements and vision combines two elements of risk:

statements cannot be

● Lack of familiarity and experience in the new market

measured, does this

● The fact that the new product is untested

mean that they are

wor thless?
When Apple moved away from home computing and entered the digital

music market and then the handphone market, it successfully diversied.

2. Should all businesses

Many attempts at diversication, however, have failed. For example,

have ethical objectives?

Microsoft bought the telephone company Nokia in 2013, but by 2015

3. Does the notion of

Nokia had failed and Microsoft had to write-off $7.3 billion.

“corporate social

Key factors to reduce the risks of diversication are:

responsibility” change

over time?
● Effective market research

● Due diligence testing to determine:

■ the attractiveness of the market

■ the cost of entering the market

● Recognition of the existing business

● Possible tie-ups with other businesses with the necessary experience

Revision checklist

✓ A vision statement should encapsulate what the business hopes to be in

the future. It should remain constant.

✓ A mission statement describes what the business is doing now. It might

need to be modied as time passes.

✓ Aims are long-term goals.

✓ Objectives are short- or medium-term goals which allow a business

to meet its aims. Objectives should be SMART (specic, measurable,

achievable, relevant and time-specic).

✓ A business strategy is an overarching plan of objectives which will

enable aims to be met.

✓ Business tactics are the actions and objectives which allow a business to

implement strategy.

✓ Ethical objectives are goals that a business sets for itself based on

established codes of behaviour.

✓ Corporate social responsibility (CSR) is the concept that all businesses

have an obligation to operate in a way that will have a positive impact

on society.

✓ A SWOT analysis is a tool used in business planning. It involves

analysing strengths, weaknesses, opportunities and threats, both inside

a business and externally.

✓ The Ansoff matrix is used to plan business growth. It considers new and

existing products and new and existing markets to identify opportunities.

It allows a business to identify areas of market penetration, market

development, product development and diversication.

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1.3 Business objectives

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Practice question

To answer the question below effectively, see Unit 6 pages 398–402.

tnemeganam
Route 11 Chips

Route 11 Chips is a privately held company that is located in the

Shenandoah Valley of Virginia, USA, which manufactures potato chips (or

“crisps” in UK English). The business began as an outgrowth of the Tabard

Inn, a restaurant located in nearby Washington, DC. The owner of the

Tabard Inn also owned a certied organic farm in the Shenandoah Valley.

Through a combination of luck and an interest in sustainability and locally

sourced food, the owners of the Tabard Inn began making potato chips. A

farmer approached the owners of the Tabard Inn. He had a huge surplus

of potatoes and was trying to sell them. The farmer and the owner of the

Tabard Inn decided to make potato chips.

At the time, the business had no real factory, no distribution network, and

no name recognition other than, perhaps, some limited awareness of the

Tabard Inn. However, the business was able to buy equipment from a small

chip manufacturer that was going out of business and, in 1992, it opened

a factory on Route 11 in the Shenandoah Valley. The business adopted the

name Route 11 Chips.

In 2008, the company built its current factory and all aspects of the new

factory followed green principles. Among other sustainable features, Route

11 Chips uses:

● certied organic sweet potatoes

● locally produced regular potatoes whenever possible

● 100% renewable hydroelectric power to run its factory and ofces

● waste potato peelings and reject chips to feed cows in the area.

In addition to selling chips, Route 11 Chips sells a range of products

designed to encourage brand recognition and loyalty: T-shirts, fridge

magnets, hats, and other items.

Posted on its website is an offer to hear charity requests: “Route 11 Chips is

committed to supporting a healthy community and environment. We enjoy

having opportunities to give. We review our charity requests once per

month, generally on or around the 5th of the month, and make a decision

on one or more opportunities to support generally on or before the 15th of

the month.”

a) State two features of a privately held company. [2 marks]

b) Explain two ways that Route 11 Chips practises corporate

social responsibility. [4 marks]

c) Explain one challenge and one opportunity that the owners of

Route 11 Chips faced when starting their potato chip business. [4 marks]

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