Business Objectives (Cambridge (CIE) A Level Business): Flashcards
Exam code: 9609
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How do objectives help business decision making?
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How do objectives help business decision making?
Objectives act as targets that give a sense of direction and focus. Decisions that contribute to the targets can be pursued, while those that make little contribution can be discarded.
Define business aim.
A business aim is its long-term direction, which is usually broadly stated and often aspirational.
In the hierarchy, the business aim informs its _____ statement, which then informs the corporate and functional objectives.
In the hierarchy, the business aim informs its mission statement, which then informs the corporate and functional objectives.
True or False?
Functional objectives are set first and then used to create corporate objectives.
False.
Functional objectives are derived from corporate objectives. They describe the targets of individual departments or functional areas.
What does the acronym SMART stand for?
SMART stands for Specific, Measurable, Agreed, Realistic and Time-bound.
Define business strategy.
A business strategy is the long-term approach a business adopts to achieve its key objectives.
True or False?
Tactics are the short-term actions a business takes as part of its overall strategy.
True.
Tactics are short-term actions. For example, a business pursuing diversification may research the target market before opening sales outlets in a new location.
How do budgets help a business achieve its objectives?
Once tactics are decided, managers set targets and allocate budgets to teams and individuals. Sticking to budgets and meeting targets contributes to achieving the overall objectives.
True or False?
Once budgets have been allocated, they should not be changed.
False.
Careful monitoring and adjustment, taking account of the external environment, is crucial. Budgets may need to be increased or more tightly controlled.
How can market conditions cause business objectives to change?
Changes in competition, demand and consumer price sensitivity can force a business to switch objectives, such as moving from gaining market share to profit maximisation.
A business that is performing poorly may change its objectives through __________, which means moving out of existing markets.
A business that is performing poorly may change its objectives through retrenchment, which means moving out of existing markets.
How do public limited companies communicate their objectives to shareholders?
They publish an annual report showing the company's operations and financial performance over the past 12 months. It also details the objectives for the next twelve months.
Why can sharing objectives during appraisal motivate employees?
Workers are set individual targets showing how they contribute to the objectives. Understanding their role in meeting objectives can be a powerful intrinsic motivator.
Define ethical code of practice.
An ethical code of practice is a framework for responsible and fair strategic decision making that also provides guidelines on staff behaviour.
How can a firm maximise profit?
Since Profit = Total revenue − Total costs, a firm can maximise profit by increasing its sales revenue or decreasing its costs.
Why might a firm pursue a growth objective?
Growing lets a firm increase output and benefit from economies of scale. A growing firm is also less likely to fail.
True or False?
Firms with ethical or socially responsible objectives do not need to make a profit.
False.
These firms still require profit to survive. However, they will accept less profit than a profit-maximising firm as long as they are meeting their social objective.
When is survival likely to be a business's main objective?
Survival is likely during challenging market conditions or a crisis, and it is common for new business start-ups. Careful cash-flow management is usually at its core.
Protecting shareholder value is a common objective for public limited companies, where the value of shares and the _______ payable to shareholders are important metrics.
Protecting shareholder value is a common objective for public limited companies, where the value of shares and the dividends payable to shareholders are important metrics.
Define public sector.
The public sector refers to organisations that are owned or controlled by the government.
What is usually the main goal of public sector organisations?
Their main goal is to provide services, such as education, healthcare or emergency services, that may not be provided by private sector businesses.
Public sector organisations often aim to meet _________ targets set by the government.
Public sector organisations often aim to meet performance targets set by the government.
True or False?
Public sector organisations may set financial objectives.
True.
Although it is not their primary aim, they may set financial objectives to provide a return to the government to reinvest.
Define social enterprise.
A social enterprise is a private sector business that does not have making a profit as its primary focus, instead using its profits to achieve its social objectives.
What social objective might a social enterprise set?
A social enterprise may aim to provide jobs and support for disadvantaged groups in society, such as disabled people or people who are homeless.
Define corporate social responsibility (CSR).
Corporate social responsibility (CSR) is the concept that businesses have a responsibility to consider and positively impact society beyond their economic interests.
CSR is a framework through which companies _________ integrate social and environmental concerns into their operations.
CSR is a framework through which companies voluntarily integrate social and environmental concerns into their operations.
True or False?
CSR simply means that a business complies with the law.
False.
CSR goes beyond legal compliance. Businesses actively contribute to sustainable development and societal well-being.
What are some examples of socially responsible activities?
Examples include sustainable sourcing of raw materials, responsible marketing, protecting the environment and responsible customer service.
How can CSR improve a business's reputation with its stakeholders?
Socially responsible businesses attract customers and positive media coverage. They can also retain and attract quality workers and appeal to ethical investors.
How can CSR add value for a business?
In competitive markets, CSR can provide a differentiating USP. This may allow the business to use premium pricing.
True or False?
CSR may make employees less likely to leave the business or take time off work.
True.
Workers are more likely to feel connected to a business that does the right thing, which can improve motivation and productivity.
How can CSR help to solve social problems?
Businesses can play a key role in solving social, ethical and environmental problems, such as resource depletion. For example, cutting the use of fossil fuels in production contributes to efforts to combat climate change.
What are the three areas of Elkington's triple bottom line?
The three areas are Profit (finances), Planet (environmental impact) and People (how socially responsible the business is).
Elkington argued that only a company measuring its performance in all three areas was considering the __ costs of its activities.
Elkington argued that only a company measuring its performance in all three areas was considering the full costs of its activities.
Why should measuring all three areas of the triple bottom line improve sustainability?
When all three areas are measured, owners and employees pay attention to them and change their behaviour, rather than focusing on profit alone.
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