Download Lessons 1 3_4 - BM1 - AIS-IB

Thought for the day:
To accomplish great things, we
must not only act, but also
dream, not only plan, but also
believe.
Anatole France – Nobel Prize for Literature
Get an A
A
Grade
Level 4
Evaluation
To what extent, Evaluate, discuss,
justify, advise, recommend.
Apply, Examine, Analyse,
Interpret, Formulate.
Level 3
Level 2
Level 1
Application & Analysis
Understand
Knowledge
Compare, Contrast,
distinguish, prepare,
construct, calculate,
explain, comment
Define, Identify,
Complete, Outline,
describe, Classify
1.3 Nature and Organisation Objectives
Target
Learning Objective

• Explain the importance of objectives in managing an organization.
• Explain the purpose of mission and vision statements.
• Explain the different views that firms may take of their social responsibility
in an international context.
Who?
ALL
Level 1
Keywords
Mission Statements
Vision statements
Aims and objectives

• Distinguish between objectives, strategies and tactics, and discuss how
these interrelate.
• Examine the reasons why organizations consider setting ethical objectives.
• Analyse the advantages and disadvantages of ethical objectives.
MOST
Level 2
Strategic objectives
Tactical/operational
objectives
Ethical objectives

• Analyse the role of mission and vision statements in an organization.
• Discuss the impact of implementing ethical objectives.
• Analyse the value of social and environmental audits to different
stakeholders.
• Discuss why a firm’s view of its social responsibilities may change over
time.
• Discuss why attitudes towards social responsibility may change over time.
(HL)
• Analyse the impact that changes in societal norms have on the way that
firms behave in a national and international context. (HL)
• Analyse the reasons why firms may choose different strategies towards
their social responsibilities. (HL)
SOME
Level 3
&4
Corporate social
responsibility
Purpose
• All business have objectives
• These are the goals of the business – what the
business wants to achieve.
• The objectives of business organisations will
be shaped by various stakeholders in the
business. Those with the most influence will
tend to set the objectives.
Mission Statement
• The overall reason for a business’ existence is known
as its corporate aim or mission.
• Eg. A business could set out to be ‘the lowest cost
producer in Europe's or ‘the worlds favourite car hire
firm’.
• A mission statement is meant to inspire and define
the underlying purpose of the organisation
‘To boldly go where no man has gone before’
-Star Trek
Aims
In business, the main aims are usually
concerned with one or more of the
following:
• Making a profit
• Providing goods and services to the local or
wider community
• Surviving in a business or expanding
• Maximising sales
• Providing a highly competitive service
• Being environmentally friendly
From Mission Statement to
Objectives
• A mission statement may be motivating but it
lacks the specific information needed for
planning.
-What does ‘best industry mean’? Or ‘Most
profitable’?
• To plan properly a business needs to turn the
mission into a objective.
Distinction between aims (or mission)
and
objectives
• Mission: The purpose of the business
• Aims: The goals the business wants to achieve
• Objectives: Practical steps to achieve the goals
– usually quantified
An aim is what you set out to do
An objective is a target you want to achieve
Objective
• Will specify exactly what the business wants
to measure, how much of an increase it wants
to measure and when it wants to achieve its
target.
‘To increase profits by 20% over a five-year
period’
The business then has to turn this overall
objective into more detailed targets for
individual departments and managers.
Objective
• To achieve the corporate objectives functional
areas need to have their own targets. Eg.
Marketing might be to increase sales.
Operations might be to reduce costs.
• Every time a target is set, the next level of
management must decide how this is to be
fulfilled.
• If everyone meets their targets successfully
then the business will achieve its overall
objective.
Objective
• An objective should contribute towards a
main aim or goal
• A good objective is said to be ‘Smart’
– Specific
M – Measurable
A – Agreed
R – Realistic
T – Time constrained
S
Get Fit
Decide Aims
Lose 10 lb
In 4 weeks
Weigh self each
week
Specify
Objectives
Check
Performance
Regularly
Setting and
Monitoring
If unsatisfactory
Aims
Take
Corrective
action
And
Objectives
Adjust/review
objectives
Exercise more
Change
aims
Learn to drive
Lose 10 lb in 10
weeks
Activity
Level 4: Discus
• Write out your own aims
for the next 12 months
• Under each aim write at
least one SMART
objective for yourself
Why Have objectives?
Why Important?
Pg19 – 20 Clark
Pg19 – 20
Clark
Pg 20
Clark
Pg 20
Clark
Strategy
• – a plan which shows how to achieve an
objective
• Once a objective is agreed it is possible to set
appropriate strategies.
• The strategy is the plan which shows how to
fulfil the objective.
• Eg. If the objective is to generate 25% of sales
from a new product, the strategy might be to
invest more heavily in research and
development.
How does ‘Management by
Objectives’ work?
• Need Mutually agreed objectives.
• A manger will discuss with subordinates
what needs to be achieved in their
particular section of the business.
• Between them they will agree specific
targets for each subordinate.
• The objectives are agreed upon not
imposed upon the subordinates
• This is because a target means nothing
unless the individual feels commitment to
achieving it.
Advantages and Disadvantages
Advantages
• Everyone knows exactly
what they should be
doing
• Motivator
(responsibility)
• Act as a control
mechanism
• Everyone working
towards common goals
Disadvantages
• Bureaucratic
• Time consuming
• Setting targets doesn’t
guarantee they they are
achieved
• Objectives can become
out-of-date quickly
Activity
Level 1 & 2: Knowledge and
understand.
Mission statements & Vision
Corporate objectives
Interrelated objectives, strategies &
tactics
Note Taking ------ Key points….
Mission statements & Vision
Interrelated objectives,
strategies & tactics
Corporate objectives
Higher Level
Changes in corporate objectives and strategy
over time
External factors
External factors affect what you are capable of doing.
Business is not independent of the outside world.
Business needs to adapt
What makes you successful will change (can’t rely on past
success).
Business needs to take advantage of any changes in the market.
Monitor the external environment. – competition, recession,
technology, political changes.
Higher Level
Changes in corporate objectives and strategy
over time
Internal
Internal environment can negative change
Adjust objective to address these issues (HR, finance,
productivity).
Improve strategies to counter act the problem.
Higher Level
Changes in corporate objectives and strategy
over time
Positive – you need to respond to things that are happening to improve the
business.
Continued checked and reviewed their objectives, adapted.
Technology – demands change.
Higher Level
Business Ethics
What does Ethics mean?
• Standards of right or wrong behaviour.
• Morality
• Ethical/unethical behaviour is often a matter
of opinion – What is right or wrong?
What do you think?
•
•
•
•
•
Do you agree with abortion?
Would you rip the wings off a butterfly?
Would you step on a cockroach?
Do you recycle?
If you worked in a business: Would you steal a 30p
chocolate bar from the canteen?
• What about making a personal phone call?
• Unethical actions are not the same as illegal
actions….
The Modern business environment:
• There is no longer one agreed moral code…
society isn’t just one religion or belief
Business Ethics
• A code of behaviour considered morally correct.
• For us ethics are shaped by values – indoctrinated
by parents, guardians, friends etc.
• Business ethics are moral guide lines for a
business
• A business decision made on ethical grounds
might reject the most profitable solution in favour
of one that befits society as well.
Business can act ethically towards its
stakeholder by:
• Paying wages above minimum wage
• Paying suppliers promptly
• Supporting local community by sponsoring
sport events
Business ethics and business
objectives
We must consider the business objectives in relation to
ethical behaviour – why does the business exist?
What comes first:
• Profit
• Using all resources efficiently
• Stakeholders – which could include ‘society’
Examples of ethical dilemmas are:
• Should an advertising agency accept work
from a cigarette manufacturer?
• Should a bank invest in companies that
produce weapons of mass destruction?
• Should a manufacturer of cosmetics test on
animals?
Is ethical decision-making profitable?
It can attract potential and existing employees
It can have a marketing advantage - acting as a
unique selling point (USP) or competitive
advantage.
'United Colours of Benetton'
Is ethical decision-making profitable?
• Advertisers try to evoke emotional responses.
• This companies sell products/services, and that
is precisely the reason for using ads in the first
place.
Is ethical decision-making profitable?
• Being ethical might reduce profitability or conflict
with existing policies.
• The positive effects of ethical decision making
depend very much on whether consumers are well
informed and concerned (marketing).
• In some cases ethical policies may create a niche
market.
Fair trade/ Organic
• M&S spending £200 m in becoming
environmentally friendly
• Organic food – worth £1.6 billion
• In 2006 there are around 1,000 organic
products in ASDA
Are all ethical decisions based on
sound moral principles?
Public opinion and media pressure may force a
firm to change its approach and adopt and
ethical position.
• This is not really making an ethical decision,
but simply responding to pressure after
considering costs and benefits. (school
canteen)
Delegations and ethics
•
There are two major influences on the moral
behaviour of business:
1. Organisations consist of individuals who have their
own moral codes, values and principles
2. Firms have their own cultures and codes of
behaviour that affect attitudes, decision-making
and management style
• This distinction is important - Overall it depends
which of these two is dominant
Ethics
• Does not just effect business as a whole.
• It effects those who work in business also.
Delegations and ethics
• If there is a conflict between the ethical point of
view of the company and the individual, then
delegated decision making may not reflect the stand
of the business.
• Business should then invest in training and
communication to ensure that all staff behave in an
agreed ethical manner and that delegated activity is
performed on an agreed ethical basis.
Ethical Codes of Conduct
• Consumer expectations and competitive
pressures – business have introduced ethical
codes of practice
• These are intended to improve the behaviour
and image of a business
Ethical Codes of Practice
• The precise focus of the code will depend on the
business concerned.
• Banks – honesty
• Chemical firms – pollution
• The main common feature – business publicise them.
• This is because they believe if they are seen to
behave ethically it is a good marketing strategy.
Ethical Codes
• Critics of ethical codes believe them to be
public relations exercises rather than genuine
attempts to change business behaviour.
• They are effective if groups follow them!
Should business be expected to
behave ethically?
• They effect stakeholders (the environment
they operate in)
• But business should make profit for owners?
• Middle ground – always conflicts.
Summary
Benefits of ethical behaviour:
• Avoiding PR disasters
• Better image with customers and better sales
• Better recruitment
• Better employee motivation because they are
proud of their job.
Summary
•
•
•
•
Effects of ethical behaviour
Increased COST
Conflict between profit and ethical standards
Business Practice may change
Ethical Objectives
Advantages
Disadvantages
Ethical Objectives
Can you:
• Examine the reasons why organisations
consider ethical objectives
• Analyse the advantages and disadvantages of
ethical objectives
• Discuss the impact of implementing ethical
objectives.
Corporate Social Responsibility
(CSR)
means businesses and
organisations working
responsibly and contributing
positively to the communities
they operate in.
Businesses and social restraints
• Businesses affect the societies in which they operate.
• Eg. Opening hours, litter, relocation of factories.
• The decisions they make can affect a range of other
groups and individuals.
• Should businesses consider the implications of their
decisions upon society and not just take into account
whether these decision help achieve their (or
shareholders) objectives?
• Balance between legal limits and feeling of the
community.
Social responsibilities
Social responsibilities – duties towards
stakeholder groups which the business may or
may not accept.
Responsibilities to:
• employees
• Customers, and
• other stakeholders
Stakeholder
• What is it? You define
• A stakeholder is an individual or group which
has an effect on and is affected by an
organisation
Brainstorm: Stakeholders
•
•
•
•
•
•
•
•
•
Stakeholders in a business are likely to include:
Customers
Employees
Shareholders
Suppliers
Government
Local communities and businesses
Financial institutions
Other creditors
Stakeholder
• What is it? You define
• A stakeholder is an individual or group which
has an effect on and is affected by an
organisation
Activity
• Essays:
•
•
Meeting the objectives of different stakeholder groups may be desirable, but is rarely profitable (14
marks)
Managers responsibilities should be to the shareholders alone (critically assess this view) (14 marks)
Brainstorm: Stakeholders
•
•
•
•
•
•
•
•
•
Stakeholders in a business are likely to include:
Customers
Employees
Shareholders
Suppliers
Government
Local communities and businesses
Financial institutions
Other creditors
Stakeholding
• All business are affected by the environment in
which they operate.
• Eg. On a daily bases managers come into contact
with – suppliers, customers, the local community and
employees.
• Each of these groups has an impact on the business
success and at the same time is likely to be affected
by any change in its activities.
Stakeholding
• If, for example, the managers decide to
expand the business, this may lead to:
• Over time for employees
• More orders for suppliers
• A wider range of products for customers
• More traffic for the local community.
Stakeholding
• Businesses have tended to be influenced mainly by
customers, employees and shareholders.
• Increasingly, however, other groups are affecting business
behaviour.
• Eg. Some businesses will only supply their products to other
businesses that have an ethical or environmental policy.
• If a business ignores the views of society, consumers will not
buy their products.
This suggests that businesses need to have a greater SOCIAL
RESPONSIBILITY to groups beyond those immediately involved
in the business.
‘Shareholder concept’
• The traditional view of an organisation was that
managers are responsible solely to the owners of the
organisation – the shareholders.
• - the shareholders employ managers to run the
company on their behalf. – to fulfil their needs and
objectives.
• Means maximising shareholder value – the share
price.
‘Stakeholder concept’
• Places emphasis on the need to meet the objectives
of a wider group. The stakeholder approach suggests
that managers should take into account their
responsibilities to other groups, not just owners,
when making decisions.
• The belief is that a business can benefit significantly
from cooperating with its stakeholder groups and
incorporating their needs into the decision making
process.
‘Stakeholder concept’
• Examples include:
• Improving the working life of employees through challenging
work, better pay and greater responsibility, so the business
benefits from a more motivated and committed workforce.
• Treating suppliers with respect and building a long term
relationship. Leads to better quality supplies and better all
round service.
The stakeholder approach is, therefore, based on an inclusive
view, in which the various groups which the firm affects are
included in its decision making rather than ignored. This can
be argued, can lead to significant advantages for the business.
Profit
Business aims
and objectives
focused on
profit
Lower costs
Profit
Maximise sales
Culture of
business
Shareholder
concept
Efficiency
Productivity
Relationship/
Recruitment
Loyalty /
reputation
Stakeholder
concept
Unjumble the
words……..
R E V O T G M E N N
G O V E R N M E N T
R E P L I S U P S
S U P P L I E R S
G A M E R A N S
M A N A G E R S
T O L D K E E H A S R
S T A K E H O L D E R
CSR
• Pg 38 – 39 Clark
TOK
• Where do you think ethics comes from?
• Which statement’s on pg 37 of Clarke are
moral statements, which are conventions?
• Why do some economists and politicians
believe that it is not the role of the business to
be ethical or socially responsible, but just to
make profit?
• Can this approach be justified?
Social Auditing
Social Auditing
• A business that produces its final accounts
must have them audited by law. An audit is a
check to make sure the financial performance
of the business, shown in its accounts, are
accurate.
• Social auditing is the process by which a
business organisation attempts to assess the
impact of the entire range of its activities on
stakeholders.
Scrutiny
• A Social Audit is part of the move towards
more scrutiny of business practices and
increased availability of information for
consumers and pressure groups.
Social Accounts
• Results in a production of a set of social
accounts and attempts to evaluate
performance against a set of non-financial
criteria.. E.g.
• Effects on the environment
• Attempts to meet social obligations to
employees.
Social Auditing
Social auditing may involve:
• Identifying the social objectives and ethical values of
the organisation
• Defining the stakeholders of the business
• Establishing social performance indicators
• Measuring performance, keeping records and
preparing social accounts
• Submitting the accounts to an independent audit
and publishing the results.
Social Auditing
The social audit may include details such as:
• Pollution
• Waste
• The salary difference between the highest and lowest paid
employee
• Health and Safety information
• The extent to which employees feel valued
• The views of consumers about whether the business is living
up to its ideals.
• The % of recycled materials used
• Industrial accidents per 100 workers
Social Auditing
The benefits of social auditing
• Provide valuable information to pressure groups
and consumers about the corporate responsibility of
a business.
• They allow the managers of the business to gain a
complete picture of the impact of the business's
activities.
• This can allow the business to make better informed
decisions about the impact of its activities upon
stakeholders.
Social Auditing
The benefits of social auditing
• A business can use a social audit as a means of
preventing future criticism of its activities. – deflect
critics.
• Shareholders can use social audits to raise questions
about a business’s activities at annual shareholder
meetings.
• Governments can use social audits of a range of
businesses in a particular industry as one means of
assessing the need for legislation or regulation of
business in the industry.
Social Auditing
• ‘As business are subjected to increasing levels
of scrutiny and as consumers and pressure
groups have access to more information about
business behaviour, it is likely that an
increasing number of businesses will use social
audits’.
(Hall 2nd Ed page 234)
Externalities
• Costs and benefits which the business doesn’t pay or
receive.
• E.g Lorry delivering goods – creates noise –
neighbours suffering don’t get compensation.
• Air pollution – causes illness
• Greenhouse gasses – lead to global warming, causing
storms and flooding
• No compensation.
Externalities
• Costs and benefits which the business doesn’t pay or
receive.
• E.g building a beautiful office block
• People enjoy looking at it.
• An enjoyment the business receives no money for.
• Other examples:
• Spill over of technology
(e.g Velcro)
Externalities
• Noise pollution, air pollution, global warming
– Negative externalities
• The beautiful building – Positive externalities.
• The full cost to society of an activity is equal to
the cost to the business, private cost, plus any
other cost, the externality. These teo add
together equal social cost of an activty.
Externalities
• Business are under pressure to pay for the
social cost of anything they do.
• Environmental groups – campaign against
larger business who pollute.
• Residence protest against local factories that
harm their environment
• These protests equal bad publicity and lower
sales.
Market Failure
• Definition:
• Where the market mechanism fails to allocate
resources efficiently
• In this case: where external costs and benefits
are NOT accounted for
Market failure
• External Costs
• Decision makers do not take into account the
cost imposed on society and others as a result
of their decision
– e.g. pollution, traffic congestion, environmental
degradation, depletion of the ozone layer, misuse
of alcohol, tobacco, anti-social behaviour, drug
abuse, poor housing
• Pollution = Market failure
• There is a cost to society which is not being paid by
the producer (and therefore not being past onto the
consumer)
• Ideally the cost of production, including pollution,
should be passed to the consumer.
• Then less polluting products would be bought as the
price would be cheaper.
GOVERNMENT INTERVENTION AND
MARKET FAILURE
• Government intervention may seek to correct for the distortions created
by market failure and to improve the efficiency in the way that markets
operate
• Pollution taxes to correct for externalities
• Laws
• Traffic congestion charge
• Taxation of monopoly profits (the Windfall Tax)
• Regulation of oligopolies/cartel behaviour
• Direct provision of public goods (defence)
• Policies to introduce competition into markets (de-regulation)
• Price controls for the recently privatised utilities
•
•
•
•
Understand the purpose
implication of social auditing.
Define social cost
Define market failure.
Step by Step
Profit
Social Audit
Unwrap
the
‘present’
answer
the
question
(teacher prepare
before hand)
Changes
Higher
Level
in corporate objectives & strategy over time.
Internal factors affecting Aims
and objectives
• Corporate culture
• Type and size of
organisation
• Age of business
• Finance
• Risk profile of key
stakeholders
• Private Vs Public sector
organisation
External factors affecting Aims
and objectives
• State of the economy
• Government constraints
• Presence and power of
pressure group
Changes
Higher
Level
in corporate objectives & strategy over time.
A change in these factors are likely to change the significance
of an organisations objectives over time:
• Corporate strategy (the tools used to achieve a firms aims
and objectives) will subsequently change.
• Also business may have already achieved their, objectives
therefore they will need to change their targets to create
new ones.
• Society may have changed their expectations of the
business…….
Higher Level
•
•
•
•
•
•
•
•
•
•
Changes in Society’s expectations of
business behaviour over time.
What was once considered acceptable able can change.
Societies have different expectations (minimum wage)
Advertising (e.g tobacco)
CSR is subjective (what is considered right or wrong varies)
Businesses need to review their objectives time after time.
Multiculturalism/ equally opportunity/donating profits/pressure groups
(cruelty to animals)
Unethical firms (backlash)
Environmental damage - business needs to respond
Societies changing views of what it is socially moral – will change
business own CSR.
Business views will change overtime to fit in with sociatal norms.
• play
Grandma’s Trunk
Share with the class….‘When I opened
grandma’s trunk I found….’
• Keyword
• Fact
• Skill
Learnt so far in business.
How to play:
• http://www.blog.montessoriforeveryone.com/5-easy-travel-games-for-kids-on-thego.html
Plenary
Level achieved_____
What do you now know as a
result of today’s lesson?
What are your areas for improvement?
What are you going to do about this?