3.7.1 Mission, corporate objectives, and strategy
Influences on the mission of a business
PESTLE Analysis = a framework for assessing the key features of the external environment in which a business operate
- Competition policy
- Industrial regulation
- Government spending and tax policies
- Business policy and incentives
- Interest rates
- Exchange rates
- Consumer spending and income
- Economic growth (GDP)
- Demographic change
- Impact of pressure groups
- Consumer tastes and fashion
- Changing lifestyles
- Disruptive technologies
- Adoption of mobile technology
- New production processes
- Big data and dynamic pricing
- Employment law
- Minimum/living wage
- Health and safety laws
- Environmental legislation
Environmental and ethical:
- Tax practices
- Ethical saving (supply chain)
- Pollution and carbon emissions
Internal and external influences on corporate objectives and decisions
Internal influences on corporate objectives:
- Business ownership – who are the business owners and what do they want to achieve?
- Attitude to profit – is the business run to earn profits or it is not-for profit?
- Ethical stance – do ethics play a role in a business’ decision-making?
- Organisational culture – how is the business structured? How are objectives set and decisions taken?
- Leadership – how strong is the influence of leadership in the business in terms of objectives and how decisions are made?
- Strategic position & resources – what options & choices does the business realistically have based on its existing market position & resources?
- Stakeholder influence – how influential are internal stakeholders?
External influences on corporate objectives:
- Short-termism – external investor pressure to focus on and achieve short-term objectives at the expense of long-term strategy?
- Economic environment – perspective on key economic indicators such as economic growth, consumer spending & interest rates?
- Political/legal environment – impact of uncertainty about changes in the political & legal environment?
- Competitors – do competitor actions & strategies shape what a business thinks it can achieve?
- Social & technological change – how rapid is the pace of social & technological change in a business’ markets? Does this make objective-setting & decision-making easier or harder?
The distinction between strategy and tactics
- Business strategy is mainly concerned with the longer-term. Business strategy is focused on:
- The long-term business plan, based on the business vision and mission
- What needs to be done to achieve corporate objectives
- What resources the business needs and to obtain and use them
- In terms of business theory, business strategy is more concerned with:
- Mission statements
- Vision and core values
- Organisational culture
- Business planning
- Growth strategy
- Segmentation, targeting & positioning
- By contrast, business tactics:
- Tend to be focused on short-term issues, responding to opportunities & threats
- Are often influenced by functional objectives and decision-making
- In terms of business theory, the following are more relevant to the tactics employed by a business:
- Marketing mix
- Financial and non-financial rewards
- Inventory management
- Location decisions
- Day-to-day customer service decisions
- Recruitment, selection, and training processes
The links between mission, corporate objectives, and strategy
Mission = the overriding goal of the business and the reason for its existence. A mission provides a strategic perspective for the business and a vision for the future
Corporate Objectives = those that relate to the business as a whole. They are usually set by the top management of the business and they provide the focus for setting more detailed objectives for the main functional activities of the business
- Mission statements inform corporate objectives which then inform the strategy for the firm and then the tactics
The impact of strategic decision making on functional decision making
How strategic decisions are made:
- Most business decisions involve middle-ranking executives making decisions based on a combination of a recommendation from decision trees and investment appraisal. Recommendations are based off of careful research
- By contrast, even though strategic decisions can be worth millions or even billions they often are made by managers that have very little to go on
The impact of strategic decision making on functional decision making:
- When a strategic decision is made new objectives need to be set that will affect functional departments. Each of the 4 departments will get its own objectives set, each of the four will aim to knit the objectives together in order to meet the wider objectives of the business.
- A strategy is a medium to long term plan for meeting objectives. This should be the result of a careful process of though and decisions throughout the business. Although key decisions will almost always be made at the top. A useful approach to decision making is known as ‘scientific decision making’ – it shows that strategy must be:
- Based on clear objectives
- Based on firm evidence of the market and the problem/opportunity, including as much factual. quantitative evidence as possible (e.g. trends in market size, data on costs, sales forecasts)
- Looking for options (alternative theories, e.g.to meet an objective of higher market share firms could launch a new product)
- Be based on as scientific a test of the alternatives as possible
- Control the approach decided on – the final stage
The value of SWOT analysis
SWOT Analysis = a method for analysing a business, its resources and its environment – it focuses on the internal strengths and weaknesses of a business (compared with competitors) and the key external opportunities and threats for the business.
SWOT looks at:
- Internal strengths
- Internal weaknesses
- Opportunities in the external environment
- Threats in the external environment
Aims of a SWOT analysis:
- What the business does better than the competition
- What competitors do better
- Whether it is making the most of the opportunities available
- How a business should respond to changes in its external environment
Strengths and weaknesses:
- Are internal to the business
- Relate to the present situation
Opportunities and threats:
- Are external to the business
- Relate to changes in the environment which will impact the business