Study Unit 6 -EB121

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Cards (53)

Vision, Mission, Goals and Objectives 
Strategic business intentions that guide all business operations and interactions with various stakeholders
Strategic intentions are expressed in a business firm's vision and mission statements and formulated into goals (longer term aims) and objectives (shorter term aims)
The strategic business intentions, or future 'road map' of a firm are planned before it is established, and once it becomes a going concern, are then continuously revised as prevailing circumstances in the business environment change
Primary economic goals of businesses
Profit maximisation
Rate of return maximisation
Shareholder wealth maximisation
Profit maximisation 
The business strives to achieve the maximisation of the positive surplus of sales income over the total costs incurred
Rate of return maximisation 
The percentage ratio calculated between the net profit earned in a specific period and the capital required to generate that profit
Maximisation of shareholders' wealth (owners' wealth) 
The business should be managed in such a way that the value of the ordinary shares increases. Value is reflected in the current market price of the shares
Secondary business goals 
Maximum productivity
Growth
Maximum sales income
Safety and security
Continuity
Target performance
Socio-economic goals
Maximum productivity 
The better and more efficient use of all resources
Efficiency 
Poses a question of whether the right technique is being used to complete a task or reach a goal
Effectiveness 
Implies the goal was reached. Poses a question, were the right tasks performed regardless of method or technique
Productivity is seen to add value to the products and services produced in terms of the efficiency and effectiveness with which they are produced and delivered to customers
Growth of business 
Show growth in assets or sales income
Growth cannot serve as an autonomous goal. No business is established with growth as its sole goal. Growth goals are usually a condition for other goals such as owner's wealth and rate of return
Maximum sales income 
New entrepreneurs are more likely to focus on sales income maximisation as a business goal, but it can only be a secondary goal which contributes to the maximisation of profitability or rate of return maximisation
Safety and security 
Entrepreneurs try to stabilise environment and relationships with suppliers, clients, competition and interest groups
Maintaining a sound liquidity position
The ongoing ability of business firms to make the necessary short-term (immediate) payments on time and therefore to fulfil all their financial obligations promptly
Maintaining the solvency of the business
The ability to pay their debts, even at liquidation, i.e. voluntary or involuntary selling of assets to service the debt
Continuity and survival 
A business does not do business to earn a profit but is profit-oriented in order to ensure its survival
Target goals 
Businesses are not focused on maximisation of profit or optimal behaviour, but rather on satisfactory performance
Socio-economic goals 
The needs of the broader community must be considered, not just the owners' interests
Continuous satisfaction of customers' needs 
Creating customers and continuously satisfying their needs should be the definition of the goal of business
Corporate social responsibility (CSR)
All the business's impacts on society and the need to deal responsibly with the impact on each group of stakeholders
Corporate social responsibilities of businesses
To shareholders and financial community
To the environment
To suppliers
To the community
To employees
To consumers
CSR is used by businesses to respond to market forces and pursue shareholder value
When setting goals and objectives, they should be: Specific, Measurable, Achievable, Relevant, Time bound
Vision, Mission, Goals and Objectives 
Strategic business intentions that guide all business operations and interactions with stakeholders
Strategic intentions are expressed in a business firm's vision and mission statements and formulated into goals (longer term aims) and objectives (shorter term aims)
The strategic business intentions, or future 'road map' of a firm are planned before it is established, and once it becomes a going concern, are then continuously revised as prevailing circumstances in the business environment change
Primary economic goals of businesses
Profit maximisation
Rate of return maximisation
Shareholder wealth maximisation
Profit maximisation 
The business strives to achieve the maximisation of the positive surplus of sales income over the total costs incurred
Rate of return maximisation
The percentage ratio calculated between the net profit earned in a specific period and the capital required to generate that profit
Maximisation of shareholders' wealth (owners' wealth)
The business should be managed in such a way that the value of the ordinary shares increases, as reflected in the current market price of the shares
Unlike the other two primary goals, shareholder maximisation is generally measured by share price performance
Secondary business goals 
Maximum productivity
Growth
Maximum sales income
Safety and security
Continuity
Target performance
Socio-economic goals
Maximum productivity 
The better and more efficient use of all resources, as measured by total factor productivity (TFP)
Efficiency 
Poses a question of whether the right technique is being used to complete a task or reach a goal
Effectiveness 
Implies the goal was reached. Poses a question, were the right tasks performed regardless of method or technique
Productivity is seen to add value to the products and services produced in terms of the efficiency and effectiveness with which they are produced and delivered to customers
Growth of business 
Show growth in assets or sales income, usually expressed in monetary value such as greater market share or higher profits