Mission,objectives and values of
organisations
The business strategy
‘strategy converts what you want to do into an
accomplishment’ (Peter Drucker)
Long term goals and short term objectives to achieve
those goals
The firm needs to take the decisions and develop the
ability to achieve the ends
The overarching aims of the organisation are referred to
as the firm’s ‘mission’
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The Mission/Vision Statement
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‘the essential purpose of the organisation…the
nature of the business(es) it is in and the
customers it seeks to serve and satisfy.’
J.Thompson (1990)
Exercise 5
Compare Mission statements of a range of
organisations
Vision statement
The Vision tends to be more futuristic and
idealistic
 Richard Koch(1997) performance objectives
‘An inspiring view of what a company could
become, a dream about its future shape and
success, a picture of a potential future for a
firm, a glimpse into its promised land. A vision
is a long term aspiration of a leader for his or
her firm.’
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Aims of organisations
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Management by Objectives
Profit
market share
Market share and cost advantage
Sales
ROCE
Growth
Level of service
Customer or user perceptions
Management by Objectives
Performance objectives
 Market standing
 Innovation
 Productivity
 Physical and financial resources
 Profitability
 Manager performance and developments
 Worker performance and attitude
 Public responsibility
MbO provides an excellent link between aims and
performance, and aims and measurement of
Profit
According to Drucker
‘it is the first duty of a business to survive. The
guiding principle of business economics, in
other words, is not the maximisation of profits;
it is the avoidance of loss. Business enterprise
must produce the premium to cover the risks
inevitably involved in its operation. And there
is only one source for this risk premium: profits’
Profit
‘profit is not a cause, it is the result – the result of the performance
of the business in marketing, innovation and productivity’ Drucker
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Profit maximisation is concerned with making as much profit as
you can over a period
The maximisation of the difference between total revenue coming
into a business and the total cost being paid out
Coca –cola makes high profits on a very high sales figure
60% of its profits go into R & D, promotion, advertising, market
research, opening up new distrbution channels and so on
Profits yield higher sales and still higher profits
Exercise 6
List the problems that a business would experience if it didn’t
make a profit
Market share
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The most reliable indicator of market share is relative
to other brands:that is, the ratio of a company’s market
share to that of its largest competitor.
Relative market share =
market share of the company
market share of the nearest competitor
A ratio of 2:1 would give a 20% cost advantage (I.e the company would
be able to operate with costs 20% lower than its nearest rival)
If a company dominates the market it can produce on a larger scale than
its rivals and gain ‘economies of scale’
Market share and cost advantage
Example
Supermarkets
Tesco and Asda have increased market share at
the expense of Sainsbury’s.
Supermarkets with largest market share will tend
to maintain that share