Business (9625) | Mission, objectives and strategy

Welcome to Section 3.3.1: Mission, Objectives, and Strategy!

Hello future business leader! This chapter is where the rubber meets the road. We are moving beyond just understanding how a business operates and diving into why it makes the big decisions it does.

Think of running a business like climbing Mount Everest. You need a clear goal (the summit), a detailed map (your strategy), and the right gear and daily actions (your tactics). This section teaches you how businesses set that ultimate destination and choose the best route to get there. Understanding this is essential for high-level analysis in your exams!

1. The Foundation: Mission, Objectives, and Strategy

Every successful business follows a logical planning path. It starts broad and gets increasingly specific:

1.1 The Strategic Chain: Linking Direction to Action

The core of this topic is understanding the hierarchical relationship between four key elements:

Mission Statement (The "Why")

• Definition: A brief, inspiring statement that defines the company’s fundamental purpose, its values, and what it hopes to achieve in the world.
• Analogy: It’s the company's North Star—it tells everyone why the business exists.
• Example: Google’s mission is "To organise the world's information and make it universally accessible and useful."

Objectives (The "What")

• Definition: Specific, measurable, achievable, relevant, and time-bound (SMART) targets that the business aims to achieve to fulfil its mission.
• Analogy: These are the specific base camps you must reach on your way up Everest.

Strategy (The "How - Big Picture")

• Definition: A long-term plan or approach used to achieve the overall objectives. This involves major decisions, resource allocation, and dealing with competition.
• Strategic Decisions: These are long-term, non-routine, and high-risk decisions (e.g., deciding to enter a new country or take over a rival).

Tactics (The "How - Day-to-Day")

• Definition: Short-term, routine actions or immediate steps taken to execute a specific part of the strategy.
• Tactical Decisions: These are short-term, routine, and lower-risk (e.g., setting the price for a product promotion next week).

Key Takeaway: The mission sets the direction, the objectives define the goals, the strategy outlines the path, and the tactics are the steps taken on that path.

2. Business Objectives: Defining Success

Objectives are critical because they guide resource allocation and measure performance. They can be broadly categorised.

2.1 Financial Objectives

• Profit: Often the primary goal for commercial businesses (survival, maximisation, or satisfactory).
• Growth: Increasing the scale of the business, often measured by sales revenue, market share, or number of stores.
• Cash Flow: Ensuring the business has enough liquid funds to pay its short-term debts.
• Shareholder Value and Returns: Crucial for publicly listed companies. This means maximising the wealth of the owners (shareholders).

What is Shareholder Value?
It's not just profit! It is typically achieved by:
1. Increasing the Share Price (making the company worth more).
2. Providing high Shareholder Returns (paying out high dividends).

2.2 Non-Financial Objectives

• Survival: The primary goal for new businesses or those facing a tough market (recession).
• Personal Objectives: For sole traders or small business owners, goals might be independence, work-life balance, or running a sustainable local enterprise.
• Social Objectives: Goals related to improving society, such as fair trade practices, supporting local communities, or providing jobs.
• Environmental Objectives: Goals related to reducing the business's negative impact on the planet, such as reducing carbon emissions or using sustainable sourcing.

2.3 Short-termism vs. Long-termism

This is a critical concept in A-Level Business. It relates to the time frame businesses use when setting objectives and making strategic decisions.

• Short-termism: Focusing mainly on immediate results, often driven by the need to please shareholders with instant profits or quick returns.
• Impact: Might involve cutting costs (like R&D or training) which boosts current profit but hurts future competitiveness.
• Long-termism: Focusing on sustainable success, growth, and stability over many years.
• Impact: Might involve investing heavily in research and development (R&D) or staff training, which costs money now but secures a competitive advantage later.

Did you know? Many managers of public limited companies (PLCs) are accused of short-termism because their bonuses often depend on annual share price performance.

2.4 Impact of Objectives on Functional Areas

Every objective has consequences for the four main business functions: Operations, Human Resources (HR), Marketing, and Finance.

Objective	Functional Area Impact
Growth (e.g., higher volume)	Operations: Must increase capacity and manage inventory. HR: Needs to recruit and train more staff.
Environmental (e.g., Net Zero Carbon)	Operations: Must change suppliers and possibly production processes. Finance: Needs a budget for green technology investment.
Survival (e.g., in a recession)	Finance: Focuses solely on cash flow and reducing expenses. Marketing: Might switch to highly competitive price tactics.

Key Takeaway: Objectives drive decisions across the entire business. A strategic decision in one area (like Operations) must be supported by the other functions (like Finance and HR).

3. Strategic Analysis Tool: SWOT

Before a business can choose a winning strategy, it must understand itself and the environment it operates in. The SWOT Analysis is the foundational tool used for this.

3.1 What is SWOT?

SWOT stands for:

• Strengths
• Weaknesses
• Opportunities
• Threats

Don't worry if this seems simple! The real skill is classifying the factors correctly and then using them to influence strategy.

Internal vs. External Factors

The core principle of SWOT is separating the things the business controls from the things it doesn't control.

• Internal (Current Position): Focuses on the business itself. These are resources and capabilities you can change.
  • Strengths (S): Internal factors that give the business an advantage (e.g., strong brand reputation, highly skilled staff, unique patented technology).
  • Weaknesses (W): Internal factors that place the business at a disadvantage (e.g., outdated machinery, poor cash flow, high staff turnover).
• External (Future Potential): Focuses on the market, the economy, competitors, and government. These are things you can't control but must respond to.
  • Opportunities (O): External situations that the business could exploit to gain an advantage (e.g., a new free trade agreement, a competitor exiting the market, new technology emerging).
  • Threats (T): External situations that could damage the business (e.g., a recession, new strict government laws, increased competition from abroad).

3.2 Using SWOT to Influence Strategy

The value of SWOT is not just listing points, but using them to generate strategic choices.

A business should aim to:

1. Use Strengths to exploit Opportunities. (S-O Strategy)
2. Overcome Weaknesses by taking advantage of Opportunities. (W-O Strategy)
3. Use Strengths to combat Threats. (S-T Strategy)
4. Minimise Weaknesses and avoid Threats. (W-T Strategy - often a defensive or retrenchment strategy).

Key Takeaway: SWOT provides a structured look at the internal health and external environment of the business, leading directly to informed strategic decision making.

4. Considering Stakeholders in Decision Making

Strategic decisions are rarely made in a vacuum. They affect many groups of people, known as stakeholders. Effective strategy must manage these relationships.

4.1 Defining Stakeholders

A Stakeholder is any individual or group that has an interest in, or is affected by, the activities and performance of a business.

• Examples: Owners/Shareholders, Employees, Managers, Customers, Suppliers, the Local Community, and the Government.

4.2 Overlap and Conflict of Objectives

Different stakeholders have different needs, which often leads to conflict:

• Conflict Example 1:
  Shareholders want high profits and dividends.
  Employees want higher wages and better working conditions.
  Result: Increasing wages (employee objective) reduces profit (shareholder objective).
• Conflict Example 2:
  Customers want the lowest possible price.
  Suppliers want the highest possible price for their inputs.
  Result: The business must strategically balance these competing pressures.

4.3 Stakeholder Mapping: Managing Relationships

Since you cannot please everyone equally, businesses use Stakeholder Mapping to determine which stakeholders need the most attention. This map categorises stakeholders based on their Power (ability to influence the business) and their Interest (level of concern about the business’s activities).

The map is a simple 2x2 matrix:

1. High Power, High Interest (Key Players):
   • Action: Manage Closely. These people are crucial to success. (e.g., Major shareholders, senior managers, key regulatory bodies).
2. High Power, Low Interest (Keep Satisfied):
   • Action: Keep Satisfied. Ensure they do not become dissatisfied, which could lead them to exert their power. (e.g., Government agencies, powerful community groups).
3. Low Power, High Interest (Keep Informed):
   • Action: Keep Informed. Ensure their enthusiasm is maintained, but they don't require heavy management. (e.g., General employees, smaller local suppliers).
4. Low Power, Low Interest (Minimal Effort):
   • Action: Monitor. Only deal with them if absolutely necessary. (e.g., The general public, occasional customers).

Key Takeaway: Strategic decision making requires balancing the potentially conflicting objectives of key stakeholders. Stakeholder mapping helps managers allocate time and resources effectively to those who can most impact the strategy.