Business Studies Unit 3

Unit 3: Strategies for success Section 3.1 Functional objectives and strategies Using objectives and strategies Once a firm has become established and no longer has survival as its main objective, it is important to set long term aims and short term objectives for the business. Setting targets creates the basis for decision making. So, the development of a business into functional areas and the need for a clear range of organizational aims and objectives combine to produce a strategy for success: ·         Each functional area sets targets which reflect the aims of the company ·         A range of strategies are deployed ·         Performance is measured against the targets Using objectives and strategies explains how functional objectives are derived from the corporate objectives. A range of corporate objectives that larger businesses might pursue are analyzed. ·         Corporate objectives – a quantifiable statement of a business’s goals which should include measurable targets. Some common corporate objectives: survival, growth, maximum returns or profit. ·         Functional objectives – a quantifiable statement of a department’s goals which should enable it to contribute to the achievement of the business objective. The success of any department will depend on the cooperation of all other areas of the business. This can be quite easy to achieve in small to medium sized firms but as companies grow larger and channels of communication become more complex, a coordinated approach to setting of increasing profits and measuring performance can be difficult to maintain. Example: corporate objective of increasing profits by 15% over next five years: Marketing function set objectives ·         Increase sales by 25% over next three years ·         Increase customer satisfaction to 95% within two years Human Resource function ·         Reduce administration and managerial staff by 15% ·         Increase productivity per employee by 6% Finance function ·         Reduce adverse budget variances in functional area ·         Cut supply costs by 2.5% within 18months Functional objectives will contribute to the achievement of the corporate objective, they need to be discussed and coordinated so that time and effort is not wasted and conflict between functional areas does not arise. ·         Functional strategies – the plan by which the department intends to achieve its functional objectives on a day to basis. Plans must be specific, quantifiable so that managers can measure progress and success. Functional strategies should be result of consultation with those involved in the implementation of the plans, otherwise there is a real possibility that the functional strategies may be too unrealistic. This could lead to delay and demotivation if channels of communication are not effective. Functional strategies need to include SMART targets. In fact, to be successful the process of setting objectives, measuring performance and devising strategies should share this common theme. SMART targets ·         Specific – no confusion about what is required ·         Measurable – quantifiable goal is clear ·         Agreed – result of consultation with those involved in their delivery ·         Realistic – impossible goal likely to demotivate ·         Time based – so progress toward achievement can be measured…