Let’s take a look at in details at factors that determine corporate objectives of a business organization:
1. Age. The number of years the business has been operating.
2. Size. The size and legal form of the business.
3. Market status. Plc or Ltd.? Public-sector or private-sector businesses?
4. Short-term or long-term. Divisional, departmental and individual objectives.
5. Stakeholders.
6. Managers. Managerial objectives
7. Culture. Business culture.
Different businesses will have completely different objectives from one another. New businesses are likely to have a different set of objectives from established businesses while small businesses are likely to have a different set of objectives from large businesses.
1. Age. The number of years the business has been operating.
The aim of a start-up business is likely to differ from that of a well-established large business because of differing circumstances.
Newly formed businesses have no choice but to do everything to survive at all costs in the first year of operation. They are focused around establishing the products in the target market. Most of the new businesses have very high failure rate at the beginning of existence.
Start-ups face much more uncertainties such as whether the business will be viable, whether customers will like the product, whether the business can be profitable, whether the business will be able to break-even, whether the business will have enough resources and sufficient cash flow to continue trading.
Larger, more mature companies are likely to pursue other objectives, such as sales growth and profit maximization. Because established businesses face fewer risks of failure, the business aim will depend on what the business owners want for the company.
Many well-established old companies prefer to trade ethically and focus on environmentally-friendly activities as maintaining good reputation is crucial for the owners who want to be known as good people.
2. Size. The size and legal form of the business.
Owners of small businesses may have a satisfactory level of profit – called ‘profit satisficing’ as a business objective.
Large businesses controlled by directors rather than owners, such as most public limited companies, want fast business growth in order to increase the status and power of the managers, returns for investors and stability of employment for the workers.
Professionals working for big businesses will be concerned about their bonuses, salaries and fringe benefits because as these items usually depend on business size.
3. Market status. Plc or Ltd.? Public-sector or private-sector businesses?
Government-owned organizations usually do not have profit maximization as a major business objective. Business objectives for companies in the public sector usually include accessibility, affordability and openness to all citizens.
Because the service they provide is not charged for, or is very affordable when payment is required, such as public education or public health services, then a financial target would be inappropriate. They may also maintain services in non-profitable locations. Instead, state-owned businesses use ‘quality of service’ to measure their success.
On the contrary, private-sector businesses may decide to close unprofitable branches in rural locations in order to lower the costs to meet profit margin targets.
4. Short-term or long-term. Corporate, divisional, departmental and individual objectives.
Corporate objectives which relate to the whole organization are considered in very long-term. They will be broken down to specific goals for each separate division of the business. Then, each division will create strategies for action.
Divisional objectives are set by senior management and play very important role. They help to maintain consistency with the corporate objectives, aid coordination between all divisions and allow to allocate adequate resources for the successful achievement of the objectives.
After the divisional objectives are established, these will be further divided into departmental objectives – meaningful targets focusing on divisional goals will be set for each department.
Ultimately, at the end of the planning process, budgets and short-term targets for each individual worker employed by the business will be established
5. Stakeholders. Different interest groups with different objectives.
Behavioral theories claim that business objectives are controlled by all stakeholders, not just by the managers, directors and owners alone.
Stakeholders argue that the business have certain minimum goals that it must deliver for its interest groups. Owners require certain profit to be paid out to them whilst the rest to be retained in the business for future growth. Workers demand minimum level of pay and acceptable working conditions. Suppliers want regular contracts and immediate payments. Managers fight for more resources to carry out their tasks. And, customers desire quality products at reasonable prices.
Stakeholder groups with the most influence will usually be the ones who achieve its objectives. However, the dominant group may change over time and sometimes groups may even compromise.
6. Managers. Managerial objectives.
Very often, a single department or even the whole company adopts the personality of the manager’s objectives. Management may take control as it has its own professional and personal objectives. Managers want to maximize their departmental budgets and the number of employees in charge, delegate as much work as possible and improve their status and recognition in the industry. Personally, they want to maximize their salary, fringe benefits and leisure time.
However, managers abusing their power will most likely be fired sooner or later.
7. Culture. Business culture.
Corporate culture is the way of doing things shared by all in the organization – the unique code of behavior that influences the decision-making style of the managers and attitudes of other employees in the business.
The culture of the organization also influences the nature of business objectives, obviously not all businesses pursue the same objectives.
Some companies are very aggressive in how they perform on daily basis, how they manage change, deal with other people and pursue their objectives. They may be willing to take over or crash rival businesses, and care very little about the society or the natural environmental.
Some other companies with less aggressive attitudes will have softer, more people-oriented and friendlier cultures.
