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Objectives and Strategy
A firm's objective is its overall target once a firm has established its objective it can
then decide on the best way of achieving this its strategy. Different organisations will
have different objectives, for example firms might seek to innovate or to grow or
diversify or to increase its broad awareness. One of the most common objectives of
firms to increase in size.
Many owners and managers will want their firms to grow. This is because;
Larger firms may benefit from economies of scale. This may mean lower unit
costs and can result in higher profit margins or lower prices.
Larger firms have more power over their markets for example they may be able
to negotiate better deals with their suppliers and distributors; they may also be
able to bargain for better positioning for there advertisements in the media.
Larger firms tend to be safe from takeover simply because they are more
expensive to buy. Managers who are interested in their own job security will
therefore have an incentive to make their firms bigger and as a result protect
their own jobs.
Larger firms have more status. Managers will often want the praise and
recognition that comes with building up a business.
The growth of a business may come internally or externally. Internal growth occurs
when a firm sells more of its products. External growth occurs when a firm acquires or
joins up with another.
Internal growth is often slower it may take some time to penetrate a market and
increase sales. External growth is naturally faster and more sudden because a firm
acquires another organisations sales in one go.
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In order to grow a firm will need to have the finance necessary to acquire resources
such as new premises or equipment or to hire new staff. This finance can from internal
and external sources.
Internal sources of Finance include:
Retained Profits the firm can invest its profits into stock and new equipment.
The sale of assets if firms have assets which are not being used (such as land) it
may sell these to raise cash.…read more
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jobs, help each other out and generally deal with things as and when they come up; there
may not be formal job descriptions at this stage.
If however growth continues it may be necessary to develop a more formal structure
within the organisation. To avoid too many people doing the same thing, or to avoid things
not getting done at all, it usually becomes necessary to clearly define what each job