Company Management, Objectives, and Social Responsibility
Company Management and Direction
External Changes and Company Values
Given the following external changes impacting the company’s direction: new technologies, globalization, market maturity, and diverse needs, the company values innovation in products, market expansion, and the use of new technologies.
Changes in Direction
- Increased flexibility and responsiveness to consumers and environmental changes
- Strategies based on superior knowledge
- Enhanced communication and teamwork
- Flatter organizational structures and cooperative strategies
Functions of Objectives
Objectives serve several key functions:
- Legitimize the organization’s role in its environment and define its unique place in society
- Enhance public relations
- Provide internal coordination
- Establish standards for performance measurement
- Motivate employees
Mission, Purpose, and Objectives
Mission
The mission reflects the prevailing values and beliefs within the organization, forming its culture. Some emphasize the future aspect when defining this mission or strategic purpose.
Purpose
More than just ambition, the purpose represents the company’s focus and its profound idea of success. It motivates staff by communicating the value of the target, allowing for individual contributions and evolving operational definitions as circumstances change. It consistently guides resource allocation.
Ansoff System Objectives
- Economic Objectives: Optimize the efficiency of resource transformation.
- Non-Economic Objectives: Result from negotiations between the objectives of different groups involved in the company. These encompass responsibilities (obligations the company agrees to fulfill) and constraints (decision rules that limit the company’s freedom of action).
Drucker System Objectives
Drucker believed that a company’s objectives and their interdependence are developed by identifying key action areas where the company must achieve superior results to survive. These areas include:
- Market conditions
- Innovation
- Productivity
- Physical and financial resources
- Profitability
- Performance and development of management and junior staff
- Social responsibility
Objectives of Ownership and Management
Sometimes, company ownership and management are separate, and their objectives may differ. Owners focus on maximizing company value and thus, their wealth. Managers have monetary and non-monetary objectives related to their position. Incentive schemes linking managers’ pay to profit can align these interests. Regulatory bodies also play a role.
Sources and Types of Profit
Sources of Entrepreneurial Profit
- Innovation: Manufacturing new products, opening new markets, introducing new production methods, and organizational innovation.
- Uncertainty: Higher risk corresponds to higher expected profit.
- Scale: Company size influences costs, prices, and capital intensity.
Received Profit
This profit is beyond the entrepreneur’s control and depends on exogenous variables such as the nature of the activity (capital intensity, costs, demand dynamics), market structure (profit is higher in concentrated, monopolistic, or oligopolistic industries), and opportunity.
Accepted Profit
This is an institutionalized income, less dependent on economic factors and more on authoritative decisions or contracts between institutions.
- Dispersed Interventions: Government control over public services, limiting large profits.
- Planned Objectives: State intervention using surpluses to guide management decisions through tax breaks, subsidies, etc.
Corporate Social Responsibility
Given the company’s importance in today’s society, defining its responsibilities is crucial. Different approaches exist for allocating resources to environmental problems:
- Negative Approach: Refuses to use resources on activities not directly increasing profit, favoring greater state intervention.
- Favorable Approach: Supports greater social commitment, believing it has a positive effect on public opinion.