9609 · 1.4.2
Objectives and business decisions flashcards
Revision flashcards for Cambridge 9609 Objectives and business decisions (syllabus 1.4.2). Flip, recall, then mark a real past-paper question.
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Objective → decision link?
Each functional decision should support the top-level objective.
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Growth vs profit conflict?
Heavy reinvestment for growth, such as marketing or R&D, reduces available funds for dividends and lowers short-run profit.
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CSR vs profit?
Using fair-trade suppliers or investing in green technology raises costs, which may cut into the profit margin unless customers pay a premium.
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What are typical decisions driven by a 'survival' objective?
Decisions may include aggressive price cuts to maintain cash flow, reducing staff numbers, selling non-essential assets, or delaying payments to suppliers.
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How does the time horizon affect objectives?
Long-run objectives like market leadership may require short-run losses (e.g., from heavy investment in new product development), creating a conflict with short-run profit goals.
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What is functional alignment in decision-making?
It means that the policies and decisions made by all departments (Marketing, Operations, HR, Finance) must be consistent and work together to achieve the overall corporate objective.
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What is the principle of 'satisficing' in the context of business objectives?
It is a management strategy of attempting to achieve a satisfactory and acceptable level for several conflicting objectives, rather than trying to maximise just one. For example, accepting a reasonable profit level in order to also meet environmental and employee welfare goals.
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How can the objective of 'growth' conflict with 'profit maximisation'?
Achieving growth, such as increasing market share, often requires significant short-term expenditure on marketing, price reductions, or opening new locations. These costs reduce short-term profits, even if they are intended to generate higher profits in the long run.
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Give an example of a decision driven by a short-run objective versus one driven by a long-run objective.
Short-run (e.g., survival): A decision to cut the staff training budget to reduce immediate costs. Long-run (e.g., market leadership): A decision to invest heavily in a new technology platform, even though it will not be profitable for several years.
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How do objectives provide a framework for decision-making?
Objectives set a clear target and direction for the entire organisation. They allow managers to make consistent, coordinated decisions across all functional departments (e.g., marketing, finance, operations) that are aligned with achieving the overall goal.
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Why might a public limited company (plc) prioritise short-term objectives over long-term ones?
Plcs are owned by shareholders who often expect regular, high dividend payments and a rising share price. This pressure can force management to focus on maximising short-term profits to keep shareholders happy, potentially at the expense of long-term investment in R&D or sustainable growth.
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What is an objective hierarchy?
It is the structure of objectives within a business, from the overall corporate objectives at the top, cascading down to divisional, departmental, and finally individual targets. This ensures that actions at every level contribute to the main goals.
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How does a mission statement relate to business objectives?
A mission statement is a broad, qualitative statement of the business's overall purpose. Objectives are the specific, measurable, and time-bound targets that are set to help achieve that mission.