Business Management

Prepared by: Talha

Chapter 1

OBJECTIVES OF AN ORGANINZATION
1.
CORPORATE & FINANCIAL STRATEGY:
Strategy is a course of action to achieve an objective. Strategies are set at the corporate, business and
operational level.
Characteristics of Strategic Decision:
a.
Strategic decisions will be concerned with the scope of the org activities
b. Strategy involve s the matching of an org activity to its resources capabilities
c. Strategic decisions therefore involves major decision about allocation of resources
d. They will effect operational decision
e. Strategic decisions will be affected by:
Environmental considerations
Resources availability
The values & expectations of the people in power within the org
f. Strategic decisions are likely to affects the long term direction that the org takes
g. They have implication for change throughout the org
Levels of Strategy in an Organization:
a) Corporate Strategy: is concerned with what type of business the org is in. Most general level of strategy
Aspects of corporate strategy
Scope of Activities: Strategy impact upon the whole org. All parts of the org should support the
strategy.
Environment: Counter threats and exploit opportunities from the environment
Resources: Strategy involves choice about allocating or obtaining corporate resources
Values: The value system of people with power in the org influences its strategy
Timescale: Corporate strategy have a long term impact
Complexity: Corporate strategy involves uncertainty about the future and integrating the operations
of the org and change
b) Business Strategy: It is concerned with how each strategic business unit attempts to achieve its mission
within its chosen area of activity.
c) Functional Strategies: Concerned with how the various functions of the org (marketing, admin, finance
etc), contributes to the achievement of the corporate & competitive strategies.
Environmental Influences:
a) External Influence:
The value of society
The influence of organized group like govt dept, consumer groups
b) Nature of the business
The market situation & market conditions it is in
The products it makes
The technologies it uses
c) Organizational Culture
Its tradition (history)
Its organization structure
Its management/leadership style
Stakeholder groups: These are groups having legitimate interest in the activities of an org
Internal- managers, employees
Connected- shareholder, banks, customers, suppliers

FROM THE DESK OF TALHA SIDDIQUI

Business Management
Prepared by: Talha
Chapter 1
External government, pressure groups, local communities

Objectives of the Stakeholder Groups:

Shareholderprovider of risk capital, wants to maximize wealth
SupplierWants long term relation, timely payments, frequent orders
Long term LendersTimely payment of interest and repayment of capital
EmployeesJob security, high reward
GovernmentPolitical objectives like high employment and sustainable economic growth
Influence of Stakeholders: The action of stakeholder groups in pursuit of their various goals can exert
influence on strategy. The greater the power of stakeholder, the greater will be their influence
Strategic Financial Management: the identification of the possible strategies capable of maximizing an org
NPV, the allocation of scares capital resources among the competing opportunities and the implementation
and monitoring of the chosen strategy so as to achieve stated objectives.
2.
FINANCIAL OBJECTIVES:
The prime financial objective of a company: to maximize the wealth of shareholders
Method of Company Valuation
Going concern basis
Break up basis
Market values
Financial Targets
Restriction on gearing (ratio of debt)
Profit retentions
Profit from operations
Cash generation
Value added
3.

NON FINANCIAL OBJECTIVES:

Welfare of employees, management, society
Provision of service to minimum standard
Responsibilities to customer by providing quality products
Responsibilities to suppliers
Leadership in research and development
Maintaining competitive position and market share

Environmental Concerns:
The impact of green issues on business practice
Environmental impacts on business may be direct.
Changes affecting costs or resources availability
Impact on demand
Effects on power balances between competitors in the market
Ecology and Strategic Planning
Resource inputsmanaging physical resources successfully is a good source of profit
Government Local authority town planning departments can influence, government can also
setup regulation about some of the org environmental interaction
DisasterThe physical environment can pose a major threat to org like earthquake etc

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Business Management
Prepared by: Talha
Chapter 1
Environmental Accounting: Environmental management accounting (EMA) suggests following measures:
Eco Balance: The firm identifies the raw material and wastages which it gives a notional value are
social costs
Cleaner Technology: Can be used in the manufacturing process to avoid waste
Corporate Liabilities: Firm often sued for environmental damages, which needs to be recorded as a
liability.
Performance Appraisal: This can include reducing pollution
Life Cycle assessment: Total environmental impact of a product is measured, from the resource it
consume till dispose off if not recycled.
Budgetary Planning and Control System: These can be used to develop variance analyzing
environmental issues
4.
OBJECTIVES OF PUBLICALY OWNED AND NON COMMERCIAL BODIES
Their prime objective is not to make profit however, the will have to meet financial targets
Nationalized Industries:
The framework of financial management in state owned industries consists of:
Strategic objectives
Corporate plans, targets and aims
Rules about investment plan and their appraisal
External financing limits

A nationalized industry may be expected to provide a certain standard of service to all customer
regardless the facts that some individual receive a service at a charged well below its costs
The need to provide a service may be of such overriding social and political importance that the
govt is prepared to subsidies the industry

Non profit Organization

They are setup with a prime objectives not relating to making profit but for the betterment of society.
They need finance to pay for its operations, major sources are funds, charity etc
They uses that fund Economically, efficiently and effectively
5.
FINANCIAL MANAGEMENT DECISIONS:
A financial manager has to make the following decisions:
Investments
Financing
Dividend
Investment Decisions:
Need to identifies investment opportunities, evaluate them and decide on the optimum allocation of the
scare funds available between investments
Financing Decisions:
Includes those for both the long term( capital structure) and the short term (working capital management).
The finance manager needs to determine the source, cost and effect on risk of the possible sources of the
long term finance, balancing b/w profitability and liquidity must be considered.
Dividend Decisions:
They affect the view of shareholders regarding long term aspects of the company and also the market value
of the share.
Conflicts among these decisions:
For investment purpose manager needs extra finance how to obtain and consequences, which increase the
demand for finance. While equity holder require dividend. The surplus cash paid out as dividend will

FROM THE DESK OF TALHA SIDDIQUI

Business Management
Prepared by: Talha
Chapter 1
reduce finance available for investments. Since the dividend paid decisions are at discretion of company, the
equity holder will sell their shares in market if not receiving dividends. So all these decisions are conflicting
with each other

FROM THE DESK OF TALHA SIDDIQUI