Size of business, objectives and stakeholders

Last time

Before we start: last time, in Enterprise, social enterprise and business structure, you learned these points. Here they are again on one card. Keep them in mind, because today builds on them.

How big, aiming for what, for whom?

Businesses differ in size, in what they aim for, and in the groups they must satisfy. This lesson covers how size is measured and how businesses grow; how objectives are set and why; and how stakeholders influence, and are affected by, decisions.

Measuring size

Number of employees, revenue, capital employed, and market share. Each can mislead: a capital-intensive firm has few employees but is large. So use more than one measure, suited to the industry.

Growth

Internal growth expands the business's own operations: slower, lower risk, and owners keep control. External growth uses mergers and takeovers: horizontal, vertical forward and backward, and conglomerate. External growth is quick, but brings culture clashes, integration costs, and possible diseconomies of scale.

Impact of a merger on stakeholders

Shareholders may gain from higher profits through economies of scale and market power. Employees may face job losses where roles overlap, and uncertainty. Customers may gain lower prices, or lose from less choice and higher prices. The most likely impact depends on the merger type and market.

Objectives

Objectives give direction, help decision-making, motivate staff, and allow performance to be measured. Good objectives are SMART: specific, measurable, achievable, realistic and time-bound. Objectives cascade: corporate objectives lead to departmental objectives and individual targets.

Types of objective

Survival, profit maximisation, growth, market share, and corporate social responsibility. Objectives change with the business's age, the economy, competition and ownership. Mission statements express the business's overall purpose, but may be vague.

Stakeholders

Stakeholders include owners, employees, managers, customers, suppliers, lenders, government and the community. Each has its own objectives, which can conflict: owners want profit, employees higher pay, communities less pollution. Stakeholder mapping weighs each group's power and interest, to decide how much to consider them.

Most important stakeholder?

Shareholders own the business, so in a company their interests may come first. But without satisfied customers and employees, there is no profit; in a school, for example, students and parents are central. So the most important stakeholder depends on the type of organisation and the decision being made.

Stakeholders and objectives

Stakeholder objectives that often conflict.

Mistakes that lose marks

Mistake one: measuring size by profit. Mistake two: describing SMART without applying it to the case. Mistake three: evaluating one stakeholder without comparing with others. The fix: correct measures, application, and comparison.

The full-marks tip

The full-marks tip: for stakeholder questions, compare groups and say what the answer depends on. For growth, weigh speed and control against risk and integration problems.

On one card

So, on one card: size, objectives and stakeholders. Keep it for revision.