From Mission to Strategic Objectives

The company's mission needs to be turned into strategic objectives to guide management. Each manager should have objectives and be responsible for reaching them. For example, its fertilizer business unit is one of International

Tlic Strategic Pian • 91

Strategy

Competitive strength

Achieve a sustained leading position worldwide

Identity

Progress

Technological, social and marketing competences focused on progress

Entrepreneurial style Will to lead

Agree on clear objectives and vigorously transform them into compecicive advantage

Managers

Entrepreneurship

Managers and employees think and act as if it were their own company

Executive Speed decision making

Faster decision making through integrated business functions

New organization Close to the customer

Marketing-oriented business functions create entrepreneurial freedom

Strength

Systems integration

Integrate competitive products into problemsolving systems

Figure 3.2

Siemens" seven core statements

Minerals & Chemical Corporation's many activities. The fertilizer division does not say that its mission is to produce fertilizer. Instead, it says that its mission is to increase agricultural productivity'. This mission leads to a hierarchy of objectives, including business objectives and marketing objectives. The mission of increasing agricultural productivity leads to the company's business objective of researching new fertilizers that promise higher yields. Unfortunately, research is expensive and requires improved profits to plough back into research programmes. So improving profits becomes another key business objective. Profits are improved by increasing sales or reducing costs. Sales increase by improving the company's share of the domestic market, or by entering new foreign markets, or both. These goals then become the company's current marketing objectives. The objective to 'increase our market share' is not as useful as the objective to 'increase our market share to 15 per cent in two years'. The mission states the philosophy and direction of a company, whereas the strategic objectives arc measurable goals.

StrategicAudit

'Knowledge is power': so stated Francis Bacon, the sixteenth-century philosopher, while according to the ancient Chinese strategist Sun Zi, 'The leader who docs not want to buy information is inconsiderate and can never win.' The strategic audit covers the gathering of this vital information. It is the intelligence used to build the detailed objectives and strategy of a business. It has two parts: the external and internal audit.

Financial Statements: Are We Making Money?

Marketing

Highlight 3.2

Net sales

Cost of goods sold Gross margin Expenses Net profit

8300,000 -175,000

$125,000 -100,000

The first part details the amount that Parsons received for the goods sold during the year. The sales figures consist of three items: gross saies, returns or allowances, and net sales. Gross sates is the total amount charged to customers during the year for merchandise purchased in Parsons' store. Some customers returned merchandise. If the customer gets a full refund or full credit on another purchase, we call this a return. Other customers may decide to keep the item if Parsons will reduce the price. This is called an allowance. By subtracting returns and allowances from gross sales:

Gross sales 8325,000

Returns and allowances -25,000

Net sales g300,000

The second part of the operating statement calculates the amount of sales revenue that Dale Parsons retains after paying the costs of the merchandise. We start with the inventory in the store at the beginning of the year. During the year, Parsons bought $150,000 worth of suits, slacks.

TABLE 1 OPERATING STATEMENT FOR DALF, PARSONS MEN'S WEAR FOR YEAR ENDING 31 DECEMBER 1995 (g)

Gross sales

¡ess: Kales returns and allowances Net sales

Cost of goods sold

Beginning inventory, 1 January 1995, at cost

Purchases plus: Freight-in

Net cost of delivered purchases

Cost of goods available for sale less: Ending inventory, 31 December 1995, at eost

Total cost of goods sold Gross margin Expenses Selling expenses: Administrative expenses: General expenses: Total expenses Net profit

150,000 10,000

60,000

160,000 220,000 45,000

50,000 30,000 20,000

325,000 25,000 300,000

175,000 125,000

100,000 25,000

employees, local newspaper and radio advertising, and the cost of delivering merchandise to customers after alterations. Selling expenses totalled £50,000 for the year. Administrative expenses included the salary for an office manager, office supplies such as stationery and business cards, and miscellaneous expenses including an administrative audit conducted by an outside consultant. Administrative expenses totalled $30,000 in 1995. Finally, the general expenses of rent, utilities, insurance, and depreciation came to 820,000. Total expenses were therefore fSlOO.OQO for the year. By subtracting expenses (8100,000) from the gross margin (8125,000), we arrive at the net profit of $25,000 for Parsons during 1995.

The cxtemal audit or marketing environment audit examines the maeroen-vironment and task environment of a company. EuroDisney's problems can be partly explained by an excessive faith in company strengths and too little attention being paid to the inacroenvironment. French labour costs make the park much more expensive than in America, Europe's high travel costs add to guests' total bill and the north European climate takes the edge off all-year-round operations. EuroDisney contrasts with the success of Center Pares. This Dutch company's resort hotels offer north Europeans undercover health and leisure facilities that they can enjoy all year round.

The internal audit examines all aspects of the company. It covers the whole value chain described by Michael Porter/' It includes the primary activities that follow the flow of goods or services through the organization: inbound logistics, operations, outbound logistics, sales and marketing, and after-sales services. In addition, it extends to the support activities on which the primary activities depend: procurement, technology development, human resource management and the infrastructure of the firm. These go beyond traditional marketing activities, but marketing strategy depends on all of them. A key to the Italian Benetton's international success is a system that allows it to change styles and colours rapidJy. Unlike traditional mass-clothing manufacturers, which have to order fabrics in colours and patterns over a year ahead of seasons, Benetton's design and manufacturing technology allows it to change within a season. Long before the idea of close supplier relationships was re-imported from Japan, Marks & Spencer and G & A made supplier relations arid human resource management central strategies.

Reading financial statements is basic to understanding the state of a company and seeing how it is developing. The operating statement and the balance sheet are the two main financial statements used. The balance sheet shows the assets, liabilities and net worth of a company at a given time. The operating statement (also called profit-and-loss statement or income statement) is the more important of the two for marketing information. It shows company sales, cost of goods sold, and expenses during a specified time period. By comparing the opcniting statement from one time period to the next, the firm can spot favourable or shirts, ties, jeans and other goods. Because the store is located away from regular shipping routes, Parsons had to pay an additional Si 0,000 to get the products delivered, giving the firm a net cost of 8160,000. Adding the beginning inventory, the cost of goods available for sale amounted to 8220,000. The 845,000 ending inventory of clothes in the store on ,31 December is then subtracted to come up with the 8175,000 cost of goods Hold.

The difference between what Parsons paid for the merchandise ($175,000) and what he sold it for (gJOO.OOO) is called the gross margin (£125,000).

In order to show the profit Parsons 'cleared' at the end of the year, we must subtract from the gross margin the expenses incurred while doing business. Selling expenses included two sales external aiic| it -1 detailed examination of the. markets,' competition, business and economic environment in whibh the organization operates.

internal audit An evaluation of die firm's entire value chain.

balance sheet

A financial statement that shows assets, liabilities antl net <&orch of a company at a given time.

operating statement (profit-and-loKs statement or income statement)

A financial statement that shows company sales, aost of goods sold and expenses during a given period of time.

unfavourable trends and take appropriate action. Marketing Highlight 3.2 describes these .statements in more detail and explains their construction.

SWOT analysis ,i distillation of the findings of the internal and external audit •which draws attention tn the critical organizational strengths and weaknesses and the opportunities and threats facing the company.

Key Principles For Entrepreneurs

Key Principles For Entrepreneurs

If you're wanting to learn how to set goals now for tomorrow's benefit. Then this may be the most important letter you'll ever read! You're About To Learn All About Growth Potential Without Potential Waste And How To Manage Your Money Principles, No Matter How Much Time You Have Had To Prepare! It doesn't matter if you've never experienced entrepreneurship up close and personal, This guide will tell you everything you need to know, without spending too much brainpower!

Get My Free Ebook


Responses

  • semrawit saare
    How company mission is turned into objectives?
    6 years ago

Post a comment