• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

The Nature of Conflict over Business Objectives Between Owners and Managers of an Organization

Extracts from this document...

Introduction

The Nature of Conflict over Business Objectives Between Owners and Managers of an Organization This report aims to examine the sources, nature and effects of conflicting business objectives of the owners and managers of an organization. Relevant theories will be illustrated on the examples of Selfridges and New Look. These organizations have been chosen, as their recent buy-outs have been followed by the resignation of their chief executives, which points to the existence of conflict between the managers and the organizations' new owners. A business objective is a precise statement of the long-term direction of an organization. It sets out both, the desired result and the strategic measures to be used to achieve that result. To be effective, an objective should be specific, measurable, achievable, relevant and time-bound. Business objectives are set at both operational and functional level. In order to survive in the long term, any organization needs to make a profit. Usually substantial investment is needed at first, yet this will only be made, where a worthwhile return can be expected. It can therefore be argued that an organizations prime objective should be to maximize profits. This simplistic approach, however, ignores the fact that in order to sustain those profits in the long-run, a company needs to further invest. ...read more.

Middle

A conflict can already be identified at this level, whilst assuming that the manager will in fact identify with the organization he represents and acting to achieve the best possible outcome for the organization in the long-term and the shareholder in the short-term. According to Simon, however, the reality often sees managers pursuing their individual goals instead. They seek to "maximize their own utility". This means that they are concerned about their remuneration, work situation, power and status, before considering organizational welfare. Simon suggests that a manager will seek to satisfice the owner of the organization, but do no more than that. He will aim to achieve a level of profits that the shareholder will be satisfied with and invest enough to create optimism about the company's future, but then pursue his own interests. Where trading results are promising and satisfactory levels are met, the management is unlikely to disturb investors by such behavior, as these are concerned with achieving a worthwhile financial return on their investment. It may prove problematic though, when sales or profits fall, be it due to strategic weaknesses of the company, a downturn in the market as a whole or even economic slowdown in general. Within a public limited company, another issue linked into this is that the directors of a company issue their own pay rises, which means that this is not necessarily linked to their actual performance. ...read more.

Conclusion

In the case of Selfridges, the loss of managers' power to act in their own interest was made obvious by the appointment of a management team overseeing all of the new owners', Galen Weston's, businesses and the abandoning of large parts of the company's expansion plans. Both examples show that it is essential for a company to reach expected levels of profits for its owners. Investment, though necessary to sustain consistent profits in the long term are a risk in the short term and must be communicated well to the company's shareholders. A drop in sales will make investment less attractive, whereby it is not always relevant, how that fall is caused. It must be carefully assessed, which stakeholders interests to focus on. A failure to achieve a balance between investment and short-term profits may lead to a take over, which may mean the loss of power or even position for the managers. While the pursuit of individual goals is often the reality for managers, this can cause problems for the company, when trading becomes more difficult. The means of influence over management decisions for an owner of a public limited company are limited, however, where objectives are too wide apart, the effect of his disapproval will be wide reaching. 1 www.newlook.co.uk 2 the appointment, 14th Feb. 2004 ?? ?? ?? ?? 1 ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level Structures, Objectives & External Influences section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level Structures, Objectives & External Influences essays

  1. Marked by a teacher

    ASDA's Ownership

    4 star(s)

    (From SKY NEWS) In Task 2 I mentioned some trends that have occurred in the past few years. The most popular trends that have occurred in ASDA and Wines Plus are: * Personal expenditure * Increases to the UK spenditure * Expenditure on household consumables (food, drink etc)

  2. The Business Environment Coursework. Describe the type of business, purpose and ownership of ...

    This contract is covered by the Sale of Goods Act which says the product must be of satisfactory quality, fit for purpose, and as described. When buying a service you are entitled to expect that the service is carried out with reasonable care and skills, within a reasonable time and at a reasonable charge.

  1. Btec National Business Level 3 Year 1 - Exploring Business Activity

    Yes Yes Logistics A logistics manager is responsible for managing processes involved in a supply chain and liaises with a variety of parties, including suppliers of raw materials, manufacturers, retailers and, increasingly, consumers. It is includes organising the delivery of products by a firm and various materials and goods around an organisation or business.

  2. This is a detailed business report on Sainbsurys.

    Organisational structure and Culture Businesses are structured in different ways with different levels of management. Some have many layers of management, while others have very few. These structures vary according to the type of market each business is operating in. below is a diagram of the organisational structure at Sainsburys.

  1. Applied Business Studies Unit 1: Investigating Business

    At Martin, support and service are key ingredients to our success. Wherever our products are found throughout the world, you will always find a certified Martin Preferred Partner, ready to support you with qualified advice and first class service. Here at the Martin UK office we support our Martin Preferred

  2. For my portfolio, I was asked to do an assignment on two businesses. I ...

    concerned about locating near to their suppliers because there suppliers are all over the world so they transport different kind of product from different parts of the Britain. Tesco transports 3500 deliveries a day within the organisation. Tesco used to transport their product in four different ways they are main field, top up, night field and fill up.

  1. Investigating Business. Tesco PLC. I will be describing the aims and objectives of ...

    Everything Tesco?s does is rooted in two values: 1.No-one tries harder for customers and 2.Treat people how we like to be treated. In Tesco?s corporate responsibility they have a community promise called Tesco?s community promises, their values are reflected in their corporate responsibility strategy, which we call Community Promises.

  2. Aims and objectives of Waitrose

    So it appears there is equilibrium between Waitrose and the local community, Waitrose gives to the community and the community gives back. Increase levels of customer service: Waitrose would want to achieve this aim because they would want the improve ability to supply Waitrose customers with their wants and needs,

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work