Chapter 5

Business objectives : The aims or targets that a business works towards

Survival : When a business has recently been set up or when the economy is moving into recession, the objectives of the business will be more concerned with survival. New competitors could make a business fell less secure

Profit : The total income of a business (revenue) minus total costs. Businesses have an objective of making a profit as it is needed to pay a return to the owners of the business for the capital invested and provide finance for further investment into the business

Returns to shareholders : Shareholders own limited companies and therefore the company would want to give returns in order to discourage shareholders from selling their shares.
This can be done in 2 ways :

  1. Increasing profit and the share of profit paid to shareholders as dividends
  2. Increasing share price

Growth
Owners may aim for growth in order to :

  1. Make jobs more secure if the business is larger
  2. Increase the salaries and status of managers as the business expands
  3. Open up new possibilities and help to spread the risks of the business by moving into new products and new markets
  4. Obtaining a higher market share from growth in sales
  5. Obtain economies of scale

Market share : The percentage of total market sales held by one brand or business
Increased market share means :

  1. The business will have good publicity as it could claim it is becoming the most popular
  2. It will have an increased influence over suppliers and an increased influence over customers

Providing a service to the community (Social enterprises)
A social enterprise has social objectives as well as an aim to make a profit and reinvest it back into the business, operated by private individuals.
Their three objectives are :

  1. Social : To provide jobs and support for disadvantaged groups in society
  2. Environmental : To protect the environment
  3. Financial : To make a profit

Main internal and external stakeholder groups and their objectives

Why business objectives could change

Examples

A business has achieved higher market share and now has the objective of earning higher returns for shareholders

A profit-making business operates in a country facing a serious economic recession so now has a short-term objective of survival

A business set up recently has survived for 3 years and now has the objective to make higher profits

Owners (Internal)

Main features

  1. They put capital in to set up and expand the business
  2. They will take a share of the profits if the business succeeds
  3. Risk takers

Most likely objectives

  1. Share of the profits so they gain a rate of return on the money they put into the business
  2. Growth of the business so that the value of their investment increases

Workers (Internal)

Main features

  1. They are employed by the business
  2. They have to follow their employer's instructions in order to do their work effectively
  3. May be employed on full or part-time contracts
  4. If there is not enough work for all workers then some may be made redundant and told to leave

Most likely objectives

  1. Regular payment for their work
  2. Contract of employment
  3. Job security
  4. Jobs that give satisfaction and provides motivation

Managers (Internal)

Main features

  1. They are the employees of the business and control the work of the other workers
  2. They take the important decisions
  3. Their successful decisions could lead to the businss expanding
  4. If they make poor decisions, the business could fail

Most likely objectives

  1. High salaries because of the important work they do
  2. Job security
  3. Growth of the business so the managers can control bigger and better businesses

Customers (External)

Main features

  1. They are important to every business as they buy the goods that the business produces or the services that the business provides
  2. Without enough customers a business will eventually fail
  3. Most successful businesses often find out what consumers want before making the goods (market oriented)

Most likely objectives

  1. Safe reliable products
  2. Value for money
  3. Well-designed products of good quality
  4. Reliability of service and maintainence

Government (External)

Main features

  1. Responsible for the economy of the country
  2. Passes laws to protect workers and consumers

Most likely objectives

  1. Wants business to succeed in its country
  2. Expects all firms to stay within the law