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Chapter 5 - Coggle Diagram
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
:
Increasing profit
and the share of profit paid to shareholders as dividends
Increasing share
price
Growth
Owners may aim for growth in order to :
Make jobs more secure if the business is larger
Increase the salaries and status of managers as the business expands
Open up new possibilities and help to spread the risks of the business by moving into new products and new markets
Obtaining a higher market share from growth in sales
Obtain economies of scale
Market share
: The percentage of total market sales held by one brand or business
Increased market share means :
The business will have good publicity as it could claim it is becoming the most popular
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 :
Social
: To provide jobs and support for disadvantaged groups in society
Environmental
: To protect the environment
Financial
: To make a profit
Main internal and external stakeholder groups and their objectives
Owners (Internal)
Main features
They put capital in to set up and expand the business
They will take a share of the profits if the business succeeds
Risk takers
Most likely objectives
Share of the profits so they gain a rate of return on the money they put into the business
Growth of the business so that the value of their investment increases
Workers (Internal)
Main features
They are employed by the business
They have to follow their employer's instructions in order to do their work effectively
May be employed on full or part-time contracts
If there is not enough work for all workers then some may be made redundant and told to leave
Most likely objectives
Regular payment for their work
Contract of employment
Job security
Jobs that give satisfaction and provides motivation
Managers (Internal)
Main features
They are the employees of the business and control the work of the other workers
They take the important decisions
Their successful decisions could lead to the businss expanding
If they make poor decisions, the business could fail
Most likely objectives
High salaries because of the important work they do
Job security
Growth of the business so the managers can control bigger and better businesses
Customers (External)
Main features
They are important to every business as they buy the goods that the business produces or the services that the business provides
Without enough customers a business will eventually fail
Most successful businesses often find out what consumers want before making the goods (market oriented)
Most likely objectives
Safe reliable products
Value for money
Well-designed products of good quality
Reliability of service and maintainence
Government (External)
Main features
Responsible for the economy of the country
Passes laws to protect workers and consumers
Most likely objectives
Wants business to succeed in its country
Expects all firms to stay within the law
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