Business Objectives

• Businesses are more likely to be successful if they set out clear objectives.
• They need objectives for the following reasons:

  • Employees need something to work towards, objectives help motivate employees therefore increasing productivity.
  • Without objectives owners might not have to motivation needed to keep the business going, they may allow businesses to ‘drift’, results in business failure.
  • Objectives help decide where to take a business and what steps are neccessary to get there.
  • It is easier to assess the performance of a business if objectives are set. If objectives are met, we can argue that the performance of a business has done well.
• In the private sector, financial objectives are particularly important. This is because owners of these types of businesses look to make money.
• Financial Objectives ->

  • Survival → All businesses will consider survival as the most important, especially when a new business emerges or new competitors, survival is key for a business to thrive, therefore monitoring financial aims & objectives is the key to survival.
• Financial Objective ->

  Profit → Most businesses aim to make pofit because their owners want financial return, some businesses try to reach profit maximisation, meaning they want to make as much profit as possible. For example, companies, which are owned by shareholders, may try to maximise profits, due to the large dividends the shareholders make them pay.
• financial return → monetary return
• shareholders → owners of limited companies
• dividends → share of the profit paid to shareholders in a company.
• Financial Objectives ->

  • Sales → Some owners want their businesses to grow in sales. This is because businesses with large volumes of sales enjoy more benefits. they may enjoy:
  • lower costs
  • larger market share
  • higher public profile
  • generate more wealth for owners
• Financial Objective ->

  Increase market share → Businesses often want to build a larger market share, they can do this by winning customers from competitors. Businesses with larger market share can dominate the market, they can charge higher prices, for example. Businesses with a large market share have a higher profile meaning they can launch new products easier for example.
• Financial Objective ->

  Financial security → Some business owners do not aim for profit maximisation, some aim to make enough profit to give them financial security. This is sometimes called profit satisficing. Some owners do not seek to maximise profits because they do not want to take on the extra responsibility that comes with expanding a business.
• profit satisficing → making enough profit to satisfy business owners.
• Some businesses may not focus on financial objectives, however this depends on the nature of a business, for example social enterprises may not focus on financial objectives as much. But generally, business owners have both financial and non-financial objectives.
• Non-financial Objectives ->

  Social Objectives → they are designed to improve human well-being, in the public sector most businesses aim to provide a public service and the objectives will be linked to quality of service and reducing costs.
• Non-financial Objectives

  Personal Satisfaction → some owners have developed their hobby or interest into a business, some owners will set up their business as they think they will be happier in this work environment better than as an employer.
• Non-financial Objectives

  Challenge → some people are interested and motivated by challenges, this can be extremely challenging. Running a business can often provide endless challenges.
• Non-financial Objectives

  Independence & Control → some people want to be their “own boss”- they want to be in control. Entrepreneurs are driven by the desire to be independent and take control of their future. However, independence can be limited : taxes must be paid and tos financing the business must be satisfied.
• As a business develops and evolves overtime, its aims and objectives are likely to change. This is usually because businesses have to respond to events or changes in circumstances.
• Aim - long-term goal
• Objective - short-term goal
• Why do business Objectives/Aims change?

  Market conditions → Businesses operate in dynamic markets, this means the market regularly changes. When market conditions change, aims & objectives are also set to change to meet demands.
• Why do business Objectives/Aims change?

  Technology → As the pace of technological development increases businesses may have to adjust their objectives. For example, a manufacturer that introduces automation may decide to switch its objectives to sales growth, to lower costs.
• Why do business Objectives/Aims change?

  Performance → the performance of a business is not likelt to stay consistent, therefore to suit such periods, objectives & aims are needed to change, like periods of sustained profitability may be interrupted by less successful periods.
• Why do business Objectives/Aims change?

  Legislation → new legislations might have an impact on the objectives of a business. New legislation aimed at businesses is putting pressure on them to consider the needs of a wider range of stakeholders
• Why do business Objectives/Aims change?

  Internal reasons → sometimes a business may change their objectives due to internal reasons such as change in ownership or change in senior management.
• automation → use of computers and machines instead of people to do a job.
• economies of scale → financial advantages ( falling costs ) of producing something in large quantities.