Business Objectives

• what is a business objective ?

  is a result a firm aims to achieve.
• Sales maximisation??

  get into market -> sell items/ services for low as possible (without making a loss) to GAIN MARKET SHARE.
• Revenue maximisation??

  earn as much money from consumers as possible to DETER OTHERS FROM ENTERING YOUR MARKET or PUT RIVALS OUT OF BUSINESS.
• Profit maximisation ??

  use strong consumer base to BOOSTS PROFITS for shareholders/reinvestment into the business.
• Profit maximisation…

  Shareholders aim to maximise their dividends from the companies that they invest in.

  Businesses must seek to maximise their profits and pay the highest possible dividends for the shareholders to invest.

  For this, the business must make a profit on every single item that it produces.
• What is profit maximisation often associated with?

  Businesses that have a lot of market power (monopoly)

  These businesses can charge higher prices to make big profits as consumers have no choice or alternatives.
• Monopoly ??

  Complete ownership or control of the entire supply of goods and services in a certain market.
• Dividends ??

  A sum of money paid regularly by a company to its shareholders out of its profits.
• Benefits of Profit Maximisation..


  •Shareholders are likely to benefit from higher dividends.

  •Retained profit can be used to improve the business- expand or spend on research and development for new products.
• Drawbacks of profit maximisation..

  •Higher profits for consumers which reduces consumer surplus.

  •High profits might act as an incentive for new firms to enter the market.
• Revenue maximisation..

  less room for competitors the more revenue a business makes.
• Benefits of maximising revenue..

  •Increased brand loyalty

  •Put competitors out of business

  •Greater influence over prices and society
• Problems with maximising revenue..

  •Lower profits

  •Can be harmful in the long run to priorities short run revenue over long-term profits.

  •Forcing competitors out of the market negatively affects consumers.
• Benefits of Sales maximisation..

  •Increased market share

  •Increases monopoly power and may enable the firm to put up prices and make more profit in the long run.
• Drawbacks of sales maximisation..

  •Leaves company at risk; no guarantee consumers will remain at an increase in prices. Businesses usually only want to increase customer base with low to no profit being made.
• Divorce of ownership of control??

  When the owners of a company aren’t fully in control of the decisions that managers are taking. E.g. Managers believing revenue maximisation will impress shareholders leading to higher salaries however shareholders want to maximise their own gain through profit maximisation. Therefore managers may continue to increase sales even if it becomes unprofitable and shareholders may be unaware.
• Survival ??

  For many businesses breaking even is the definition of survival.
• satisficing??

  A situation where there is a separation of ownership and control in a firm.
• ROI (return of investment)

  ROI tried to indirectly measure the amount of return on a particular investment, relative to investments cost.
• what is ROI and the calculation?

  return on investment is a ratio between net income and investment.

  Net profit/cost of investment x 100

  Measured in % : will let you know how good ur investment has done.
• Employee Welfare ??

  Maintaining a healthy and safe work enviournment.

  This will lead to improvement in staff motivation and productivity which are critical issues for every workplace.
• Social objectives ??

  A social objectives is a statement that details a specific desired outcome of a a project that is relation to the interactions of individuals, groups and institutions within a society.

  e.g employee satisfaction or employment opportunities.
• Customer satisfaction??

  A customers satisfaction indicated fulfilment that the consumer derived from doing business with a firm.
• Cost efficiency??

  The act of saving money by making a product or performing an activity in a better way.
• Market share??

  the portion of a market controlled by a particular company or product.
• Benefits of ROI

  •generally easy to calculate •Measure of profitability. This provides a better measure of profitability by company or team.
• limitations of ROI

  •inability to consider time in the equation.

  • no way to account for non-financial benefits. e.g. value of improved worker morale as a result of getting new computer is difficult.