Bussiness

• Business objectives


  Aims or targets that a business works towards
• Benefits of setting business objectives

  • Give workers and managers a sense of direction and an aim to work towards achieving it thus it motivates them
  • Taking decisions will be focused on achieving the target
  • Help unite the business towards the same goal
  • Help assess the performance of the business
• Most common objectives for businesses in the private sector

  • Survival
  • Profits
  • Returns to shareholders
  • Growth of the business
• Survival


  When the business has been recently set up, the economy is moving into recession, or new competitors enter the market. Managers will feel threatened and would lower prices in order to survive though the profit on each item sold will be reduced.
• Profits


  Total income of a business (sales revenue) less total cost. Needed to pay a return for the owners, provide finance for further expansion.
• Consequences of raising prices to increase profits


  • Some consumers will stop buying the product
  • New competitors may enter the market which will reduce the profits in the long run for the original business
  • Paying too much taxes to the government
• Returns to shareholders


  Helps managers maintain their jobs as they please shareholders. Achieved by increasing profits (which increases dividends) and/or increasing share price.
• Growth of the business

  Obtained if customers are satisfied. Measured in sales value or output. Benefits include more secure jobs, increased salaries and status of managers, spreading risk by moving into new products and markets, obtaining economies of scale.
• Market share


  The proportion of total market sales achieved by one business.
• Benefits of increased market share

  • Good publicity
  • Increased influence over suppliers
  • Increased influence over consumers
• Social enterprise


  Has social objectives as well as an aim to make a profit to reinvest back into the business.
• Objectives of social enterprises

  • Social: to provide jobs and support for disadvantaged groups in society
  • Environmental: to protect the environment
  • Financial: to make profit which will be reinvested into the business to perform more social work
• Business objectives change in response to changes in the business environment and economy
• Stakeholder


  Any person or group with a direct interest in the performance and activities of a business
• Stakeholder groups and their objectives

  • Owners: profits, growth of the business
  • Consumers: safe and reliable products, reasonable prices, well-designed and good quality products, reliability of service and maintenance
  • Workers: receiving their payments regularly, having a contract of employment, job security, job satisfaction and motivation
  • Government: success of the business, compliance with laws
  • Managers: growth of the business, higher status and power, higher salaries, secure jobs
  • Banks: ensure the business can pay interest and repay capital
  • The whole community: safer products, socially responsible production, creation of jobs
• Stakeholders' objectives could conflict with each other
• Objectives of public-sector businesses

  • Financial: meet profit targets set by government
  • Service: provide a service to the public and meet quality targets set by government
  • Social: protect or create employment in certain areas
• Motivation


  The reason why employees want to work hard and work effectively for the business
• Fewer days off work, less grievances, no strike actions, high productivity and increases profits in a business are the end result of a motivated workforce
• Reasons why people work

  • To earn money to pay for needs and wants
  • To have a sense of security, stable job and steady pay
  • To fulfil their social needs; feeling part of a group or organization, meeting people, and making friends at work
  • To fulfil esteem needs; feeling important due to the job you do
  • To have job satisfaction; enjoyment derived from feeling that you have done a good job
• Money is the main motivator for employees
• When workers are well-motivated, they become highly productive and effective in their work, increasing the firm's efficiency and output, leading to higher profits
• F.W. Taylor


  Assumed that all people are motivated by personal gain and therefore, if they are paid more, they will work more effectively
• Criticism of Taylor's ideas: too simple, productivity gains will not be achieved if an employee is dissatisfied by his work even if you pay him more, it is hard to measure some employees' output
• Maslow's hierarchy of needs


  Shows that employees are motivated by each level of the hierarchy going from bottom to top. Managers can identify which level their workers are on and then take the necessary action to advance them onto the next level.
• Limitations of Maslow's theory: some levels don't appear to exist for certain individuals, while some rewards appear to fit into more than one level
• Herzberg's two-factor theory


  Hygiene factors must be satisfied for the motivational ones to be effective in motivating employees. If hygiene factors are absent then they can act as de-motivators to workers. If present they don't motivate employees as their effects wear off quickly.
• Hygiene/maintenance factors


  • Status
  • Security
  • Work conditions
  • Company policies and administration
  • Relationship with supervisor
  • Relationship with subordinates
  • Salary
• Motivators


  • Achievement
  • Recognition
  • Personal growth/development
  • Advancement/promotion
  • Work itself
• Factors which can motivate employees

  • Financial reward
  • Non-financial rewards/perks/fringe benefits
  • Introducing ways to give job satisfaction
• Financial reward


  Increased pay may be used to give incentives to employees to encourage them to work harder or more effectively
• Forms of pay


  • Wages
  • Salaries
  • Commission
  • Profit sharing
  • Bonus
  • Performance related pay
• Wages


  Payment for work, usually paid weekly. Benefits include regular payment, overtime pay. Drawbacks include time-consuming calculation and extra labor cost.
• Time rate


  Payment by hour. Advantages include easier calculation, workers know exact amount. Disadvantages include time-consuming calculation, good and bad workers paid the same.
• Piece rate


  Payment that depends on the quantity of products made. Advantages include encouraging workers to work faster and produce more. Disadvantages include ignoring quality, unfair to careful workers.
• Salaries


  Payment for work, usually paid monthly. Benefits include easy calculation, no extra payment for extra tasks, better cash flow for the business.
• Commission


  Payment to sales staff relating number of sales to payment. Motivates them to sell more.
• Profit sharing


  System where a proportion of the company's profits is paid out to employees. Motivates employees to work hard to receive a share of the profit.
• Bonus


  Additional amount of payment above the basic pay as reward for good work.
• Performance related pay


  Pay system used when output can be measured, related to the effectiveness of the employee. Determined through an appraisal system.