BUSINESS

OBJECTIVES
Business Objective: a stated
measurable target that a business
plans to achieve
Importance of business objectives
• They clarify to everyone what the business is working to achieve
• They aid in decision making and choice of alternative strategies
• They enable checks on progress and corrective action
• They provide means by which performance can be measured
• They motivate employees
• They can be broken down to provide targets for each part of the
organisation
• They provide shareholders with a clear idea of the business in which they
have invested
• They facilitate the resolution of conflict between departments
Objectives should be SMART
Objectives of private sector
business
• Profit maximisation-it means producing at that level of output where the greatest
positive difference between total revenue and total costs is achieved.
• Profit satisficing-This means aiming to achieve enough profit to keep the owners
satisfied.
• Growth
• Increasing market share
• Survival
• Corporate social responsibility (CSR)- considering the interest of society by taking
responsibilities for the impact of their decisions and activities on customers,
employees, communities and the environment.
• Maximising short-term revenue
• Increasing shareholder value
Objectives of social enterprises
Social enterprises have three main aims. These are:
1. economic (financial) – to make a profit to re-invest back into the
business and provide some financial return to the owners
2. social – to provide jobs or support for local, often disadvantaged,
communities
3. environmental – to protect the environment and to manage the
business in an environmentally sustainable way. These aims are often
referred to as the triple bottom line.
Triple bottom line: the three objectives of social enterprises:
economic , social, environmental .
Objectives of public-sector
businesses
• to provide an efficient, reliable service to the public, such as water
supply or postal service
• to encourage economic and social development, especially in
deprived areas
• to create employment or prevent major job losses if the industry is
making a financial loss
• to meet financial targets set by the government, but not necessarily
make a profit
• to achieve high environmental standards
Factors that determine business
objectives
Relationship between mission
statement, aims, objectives,
strategy and tactics
Evaluation of mission
statements
Benefits of mission statements could be that they:
• inform groups outside the business what the central aim and vision are
• motivate employees, as they are associated with the positive qualities the statement
refers to
• often include moral statements or values to be worked towards, which might help to
guide and direct individual employees’ behaviour at work
• help to establish what the business is about, for the benefit of other groups.
On the other hand, mission statements might have limitations by being:
• too vague and general, so that they end up saying little that is specific about the
business and cannot be used as actual targets
• just a public relations exercise to make stakeholder groups feel good about the
organisation
• virtually impossible to really analyse or disagree with
• too general and lacking in specific detail, so two completely different businesses could
have very similar mission statements.
Objectives, strategies and
tactics
• Annual (company) report: a document that gives details of a company’s activities over the year,
including its financial accounts.
• Business strategy: a long-term plan of action for a business, designated to achieve a particular
objective.
• Tactic: a short-term action as part of an overall strategy
The links between objectives, strategies and tactics:
Objectives and business
decisions
How objectives might change
over time
• A newly formed business may have satisfied the survival objective by
operating for several years, and now the owners wish to pursue
objectives of growth or increased profit.
• The competitive and economic environment may change. The entry
into the market of a powerful rival or the start of an economic
recession may force a business to switch from growth to survival as its
main aim.
• A short-term objective of growth in sales or market share might be
adapted to a longer-term objective of maximising profits from the
higher level of sales.
Translation of objectives into
targets and budgets
• Targets: a short-term goal that must be reached before an overall
objective can be achieved.
• Budget: a detailed financial plan for the future.
For example, a business might aim to increase sales in foreign markets.
The promotion department operating in each foreign country could be
allocated $3m to spend on increasing sales, with the target of reaching
total sales increases of 15% within four months.
Communicating objectives
• If employees are communicated with and therefore involved in the setting
of individual targets, then these benefits should result:
• Employees and managers have a greater understanding of both individual
and company-wide goals.
• Employees understand the overall plan and how their individual goals fit
into the company’s business objectives.
• Employees share responsibility for targets and objectives by interlinking
their goals with those of others in the company.
• Managers stay in touch with employees’ progress more easily, as regular
monitoring of employees’ work allows for praise or training to keep
performance and deadlines on track.
Ethical influences on business
objectives and activities
• Ethical code (code of conduct): a document detailing a company’s rules and
guidelines on staff behavior that must be followed by all employees.
Ethical dilemmas:
• Should a toy company advertise its products to young children so that they pester their parents
into buying them?
• Is it acceptable to take bribes to place an order with another company?
• Should a bank invest in a company that manufactures weapons or tests chemicals on animals?
• Is it acceptable to feed genetically modified food to cattle?
• Do we accept lower profits in the short term by purchasing less polluting production
equipment?
• Should chief executives receive substantial pay rises and bonuses when other workers in the
business are being made redundant?
• Is it acceptable to close a factory to save costs and increase profits even though many jobs will
be lost and workers may find it hard to get other jobs?
• If legal controls and inspections are weak, is it acceptable to pay very low wages for long hours
of work in order to reduce business costs?
• If it is not illegal, should a business employ child labour to reduce costs?
• Should a business produce potentially dangerous goods as long as ‘no one finds us out’?
Evaluating ethical decisions
Following a strict ethical code in decision-making can be expensive in the short term:
• Using ethical and Fairtrade suppliers can add to business costs.
• Not taking bribes to secure business contracts can mean failing to secure significant sales.
• Limiting the advertising of toys to just adults, so that children do not pester them to buy, may
result in lost sales.
• Accepting that it is wrong to fix prices with competitors might lead to lower prices and profits.
• Paying fair wages, even in very low-wage economies, raises wage costs and may reduce a firm’s
competitiveness against businesses that exploit workers.
In the long term, there could be substantial benefits from acting ethically:
• Avoiding potentially expensive court cases can reduce the cost of fines.
• Acting unethically can lead to bad publicity, lost consumer loyalty and long-term reductions in
sales. Ethical policies can lead to good publicity and increased sales.
• Ethical businesses attract ethical customers and, as world pressure grows for corporate social
responsibility, this group of consumers is increasing.
• Ethical businesses are more likely to be awarded government contracts.
• Well-qualified employees may be attracted to work for the companies with the most ethical and
socially responsible policies.