1.1.2 Business Objectives

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    Business Objectives   –   a goal or target that a business does its best to achieve

     

    • Business objectives give businesses a purpose and/or a direction
    • It also allows businesses to measure their progress.
    • There are many different objectives and different businesses will choose differently as their aims and motivations will differ from each other.

     

    RETURN ON INVESTMENT (ROI)

    • This is the profit that entrepreneurs make by taking risks through making investments.
    • The higher the ROI the more attractive the investment and can give an idea of how profitable it is.

     

    PROFIT MAXIMISATION

    • Profit is often important to companies, and in traditional forms of business, the first aim is often to maximise profits.
    • Profit is maximised when costs are at their lowest and revenue is at its highest.
    • Firms choose to maximise profits because it provides greater wages for employees and dividends for shareholders which makes both groups happy.
    • It is a cheap source of finance.
    • This provides a stable price and output.
    • PLCs are often keen to profit maximise because their shareholders expect high dividends and as a result PLCs may have short run profit maximisation as an objective.

     

    SALES MAXIMISATION

    • This is when the business aims to sell as much of its goods and services without making a loss.
    • It helps keep out competitors as well as deterring them as well as helping them earn more profits in the long term.
    • This may be one of the objectives for not-for-profit organisations

     

    SATISFICING

     

    Satisficing   –   to be satisfied with a limited amount of income that is enough for survival                        and costs.

    • This is when a business earns enough profits to keep their shareholders happy.
    • This is often the objective for smaller firms.
    • It also allows them to keep shareholders happy whilst letting them meet their other objectives.

     

    SURVIVAL

    • This is a short-term objective for businesses trying to enter a competitive market.
    • It is also used in times of economic downturn until there is economic growth again.
    • Businesses aim to sell as much as possible in a short time to keep to their market position despite the fact it may mean a loss in the short term.

     

    MARKET SHARE

    • A market share is the portion of the market controlled by a company or product.
    • By having a good market share, this allows a business to survive better in the market and can be achieved by maximising sales.

     

    COST EFFICIENCY

    • The more cost efficient a company is, the lower the average cost as they find cheaper resources and manufacturing processes.
    • This allows them to offer customers lower prices, meaning in competitive markets they will gain customers from less efficient producers.

    EMPLOYEE WELFARE

    • This is when the business tries to take care of their employees, so they are more productive and do a better job.
    • This also makes the employee more loyal to the company and less likely to leave their job, lowering employee turnover.

     

    CUSTOMER SATISFACTION

    • To improve their competitiveness by improving their quality and therefore improving customer satisfaction.
    • They can improve either their quality or customer service
    • If they have a good reputation, they may be able to charge higher prices for their goods.

     

    SOCIAL OBJECTIVES

    • They try to focus on their Corporate Social Responsibility and try to help the local area.
    • They would try to produce goods more ethically or hire groups that are discriminated against.

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