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 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.
- 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 – 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.