1.5 Flashcards
What is a business objective?
An aim or target a business works towards.
Why are objectives important for businesses?
They help to make a business successful by providing clear targets and focus.
Name one benefit of setting business objectives.
They give workers and managers a clear target to work towards, which helps motivate people.
How do objectives help decision-making?
Decisions can be focused on whether they help achieve the objectives.
How do objectives help measure business success?
Managers can compare performance against objectives to determine success.
Do all businesses, regardless of size or age, need objectives?
Yes, objectives are important for all businesses, small or large, new or established.
Give an example of why a business might be started.
To provide employment and security for the owner or family.
What is a common charitable objective for some businesses?
To provide service to the community.
List the most common objectives for businesses in the private sector.
Business survival
Profit
Returns to shareholders
Growth of the business
Market share
Service to the community
What is meant by “business survival” as an objective?
Ensuring the business continues to operate in challenging conditions.
What does “returns to shareholders” mean as an objective?
Providing financial rewards to those who have invested in the business.
Why might a business prioritize “growth” as an objective?
To expand operations, increase market presence, and gain more customers.
What does achieving “market share” mean for a business?
Increasing the proportion of sales in a specific market compared to competitors.
How do objectives unite a business?
Clear and measurable objectives align the entire business towards the same goal.
What is the primary focus for a newly established business or one in an economic recession?
Survival.
What external factor can make a business focus on survival?
The emergence of new competitors.
What might managers do to ensure survival during tough times?
Lower prices to maintain sales, even if it reduces profits.
Why is profit a critical objective for privately owned businesses?
To provide returns to owners for their capital investment and the risks taken.
What are two main purposes of profit for a business?
- To pay returns to the owners.
- To finance further investment in the business.
What might happen if a business fails to make any profit?
The owners may close the business.
Why might businesses avoid maximizing profit at all costs?
High prices may deter consumers, and new competitors may emerge, reducing long-term profits.
What is meant by a “satisfactory level of profit”?
A profit level that satisfies owners without excessive work hours or high taxes.
Who owns limited companies?
Shareholders.
What is a common objective for managers of limited companies?
Increasing returns to shareholders.
Why do managers aim to increase returns to shareholders?
To discourage shareholders from selling shares and to keep their jobs.
What are two ways to increase returns to shareholders?
- Increasing profit and dividends.
- Increasing the share price.
How can managers boost share prices?
By making profits and implementing growth plans for future success.
What does business growth typically measure?
The value of sales or output.
Why is growth a common business objective?
To make jobs more secure, increase managers’ salaries and status, and spread business risks.
What new opportunities does business growth provide?
Expanding into new products and markets.
How does growth help increase market share?
By boosting sales volume.
What cost advantage can businesses gain through growth?
Economies of scale.
Why is meeting customers’ needs crucial for growth?
Customer satisfaction is necessary for sustainable growth.
Define “profit.”
Total income (revenue) minus total costs.
Why is growth often linked to manager motivation?
It increases their salaries and enhances their status as the business expands.
How does growth help in risk management for a business?
By diversifying into new products and markets.
What is an economy of scale?
Cost advantages achieved as a business expands its operations.
What happens if a business does not satisfy its customers while aiming for growth?
It risks losing customers and failing to achieve sustainable growth.
What is market share?
The percentage of total market sales held by one brand or business.
How is market share calculated?
Market share % = (Company sales ÷ Total market sales) × 100
What is Company A’s market share if it sells $20 million in a $100 million market?
20%.
What are the benefits of increased market share?
Good publicity for being seen as “the most popular.”
Increased influence over suppliers.
Increased influence over customers, including in pricing.
What is a social enterprise?
A business with social objectives as well as an aim to make a profit to reinvest back into the business.
Who operates social enterprises?
Private individuals, as they are part of the private sector.
What are the three common objectives of a social enterprise?
Social: Provide jobs and support disadvantaged groups.
Environmental: Protect the environment.
Financial: Make a profit to reinvest in the enterprise.
Give an example of a social enterprise.
RangSutra in India.
What is RangSutra’s core value?
Respect for both the producer and the customer.
How does RangSutra ensure fair practices?
By providing a fair price to producers and quality products to customers, with profits reinvested into improving community life.
What does Google’s growth objective demonstrate?
Diversification beyond its original purpose as a search engine.
Name some industries Google (via Alphabet Inc.) has expanded into.
Robotics, mapping, video broadcasting, telecommunications, scholarships, and smoke alarms.
Why might a social enterprise focus on environmental objectives?
To protect the environment as part of its broader social goals.
What does good publicity from increased market share lead to?
Enhanced reputation as a popular or leading brand.
Why do suppliers prefer working with businesses that have a larger market share?
Larger businesses offer more opportunities and stability, making suppliers eager to partner with them.
Why do business objectives change over time?
Business objectives change due to evolving circumstances, such as achieving initial goals, adapting to new challenges, or shifting market conditions.
Give an example of a business objective changing due to survival.
A profit-making business in a country facing a serious economic recession may shift its short-term objective to survival.
What might a new business focus on after surviving its first few years?
Working towards higher profits.
How can achieving a higher market share affect business objectives?
It might lead to setting a new objective of earning higher returns for shareholders.
What is a stakeholder?
Any person or group with a direct interest in the performance and activities of a business.
Name some internal stakeholders of a business.
Owners, workers, and managers.
Name some external stakeholders of a business.
Consumers, government, the whole community, and banks.
Why are stakeholders important to a business?
They have a vested interest in how the business is run and are affected by its activities and performance.
How might a government act as a stakeholder?
By regulating the business and expecting it to follow laws, pay taxes, and create employment.
How are banks stakeholders in a business?
They provide loans and expect timely repayments and financial stability from the business.
How might workers’ objectives differ from those of owners?
Workers may focus on job security and fair wages, while owners aim for profitability and return on investment.
Why is the community considered a stakeholder in a business?
The community is affected by the business’s environmental impact, job creation, and contribution to local development.
How do consumers act as stakeholders?
They demand quality products or services at fair prices and are directly impacted by the business’s offerings.
What might managers aim for as stakeholders?
Higher salaries, job satisfaction, and the success of their strategies in the business.
Who are the owners in a business, and what are their main features?
Owners put capital into the business, share profits if successful, risk losing investments if the business fails, and are risk-takers.
What are the most likely objectives for business owners?
Share of the profits as a return on investment.
Growth of the business to increase the value of their investment.
Who are considered workers in a business, and what are their main features?
Workers are employed by the business, follow managers’ instructions, may need training, and face the risk of redundancy if there isn’t enough work.
What are the most likely objectives for workers?
Regular payment for their work.
Job security and a contract of employment.
Job satisfaction and motivation.
Who are the managers in a business, and what are their main features?
Managers are employees who control workers, make important decisions, and are responsible for the success or failure of the business through their choices.
What are the most likely objectives for managers?
High salaries due to the importance of their role.
Job security, depending on their success.
Growth of the business for increased status and power.
Who are customers, and why are they important to businesses?
Customers buy goods or services. Without them, a business will make losses and fail. Successful businesses conduct market research to meet customer needs.
What are the most likely objectives for customers?
Safe and reliable products.
Value for money.
High-quality, well-designed products.
Reliable service and maintenance.
What role does the government play in business, and what are its main features?
The government is responsible for the country’s economy, passes laws to protect stakeholders, and expects businesses to succeed, employ workers, and stay within the law.
What are the most likely objectives for the government?
Successful businesses that create jobs, pay taxes, and boost economic output.
Businesses that comply with laws affecting business activity.
How does the community interact with businesses, and what are its main features?
The community is affected by business activity, including pollution and product safety. Businesses also create jobs and provide beneficial products, like medicines.
What are the most likely objectives for the community?
Jobs for the working population.
Environmentally safe production.
Safe, socially responsible products.
What role do banks play in business, and what are their main features?
Banks provide finance for operations and expect businesses to remain liquid, pay interest, and repay capital lent.
What are the most likely objectives for banks?
Timely repayment of loans and interest.
Financial stability of the business.
What are the objectives of public sector businesses?
Financial: Meet profit targets set by the government, with profits reinvested or handed over to the government.
What is the service objective of public sector businesses?
To provide a service to the public and meet quality targets set by the government, such as reliability and punctuality for trains and postal services or achieving targets in health and education.
What is the social objective of public sector businesses?
To protect or create employment in regions with limited job opportunities, especially in economically disadvantaged areas.
Why can satisfying stakeholder objectives be challenging for businesses?
Businesses often need to satisfy the objectives of multiple stakeholder groups, which can conflict with one another.
What is an example of a potential conflict between stakeholders?
Owners may want higher profits, while workers seek higher wages, which can reduce profits.
How do managers handle conflicting objectives?
Managers must compromise and balance the differing objectives of stakeholders to ensure the business operates effectively.
Why might business objectives change over time?
Objectives may shift due to economic conditions, such as focusing on growth during expansion or survival during a recession.
