1.5.3 Business Objectives Flashcards
Business Objectives
• A business objective is a goal or aim that a business wants to achieve. The best objectives are SMART and not vague, so that everyone in the business knows what direction the business is going.
What is SMART
- Specific
- Measurable
- Achievable
- Realistic
- Timely
Survival as a business objective
- Survival is a short-term objective of a business and is usually applied to a new business or start-up
- Having an objectives helps the employees to focus on shared aims of the business
- Different businesses have different objectives, it can depend on the product, service or industry and even on the goals of the entrepreneur starting the business
Profit maximisation
- Profit maximisation is when a business wants to make the most profit possible from a given amount of resources
- Profit maximisation is important as an objective because it helps a business to recoup any research and development costs (R&D)
- Profit maximisation is needed to help a business to maintain high levels of product development and innovation
Profit maximisation - shrinkflation
- Lots of supermarket items are getting smaller
* This is known as shrinkflation – where a manufacturer keeps the price the same but makes the product smaller
Other business objectives
- sales maximisation
- market share
- cost efficiency
- employee welfare
- customer satisfaction
- social objectives
sales maximisation
• Some businesses may set their objective as sales maximisation
• Profit figures tend to be annually so sales figures can be examined on a daily, weekly or monthly basis
• Managers find sales figures more satisfying as targets as profits go to owners and salaries are often linked to sales levels
• Anyone interested in investing in the business may want to see the sales data and judge it as an indicator of performance
• Often found in a sales drive environment like an estate agents or a car dealership
market share
• Market share is the % of a market that a business has, either in revenue or in units sold
• This may be an objective in a very competitive market where consumers switch between suppliers (supermarkets)
• Very important for investors to judge how a business is doing against competitors Loss in market share can be an indicator of long- term serious financial problems
cost efficiency
• The most common objective in transport and construction industries where goods and services make up 70% of the cost of a project is to achieve cost efficiency
• Cost efficiency can be achieved by:
• Paying minimum wage to unskilled workers
• Subcontracting where economically viable
• Lean production or construction where material, time and
process waste is eliminated to save costs
• Increase the perceived value of the product through strong branding
• Lower the quality and the price of the product
• Lowering the average costs means economies of scale
employee welfare
• Some businesses seek the harmonious relations with their workforce as an objective, and they aim to achieve this through employee welfare
• External examples: Medical insurance, housing, education for family
• Internal examples: Canteen, crèche, toilets, uniform
• Employees that are satisfied are loyal and hard working,
they have increased morale, motivation and productivity
• The business also benefits from an enhanced public image as a good place to work – which makes recruitment easier
customer satisfaction
• This objective is common in service industry and the coffee corner shop competitive market
• Businesses who follow this objective wills eek to monitor customer service levels through surveys and will focus on quality
• They will attempt to identify and understand what the customer wants and then provide this
• They also aim to reduce the number of complaints
• A customer centred approach will:
• Ensure repeat sales
• Create brand loyalty to prevent customers from switching to similar brands
• Satisfied customers will tell others and reputation and word of mouth are very cheap ways of highly effective marketing to improve sales
social objectives
• Social objectives are also known as corporate social responsibility or CSR objectives
• This may involve:
• Reducing impact on the environment
• Fair wages in developing countries
• Helpingsociety
• Compliance with laws to minimise externalities like operating sensible hours so not as to noise pollute the local community
How can a business survive?
- Strong Financial Management
- Customer Focus
- Adaptability
-Strong Leadership - Innovation
Why is strong financial management a factor for survival ?
Strong Financial Management: A business must have a solid financial foundation to survive. This means managing cash flow, keeping expenses under control, and ensuring that revenue is sufficient to cover costs.
Why is customer focus a factor for survival ?
Customer Focus: A business that focuses on providing value to its customers is more likely to survive. This means understanding their needs and preferences, providing high-quality products or services, and delivering a great customer experience.
