1.5.3. Business Objectives

Question 1

What are business objectives?

Answer 1

Goals or targets that a business intends to achieve.

Question 2

What type of hierarchy do businesses tend to occur in?

Answer 2

A layered hierarchy with sub-objectives within each layer.

Question 3

At the top levels of the hierarchy, what are the objectives like?

Answer 3

Broad, long term strategic objectives focusing on business policy, and their success depends on achieving objectives further down the hierarchy.

Question 4

Further down the hierarchy, what are the objectives like?

Answer 4

They tend to be more narrow, short term, tactical and specific, focusing on a business’s day to day operation.

Question 5

What is the reason for the objective ‘profit maximisation?’

Answer 5

It provides the finances necessary to purchase capital and invest in growth and expansion.

Question 6

What is the reason for the objective ‘survival?’

Answer 6

Businesses need a positive cash flow, as even if the company is profitable overall, if they can’t pay their short term expenses, it probably won’t be able to survive.

Question 7

What is the reason for the objective ‘sales maximisation?’

Answer 7

By maximising the number of sales they generate, they can achieve economies of scale and more sales = more revenue = higher profit.

Question 8

What is the reason for the objective ‘market share?’

Answer 8

To promote themselves to more customers.

Question 9

What is the reason for the objective ‘cost efficiency?’

Answer 9

Bringing costs down, with lower costs, can earn more profit.

Question 10

What is the reason for the objective ‘employee welfare?’

Answer 10

To maintain quality and efficiency.

Question 11

What is the reason for the objective ‘customer satisfaction?’

Answer 11

Can lead to repeat sales and word of mouth referrals, which can convert into sales.

Question 12

What is the reason for the objective ‘social objectives?’

Answer 12

To satisfy the personal ethics of the business owner and create a positive reputation for the brand, which can lead to higher sales in the long run.

Question 13

What is the acronym for business objectives and what does it stand for?

Answer 13

S-pecific: to the business’s aims
M-easurable: quantifiable to ensure objectives are achieved
A-chievable: agreeing they are capable of being fully completed
R-ealistic: capable of being achieved using existing resources
T-ime bound: given a realistic time for completion

Question 14

What is SWOT analysis?

Answer 14

Where the business looks at an objective, considering factors it can control and whether the business has the capability to effectively deliver the objective.

Question 15

What does SWOT stand for?

Answer 15

S-trengths that allow it do deliver the objective
W-eaknesses that prevent it from being achieved
O-pportunities that would arise from an achieved objective
T-hreats to business if objective fails/succeeds

Question 16

What are some example strengths which will help achieve an objective?

Answer 16

Solid liquidity base, good cash flow

Question 17

What are some example weaknesses which will hinder achieving an objective?

Answer 17

Lack of trained employees, high level of labour turnover.

Question 18

What are some opportunities that could arise from an achieved objective?

Answer 18

Attraction of new customers and encouragement of repeated purchases.

Question 19

What are some possible threats to businesses if an objective fails/succeeds?

Answer 19

Loss of sales revenue income or loss of image/prestige, problems from overtrading/competitors..

Question 20

Why is it important that a business ‘identifies’, ‘defines’ and ‘agrees’ SMART objectives?

Answer 20

As this will encourage a spirit of collective responsibility, improving motivation of the workforce and can be used as a means of incentive.

Question 21

What are tactical objectives?

Answer 21

• Short term, narrow in focus and specific in terms of the day to day running of the business.
• Usually broken down into sub-objectives in order to facilitate their achievement.
• Essential that they are SMART
• Low down the hierarchy of objectives and usually set in departments by middle management.

Question 22

What are strategic objectives?

Answer 22

• Top of the hierarchy of objectives and are corporate objectives
• Broad in vision and focusing on business policy and long term in fulfillment, usually 3-5 years
• Success depends on the achievement of the tactical objectives further down the hierarchy
• Usually associated with increasing a business’s sales revenue, income, market share, profits, customer satisfaction, employee welfare and being environmentally aware