5. Business objectives and stakeholder objectives

Question 1

what are the business objectives of the private sector?

Answer 1

1. survival- when a business has recently been set up or when the economy is moving into recession, the objectives of the business will be ore concerned with survival than anything else
2. profit- when a business is owned by private individuals rather than the government it is usually the case that the business is operated with the aim of making profit. Normally a business will try to obtain a satisfactory level of profits so they do not have to work long hours or pay too much tax. profits are needed to:
   • pay a return to the owners of the business for the capital invested and the risk taken

• provide finance for further investment of the business

3. returns to shareholders- the managers of the companies will often set the objective of increasing returns to shareholders. this is to discourage shareholders from selling shares and helps managers keep their job.
   returns to share holders are increased in 2 ways:
   • increasing profit and the share of profit paid to shareholders as dividends

• increasing share price- this can be done by not only making profits but by putting plans in place so that the business has a good chance of growth and higher profits in the future.

4. growth- When businesses grow they create more jobs and make them more secure when a business is larger. The status and salary of managers are increased. Growth also means that a business is able to spread risks by moving to other markets, or it is gaining a larger market share. Bigger businesses also gain cost advantages, called economies of scale.
5. market share- increased market share gives a business:
   • good publicity, as it could claim that it is becoming ‘the most popular’

• increased influence over suppliers, as they would become very keen to sell to a business which is becoming relatively larger than others
• increased influence over customers (e.g. in setting prices)

6. service to the community (the objectives of social enterprises)- often set 3 objectives:

• social- are operated by private individuals (private sector) to provide jobs and support for disadvantaged groups in society such as the disabled or homeless
• environmental- to protect the environment
• financial- to make a profit to invest back into the social enterprise to expand the social work that it performs

Question 2

define profit

Answer 2

is total income of a business (revenue) less total costs

Question 3

define market share

Answer 3

is the percentage of total market sales held by one brand or business

Question 4

define social enterprise

Answer 4

has social objectives as well as an aim. to make a profit to reinvest back into the business

Question 5

Why business objectives may change?

Answer 5

1. A business has already survived and the owners may now aim at growing.
2. A business has achieved higher market share and now has the objectives of earning higher returns for shareholders.
3. A profit making business operating in a country which faces recession may now has short term objective of survival

Question 6

define shareholders

Answer 6

is any person or group with a direct interest in the performance and activities of a business

Question 7

stake holder groups

Answer 7

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Question 8

what are the objectives of the public sector?

Answer 8

1. financial- meet profit targets set by the government, sometimes it is reinvested into the business but other times it is handed over to the government as the ‘owner’ of the organisation
2. service- provide a service to the public and meet quality targets set by government.
3. social- protect or create employment in certain areas , especially poor areas with few other business employers