Business Objectives Flashcards
What is the definition of survival?
When a business’ main focus is on trying to operate for the foreseeable future.
Advantages of survival
1.Helps focus on efficiency-reducing costs and focusing on expenditure.
2. Can unite all staff in working together to ensure job security.
Disadvantages of survival
1.Possible conflict between shareholders and managers- will have to justify their strategy.
2.Miss out on profitable opportunities due to cost cutting. Cost cutting could also impact quality/brand image.
3.Redundancies or reduced working conditions may have to be implemented.
Define “Growth”
When the main focus of a business is trying to be larger.
Advantages of growth as a business objective.
1.Take advantage of EOS
2. Improved motivation of employees- job security and chances of promotion
3.Attract new customers
4. Minimise risk of business failure.
Disadvantages of growth as a business objective
1.Diseconomies of scale
2.Lower levels of motivation- staff feel stressed due to increased workload
3.Can lower profits in the short term- may have to finance this- impact on gearing ratio
4. Business may find it harder to manage a larger portfolio- poor decision making-corporate image
Define “Profit maximisation”
When the difference between sales revenue and total costs is at its greatest.
Advantages of “Profit maximisation” as a business objective
1.It will force the firm to consider how it could increase sales and lower costs- become a more efficient organisation#
2.Improved staff motivation-benefit through profit sharing schemes-job security
3.Will have more retained profits-attract shareholders-less conflict
4. Increased profit will reduce debt and therefore gearing.
Disadvantages of profit maximisation as a business objective
- Can typically lead to cost cutting measures-reduced quality- customer dissatisfaction
2.Long periods of cost cutting can demotivate employees
3.Might charge higher prices to increase profits
Define “CSR” as a business objective
When a business’ main focus is having a duty to all its shareholders to do the right thing
Advantages of CSR
1.Attract customers-USP
2.Attract higher quality employees-improve quality
3.May qualify for grants
4.Can be used in the firms mission statement and therefore attract shareholders
Disadvantages of CSR
1.No guarantee it will attract customers, especially in times of economic uncertainty
2.Time consuming and costly-costs cannot be passed onto consumer
3.Stakeholder conflict-may affect profitability
Define “Corporate image”
The way people think of a firm
Advantages of a good corporate image
1.Attract customers if it is included in the mission statement
2.Can attract a quality workforce-better customer service
3.Can motivate employees to work hard and achieve targets
Disadvantages of corporate image
1.No guarantee to increase market share-possibility of having no media coverage or competitors copying
2.Can take time and money away from core business objectives-use up time and money-can’t pass savings onto customers
3.Stakeholder conflict may exist- Profit maximisation may not be achieved in the short term
