Business objectives Flashcards
What is Survival
Survival involves keeping a business operating for a certain amount of time, such as its first year of operation
Survival is also a key focus during periods of challenging business conditions or when strong competition emerges
Profit
Profit is the difference between the total sales revenue and the total costs of the business
Profit can be reinvested into a business or shared with business owners as a reward for risking their investment
Profit maximization involves making as much profit as possible
Sales
Selling increasing volumes of products can help a business to increase its market share
High sales can also increase awareness of a business and its brands
Large-scale businesses often benefit from lower average unit costs
Market Share
Market share is the proportion of a market controlled by a particular company, brand or product
Businesses with high market share can dominate the market and become well-known
Market leaders may be able to charge higher prices than rivals and make more profit
Financial Security
Business owners may simply want to earn a living from the risk and effort they put in
Satisficing may be enough for a business owner to pursue a desired lifestyle
What is Satisficing
A decision-making strategy that aims for a satisfactory or adequate result, rather than the optimal solution
What are non-financial objectives
Non-financial objectives are targets that are not directly connected to making money
Social
Providing a reliable, high-quality service to a particular community is the focus of many public sector organization
Charities and cooperatives are often focused on improving human well-being or the environment
Personal Satisfaction
Achieving success by doing something enjoyable can be satisfying for business owners
Spotting an opportunity and pursuing it as a business can be a matter of great pride
Challenge
Using and developing skills can present interesting challenges
Some business owners love solving problems or enjoy seeing the results of hard work
Independence & control
Independence to make their own decisions can be a key motivator for entrepreneurs
A business owner may want to control their own time and business direction without interference from others
Changes in Business Objectives
Business objectives can change due to factors like:
Business growth or downsizing
New competitors or market conditions
Changes in consumer demand
Technological advances
Economic conditions (e.g. recession or boom)
Change in ownership or leadership
These changes help the business stay competitive, relevant, and sustainable.
Internal Factors
A new leader or manager may set challenging targets or implement their preferred social objectives
Business performance can require a change in objective
E.g. A business that has succeeded in becoming the market leader may now decide to focus on maximizing profit
External factors
Marketing conditions
Technology
Legislation
Marketing conditions
Market conditions include the level of competition in a market and its rate of growth
Increased competition may prompt a change in objective from maximising profit to maintaining market share
In fast-growth markets businesses are likely to pursue objectives of maximizing sales and profits
Technology
New production technology may support a profit maximisation objective as manufacturing costs are likely to fall as output rises
Improvements in e-commerce software may help increase sales
Investment in robots could allow manufacturing businesses to improve working conditions for their employees
Legislation
Legislation refers to laws or regulations that compel individuals or organisations to behave in a desired way
New laws may increase business costs and force the firm to focus on increasing sales volumes
