Business objectives

Question 1

What is a business objective?

Answer 1

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.

Question 2

What are smart goals?

Answer 2

Specific 
Measurable 
Achievable
Realistic
Timely

Question 3

Explain survival as a business objective.

Answer 3

The business in the first year may just have survival as the objective while it builds a customer base and establishes itself in the market.

The objective is to reach a sustainable level of sales that allows the business to reach its break-even point.

This may involve penetration pricing of products or services at the outset to establish the business. This means low prices to persuade customers to switch from their usual brand or supplier

This may not mean much profit in the first instance, but when the business starts to grow it will be able to comfortably raise prices to the optimal level

Question 4

Explain profit maximisation as a business objective.

Answer 4

The aim of most businesses, because it will give them the capital needed to expand and to grow the business

In the short-term survival through good cash flow management is more important than profit maximisation

Question 5

What objectives other than survival or profit maximisation might a business have?

Answer 5

sales maximisation
market share
cost efficiency
employee welfare
customer satisfaction
social objectives

Question 6

Explain sales maximisation as a business objective.

Answer 6

Some businesses may set their objective as sales maximisation. Unlike profit figures which are annual, sales figures can be examined daily and can be an indicator of performance.

Question 7

Explain market share as a business objective.

Answer 7

Market share is the % of a market that a business has, either in revenue or in units sold and may be an objective in a very competitive market where consumers switch between suppliers. It is used by investors to judge how a business is doing against competitors.

Question 8

Explain cost efficiency as a business objective.

Answer 8

Cost efficiency can be achieved by:
Paying minimum wage to unskilled workers
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

Question 9

Explain employee welfare as a business objective.

Answer 9

Some businesses seek the harmonious relations with their workforce as an objective, and they aim to achieve this through employee welfare. This can be external (medical insurance) or internal (canteen).

Employees that are satisfied are loyal and hard working, they have increased morale, motivation and productivity,

Question 10

Explain customer satisfaction as a business objective.

Answer 10

Businesses who follow this objective wills seek 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

Question 11

Explain social objectives as a business objective.

Answer 11

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
Helping society 
Compliance with laws to minimise externalities like operating sensible hours so not as to noise pollute the local community