Business Objectives and Stakeholder Objectives (Chapter 5). Flashcards
Importance of Setting Business Objectives. Business Objective Definition. Objectives for Businesses in the Private Sector. Survival. Profit. Return to shareholders. Growth. Market Share. Providing a service to the Community. Social Enterprise. Why business objectives could change. The main internal and external stakeholder groups and their objectives. Stakeholder Definition. Main features of Owners, workers, managers, customers, government, the whole community, and banks.
Define business objectives.
Business objectives are the aims or targets that a business works towards.
What are the benefits of setting objectives? (4 benefits)
- Motivates workers and gives workers and managers a clear target to work towards.
- Business manager can compare how the business has preformed to their objectives.
- Clear and measurable objectives help unite the whole business towards the same goal.
- Taking decisions will be focused on: ‘Will it help achieve our objectives?’
What are the most common objectives for businesses in the private sector are to achieve:
- Business survival.
- Profit.
- Returns to shareholders.
- Growth of the business.
- Market share.
- Service to the community.
Define profit.
Profit is the total income of a business [revenue] less total costs.
What are profits needed for?
- To pay a return to the owners of the business for the capital invested and the risk taken.
- To provide finance for further investment in the business.
Why would the owners of a business aim for a satisfactory level of profits?
The owners of a business aim for a satisfactory level of profits which will avoid them having to work too many hours or pay too much in tax to the government.
Why would a business set increasing returns to shareholders as an objective?
This is to discourage shareholders from selling their shares and helps managers keep their jobs.
How are returns to shareholder increased? (2 ways).
- Increasing profit and the share of profit paid to shareholders as dividends.
- Increasing share price.
How can managers increase share price?
Managers can try to achieve this by putting plans in place that give the business a good chance of growth and higher profits in the future.
The owners and managers of the business may aim for growth in the size of the business in order to: (5).
- make jobs more secure if the business is larger.
- increase the salaries and status of managers as the business expands.
- open up new possibilities and help to spread the risks of the business by moving into new products and new markets.
- obtain a higher market share from growth in sales.
- obtain cost advantages.
Why is it important to put meeting customers’ needs as a very high priority?
Growth will be achieved only if the business’s customers are satisfied with the products or services being provided.
Define Market share.
Market share is the percentage of total market sales held by one brand or business.
What is the formula for market share?
Market share % = company sale/total market sales x 100
What three things does increased market share give a business?
- Good publicity.
- Increased influence over suppliers.
- Increased influence over customers.
What is a social enterprise?
A social enterprise has social objectives as well as an aim to make a profit to reinvest back into the business.
Who operates social enterprises?
Social are operated by private individuals.
People operating the social enterprise often set three objectives for their business:
- Social: To provide jobs and support for disadvantaged groups in society (homeless or disabled).
- Environment: To protect the environment.
- Financial: To make a profit to invest back into the social enterprise to expand the social work that it performs.
Give three examples of situations in which a business might change its objective:
- A business set up recently has survived for three years and the owner now aims to work towards higher profit.
- A business has achieved a higher market share and now has the objective of earning higher returns for shareholders.
- A profit-making business operates in a country facing a serious economic recession so now has the short-term objective of survival.
The following groups of people are involved in business activity in one way or another or are affected by it:
- Owners.
- Workers.
- Managers.
- Consumers.
- Government.
- The whole community.
- Banks.
NOTE - These groups are sometimes called the stakeholders.
Some of these groups are internal to the business - they work for/own it.
Some of these groups are external to the business - they are groups outside of the
business.
What is a stakeholder?
A stakeholder is any person or group with a direct interest in the performance and activities of a business.
Main features of Owners [Internal] (4).
- Invest capital to set up and expand the business.
- They will take a share of the profits if the business is successful.
- If the business does not succeed, they may lose the money they invested.
- They are risk-takers.
Main features of Workers [Internal] (4).
- They are employed by a business.
- They have to follow the instructions of managers/ May need training to work effectively.
- Many be employed on full/part-time contracts and on a temporary/permanent basis.
- If there is not enough work for all workers, some may be retrenched.
Main features of Managers [Internal].
- They take important decisions.
- If they make successful decisions, the business could expand.
- If they make poor decisions, the business could fail.
- They are employees of a business and control the work of other workers.
Main features of Customers [External] (3).
- Without customers, a business will make a loss and eventually fail.
- The most successful business often find out what consumers want before making good or providing services (market research).
- Customers are important to business because they buy goods or pay for services.
