Business Objectives - UB Flashcards
What is the definition of objectives?
An objective is a goal or target that a business has. They provide a focus for the organisation and its workforce to work towards over a period of time. They are important because they can be used to measure how successful and organisation is. An organisation will usually make its objectives public, e.g. on its website and in its mission statement.
What is a mission statement?
A mission statement sets out the vision and aims of an organisation.
What are the qualities of a mission statement?
- It can be used to inform customers about future plans the organisation has
- It can be used to raise the profit and image of the organisation and might attract media attention and, in the long run, potentially increase sales
- It will tell employees what it plans to do and they can think about how this would impact their own job
- Prospective employees might use it to see whether their own values match those of the organisation and whether or not they would fit in
What is the business objective: Survival?
To continue trading to exist. Other objectives would be pointless if the business did not exist
What is the business objective: Profit maximisation?
To have more income than costs. Most private sector businesses have this aim. Dividend payment to shareholders in a plc will be based on profit
Why would an organisation want profit maximisation? (6)
- Higher profits will attract more investment
- Seen as a sign of success for the business
- High prices “may” attract negative publicity
- Lowering costs can affect quality
- High profits may attract higher pay claims
- High profits may attract competition
What is the business objective: Customer satisfaction?
To make customers happy. To ensure customer loyalty and to encourage new customers.
What is the business objective: Market Leader?
To become the biggest business in a market. This will highlight the fact that the business has the greatest number of customers compared to competitors.
What is the business objective: Corporate Social Responsibility?
This might also be referred to as social responsibility or ethics. An organisation with this aim will behave in a responsible way; this might involve treating suppliers fairly and/or protecting the environment. Large organisations may have a code of conduct or a set of regulations that must be complied with if working with that organisation.
This objective is becoming more important in a modern world; people expect businesses to behave responsibly and, if they don’t, this will impact negatively on their image and customers would likely shop elsewhere.
Examples of Corporate social responsibility. (8)
- Making sure suppliers are paid fairly for what they product e.g. by adopting a fair trade policy
- Providing opportunities for employees to participate in physical activity and promoting healthy eating e.g. providing cycling facilities to get to work or providing healthy options in the canteen
- Paying staff living wage instead of minimum wage
- Ethical marketing
- Recycling to reduce waste
- Ensuring suppliers have the same standards
- Minimising packaging for customers
- Ensuring business process are not polluting
What is the business objective: Managerial Objectives?
Managers might have their own internal objectives. They might want to receive bonuses for achieving certain targets or other fringe benefits such as a company car. These objectives can be motivating to a manager but they might put their own objectives before the organisation’s.
Why might a business want to undertake the business objective: Growth? (5)
- To increase sales and profit which in turn will increase the return on investment for owners
- To increase the number of customers which will increase profits and market share, and may enable the organisation to become a market leader
- To take advantage of economies of scale, thereby reducing costs
- To reduce the risk of a takeover by another organisation
- To gain a better reputation in the marketplace which will encourage new customers to buy, thereby increasing sales and ultimately profit
