Chapter 21- Business Objectives

Question 1

Aims

Answer 1

What a business tries to achieve in the long term

Question 2

Objectives

Answer 2

The goals or objectives set by a business to achieve its aims
- Employees need something to work towards – objectives help
motivate people

• Without objectives owners might not have the motivation needed to
  keep the business going – owners might lose grip and allow their
  business to ‘drift’ – this could result in business failure

Question 3

Sales Maximisation

Answer 3

An attempt to sell as much as possible in a given time period

Question 4

7 Business objectives factors

Answer 4

• Survive
• Profit maximisation
• Sales maximisation
• Market share
• Cost efficiency
• Employee welfare
• Customer satisfaction

Question 5

Survive

Answer 5

It often takes time for people to recognise the existence of a new business – Entrepreneurs may lack experience and there may be a shortage of recourses – therefore a target of a new business may be simply to survive In the first 12 months e.g. British Airways between 2008-2013

Question 6

Profit maximisation

Answer 6

Without profit most businesses would not exist – some businesses focus on making as much profit as possible – this is called profit maximisation – this might be more likely if businesses are owned by institutional shareholders, such as pension funds and investment funds – these owners need to maximise the returns on their investments to meet the needs of their clients.

Question 7

Sales maximisation

Answer 7

Some entrepreneurs might try to increase sales as an objective – this is called sales maximisation – it involves a business selling as much as it possible can in a particular period of time

Question 8

Market share

Answer 8

Most businesses would prefer a large market share than a small one – consequently trying to increase market share is a common business objective

– if a business can get a larger market share this should help to increase revenue and raise the profile of the business in the market, if a business can build a bigger market share than its rivals, it may be able to dominate the market.

Question 9

Cost efficiency

Answer 9

From time to time the business may consider how to reduce their costs – it is an objective that might be pursued when trading conditions become difficult due to competition or an economic downturn – however, some businesses look to cut costs all of the time – if costs are lower – profit margins will be higher

• Lay off staff to cut labour costs
• Find new suppliers to get cheaper recourses
• Increase the usage of recycled materials
• Develop new working practices that use fewer recourses
• Develop ways of saving energy

Question 10

Employee welfare

Answer 10

In recent years a number of businesses have realised the benefits of meeting the needs of employees more effectively – if employee welfare is improved workers will be happier, better motivated, more productive, more co-operative, more flexible and less likely to leave

Question 11

Customer satisfaction

Answer 11

If customers are satisfied they are more likely to return – loyal customers are valuable to a business – in order to win loyalty a company may ensure that customer-facing staff are well trained

– they may provide a customer feedback online review system – deal with customer complains promptly and effectively