Chapter 5 Flashcards
Business objectives (profit, market share, survival) and stakeholders objectives (customers, banks, and government)
Business Objectives
are the aims or targets that a business works towards.
Profit
is the total income of a business (revenue) less total costs.
Market share
is the percentage of total market sales held by one brand or business.
Social enterprise
has social objectives as well as an aim to make a profit to reinvest back into the business.
stakeholder
is any person or group with direct interest in the performance and activities of a business.
benefits of setting objectives
- Give workers and managers a clear target
- Taking decisions will be focused
- Clear and measurable objectives
- Can compare business performance –successful or not?
different business objectives
- Business survival
- Profit
- Returns to shareholders
- Growth of business
- Market share
- Service to the community
what is survival
When a business has recently set up, or when economy is moving into recession, objective is survival.
New competitors can also make a business feel less secure.
The managers of a business threatened in this way could decide to lower prices in order to survive, even though this would lower the profit on each item sold.
why is profit important
When a business is owned by private individuals rather than government. This is when profit is the aim
* Pay a return to owners
* Provide finance for further investments
what are sharholders
oweners of limited companies
How are returns to shareholders increased
- Increasing profit
- Increasing share price
How is growth usually measured
- Sales
- Output- products produced
why is growth important
- Make jobs secure
- Increase salaries and status of employees
- Open up new possibilities like new product or new market
- Obtain higher market share
- Obtain cost advantage (economies of scale-the bigger the business is, more discounts given by suppliers)
how to calculate market share
Market share % = Company sales x 100
——————–
Total market sales
why is market share important
- Good publicity
- Increase influence over suppliers
- Increase influence over customers
what is a social interprise
- Social enterprises are operated by private individuals – they are in the private sector – but they do not just have profit as an objective.
- A social enterprise has social objectives as well as an aim to make a profit to reinvest back into the business.
social interprise’s objectives
- Social: to provide jobs and support for disadvantaged groups in society, such as the disabled or homeless.
- Environmental: to protect the environment.
- Financial: to make a profit to invest back into the social enterprise to expand the social work that it performs.
why business objectives could change
- A business set up recently has survived for three years and the owner now aims to work towards higher profit.
- A business has achieved 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.
main features of ‘owners’
internal
- They put capital in to set up and expand the business.
- They will take a share of the profits if the business succeeds.
- If the business does not attract enough customers, they may lose the money they invested.
- They are risk takers.
most likely objectives of ‘owners’
internal
- Share of the profits so that they gain a rate of return on the money put into the business.
- Growth of the business so that the value of their investment increases.
main features of ‘workers’
internal
- They are employed by the business.
- They have to follow the instructions of managers and may need training to do their work effectively.
- They may be employed on full- or part-time contracts and on a temporary or permanent basis.
- If there is not enough work for all workers, some may be made redundant (retrenchment) and told to leave the business.
most likely objectives of ‘workers’
internal
- Regular payment for their work.
- Contract of employment.
- Job security – workers do not want to look for new jobs frequently.
- Job that gives satisfaction and provides motivation.
main features of ‘managers’
internal
- They are also employees of the business and control the work of other workers.
- They take important decisions.
- Their successful decisions could lead to the business expanding.
- If they make poor decisions, the business could fail.
most likely objectives of ‘managers’
internal
- High salaries because of the important work they do.
- Job security - this depends on how successful they are.
- Growth of the business so that managers can control a bigger and better-known business. This gives them more status and power.
main features of ‘customers’
external
- They are important to every business. They buy the goods that the business produces or the services that the business provides.
- Without enough customers, a business will make losses and will eventually fail.
- The most successful businesses often find out what consumers want before making goods or providing services - this is called market research.
most likely objectives of ‘customers’
- safe and reliable products
- value for money
- well-designed products of good quality
- reliability of service and maintenance
main features of ‘government’
- It is responsible for the economy of the country.
- It passes laws to protect workers and consumers.
most likely objectives of ‘government’
- wants businesses to succeed in its country. Successful businesses will employ workers, pay taxes and increase the country’s output
- expects all firms to stay within the law - laws affect business activity
main features of ‘the whole community’
- The community is greatly affected by business activity. For example, dangerous products might harm the population. Factories can produce pollution that damages rivers, the sea and air quality.
- Businesses also create jobs and allow workers to raise their living standards. Many products are beneficial to the community, such as medicines or public transport.
most likely objectives of ‘the whole community’
- jobs for the working population
- production that does not damage the environment
- safe products that are socially responsible
main features of ‘banks’
- They provide finance for the business’s operations.
most likely objectives of ‘banks’
- expect the business to be able to pay interest and repay capital lent - business must remain liquid
Objectives of public sector businesses
- Financial-meet profit targets of government
- Service- provide a service to the public and meet quality targets
- Social- protect or create employment in certain areas
Conflict of Stakeholder Objectives
- Consumers –price and quality
- Community-environment/low pollution
- Workers- Jobs
- Directors-Growth
