Unit 1 - Business Activity and Influences on Business (Business Objectives)) Flashcards
The Importance of Clear Objectives
More likely to be successful if they have set clear objectives. Needed for the following reasons:
- Employees need motivation and something to work towards.
- Without objectives, owners may not have the motivation to keep a business going.
- Help to decide where to take the business and what steps necessary to get there.
- Easier to assess performance of business if objectives are set.
Financial Objectives
Private Sector - individuals or groups of individuals want to make a profit. Main financial aims and objectives:
- Survival
- Profit
- Sales
- Increase Market Share
- Financial Security
Survival
May be considered an important objective - mainly to people starting a business and/or for businesses surviving the competition.
Profit
Owners want financial return so they strive to maximise profits.
Shareholders may demand or expect large dividends so companies need to make profits.
Sales
Some owners want to grow their businesses so they can enjoy a number of benefits (lower costs, market share, higher public profile, generate wealth for owners).
Increase Market Share
- Win customers from competitors
- Will be able to dominate the market
- Charge higher prices leading to larger profits
- Big business easier to launch new products
Financial Security
Some businesses do not aim for profit maximisation - rather seek financial security. Don’t want to take on extra responsibility of expanding their business.
Some entrepreneurs run a lifestyle business.
Non-Financial Objectives
Could depend on nature of the business (some could have both financial and non-financial objectives) such as:
- Social Objectives
- Personal Satisfaction
- Challenge
- Independence and Control
Social Objectives
Public sector (government owned) designed to help human well-being. Objectives linked to quality of service and reducing costs.
Not-for-Profit (Charities and Cooperatives) aim to improve human and environmental well-being with clear mission.
Improve social responsibility - take into account wider range of stakeholders e.g. customers, local community. Objectives would be providing local employment, reducing pollution, making contributions to local community.
Personal Satisfaction
Owners think they would be happier and more satisfied in own environment than working for an employer.
Some owners have developed their own interests into a business e.g. Personal Trainer.
Satisfying and a matter of great pride.
Challenge
Motivation for the owner(s) is to achieve a challenge. To be successful need to be committed, multi-talented and hardworking.
Independence and Control
Be your own boss and in control - non-financial objective. Independence and taking control of own future - key point of being an entrepreneur.
Some people dislike being told what to do at work.
Why might Objectives change as Businesses evolve
As business develops and evolves aims and objectives likely to change because businesses have to respond to events or changes in circumstances. For example:
- Market Conditions
- Technology
- Performance
- Legislation
- Internal Reasons
Market Conditions
Businesses operate in dynamic markets - new entrants, a rival introducing new products, economy starts to decline.
May then be necessary to set new objectives.
Technology
As pace of technological development increases businesses may need to adjust their objectives. May be pressure to reduce costs or achieve economies of scale.
