Unit 5: Business and Stakeholder’s objectives

Question 1

Business objectives

Answer 1

The aims or targets that businesses work towards.
• Advantages: give workers and managers a clear target to work towards, decisions will be focused on achieving the objective, help unite the whole business towards the same goal, managers can compare how the business has performed with their objectives.

Question 2

Common objectives:

Answer 2

• Business survival: when the business has recently been set up, when the economy is moving towards a recession or when there are new competitors, the business will be concerned in surviving more than anything else. It could decide to lower its prices in order to survive.
• Profit: in order to pay a return to the owners of the business for the capital invested and to provide finance for further investment. Businesses will aim for a satisfactory level of profit which doesn’t involve working too many hours or paying too much in tax to the government.
• Returns to shareholders: this is to discourage shareholders from selling their shares. Returns are increased by increasing profit therefore increasing the dividends, and by increasing share price making the business grow.
• Growth: to make jobs more secure, to increase the salaries and status of managers, to open up new possibilities and spread the risks by moving into new markets, to obtain a higher market share, and to obtain economies of scale.

Question 3

Market share

Answer 3

is the proportion of total market sales achieved by one business.
Market share % = (Company Sales / Total market sales) * 100

Question 4

Social enterprise

Answer 4

has social objectives and aims to make a profit to reinvest back into the business. They often have 3 objective (the Bottom line):
• Social: to provide jobs and support disadvantaged groups in society.
• Environmental: to protect the environment.
• Financial: to make a profit to invest back into the social enterprise and expand the social work.

Question 5

Why do business objectives change?

Answer 5

• A business that has survived for many years now want to work towards higher profit or growth.
• A business has achieved a higher market share and now wants to earn higher returns for shareholders.
• An economic recession forces a business to set survival as their objective.

Question 6

Stakeholder

Answer 6

any person or group with direct interest in the performance of a business. People that are affected by the business in any way. (Not to confuse with Shareholders)

Question 7

Objectives for each stakeholder group:

Answer 7

• Owners (internal): share of the profits so that they gain return, growth so that the value of their investment increases.
• Workers (internal): regular payment, contract of employment, job security, satisfaction and motivation
• Managers (internal): high salaries for their important work, job security, growth because it gives them more status and power.
• Customers (external): safe and reliable products, value for money, good quality, reliability of service.
• Government (external): wants business to succeed in their country and wants them to say within the law.
• Whole community (external): jobs for working population, production that doesn’t change the environment, socially-responsible products.
• Banks (external): expect the business to be able to pay interest and repay the lent.

Question 8

Objectives of public sector businesses

Answer 8

• Financial: meet the profit targets set by the government to reinvest it back in the business or to keep it.
• Service: provide a service to the public such as health services or education.
• Social: protect or create employment in certain areas, especially on poor regions.