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Chapter 5: Business objectives and stakeholders objectives

Objective: a statement of a specific target to be achieved.

1- Business objectives and how their importance can change

Every business needs to set objectives. This helps managers to produce a

plan or strategy to set out how objectives will be achieved. It should be
reviewed from time to time just to make sure its in tune with the target.

a- Businesses use usually SMART criteria to set objectives:

- Specific, Measurable, Achievable and agreed, Realistic and relevant,
Time bound.

b- Different business objectives

Objectives might differ among new and established business but the most
common are:

- Survival: to maintain existing for a long while based on profit and

- Profit: generating the greatest difference possible between revenue
and the total costs.
- Growth: expanding the size of the business in order to increase
output and benefit from economies of scale.
- Market share: the revenue of a business expressed as a
percentage of total market revenue.
- Corporate social responsibility: business taking responsibility for
the impact their activities might have on society and the
environment. This has become an important objective for businesses
as result of:
The role of trade unions, of government and laws;
The activity of pressure groups: organizations of like-minded
people who put pressure on business and government to change
their policies to reach a predetermined objective.

c- Objectives of social enterprises

Social enterprise: is a business with social objectives that

reinvests most of its profits back into the business or into benefiting
society at large.
- Objectives are like:
Benefits employees;
Relates to needs of local communities;
Relates to care of the environment.
2- The role of stakeholder groups

A stakeholder is an individual or group which has an interest in a business

because they are affected by its activities and decisions. There are two
types of stakeholders: internal and external.

The decisions and activities of a business may have positive or negative

effects on stakeholders. Stakeholders in turn have their own objectives
that they will want to achieve through their relationship with the business
in which they have an interest.

Internal stakeholders
Owners - To receive high
returns/dividends as reward
for risking their investment in
the business.
- To benefit from an increase in
share value.
Managers - To have a job satisfaction and
- To receive salary increase and
Employees - To have job security.
- To receive a fair wage that
reflects their contribution to
the businesss success.
External stakeholders
Lenders - To receive interest payments
when due.
- To have borrowing repaid by
the due date.
Suppliers - To receive prompt payment
for goods supplied on credit.
- To be treated fairly and not be
forced to reduce their prices
by businesses of strong
buying power.
Customers - To receive quality goods and
after sales service.
- To be charged a fair price
which gives value of money.
Government - To be paid the correct amount
of taxes on time.
- To have minimal spending on
unemployment benefits.
Local community - To receive benefits for the
local economy such as
employment and subsiding
community facilities.
- To avoid the negative impact
of business activities such as
noise, air and traffic pollution.

3- Objectives of public sector and private sector enterprises

Public sector organizations have very different aims and objectives from
those in the private sector. The services and facilities they provide must
be: accessible, affordable and open to all.

Some vocabulary: rentier economy, liquidity, non-current asset,

inventories, profit sharing schemes, trade unions, business plan.