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5

Business objectives and


stakeholder objectives
Revision answers
1 Targets set for the business by owners/managers.
2 i) Survival
ii) Profits
iii) Market share
3 Any two of:
i) Managers will know what is aimed for when taking decisions.
ii) Employees will have clearer sense of focus/direction.
iii) Managers able to assess level of success/failure of the business.
4 i) Higher profits are likely to result from a larger business.
ii) Owners are likely to earn higher income.
Other answers possible.
5 i) Profit can be used to reward the owners/investors for their risk in the
business.
ii) Profits will increase incomes of owners and can also be kept as a source of
finance for further business expansion.
6 i) Social objectives, for example, make public transport available in all areas at a
low price.
ii) Protect employment.
7 i) Customers
ii) Suppliers
iii) Creditors/lenders
8 i) Decision to introduce new technology production equipment: should increase
profits for shareholders but may lead to fewer jobs for
employees.
ii) Decision to open a new factory: more jobs will be available but local residents
might suffer from pollution.
9 a) They would lose their current jobs: there might be job vacancies in the new
shops but would they offer the same pay level?
b) Yes: the business is owned by shareholders and they have the right to expect
the business will operate for profit to increase their returns. They have the
ability to replace directors.
No: a business should also aim to meet social responsibility objectives. Failure
to be socially responsible could lead to lower profits in the long term.
Overall judgement/conclusion needed.
10 Students own answer.
There should be a clear conflict of interest between stakeholders as a result of
the decision.

Answers to activities
Activity 5.1
a) Builder: survival increased competition is a danger to the continued existence
of this business.
Computer firm: growth eager entrepreneurs in an expanding industry will
want to become owners/managers of an expanding business.
Publisher: market share to maintain market dominance.

Cambridge IGCSE Business Studies 4th edition Hodder & Stoughton Ltd 2013 1
5 Business objectives and stakeholder objectives

Social enterprise: social enterprise objectives, such as achieving clean water for a
certain number of communities each year without harming the environment but
also breaking even.
b) Builder: lower prices.
Computer firm: offer new innovative goods and services.
Publisher: take over other publishing firms (if not prevented by the
government).
Social enterprise: arrange poor communities to take out micro loans to pay for
clean water facilities.
Other answers possible.

Activity 5.2
a) It is a public limited company and shareholders will expect dividends each
year and stable or increasing share price, so returns to shareholders is
important. Shareholders can replace directors if they are not satisfied with their
performance.
b) Returns to owners can only be achieved by targeting other specific objectives
such as increasing value of sales to remain largest soft drinks business.
Protecting the environment meets social responsibility objectives and might help
raise profitability in the long term too.
c) Students own answer based on own country knowledge/experience. Higher/
lower prices? Change products or brand image? Develop these or other points
in own country context.

Activity 5.3
a) A group with an interest in the operations of the business
b) Developing new oil fields to increase sources of oil supply to try to keep prices
down for customers but this may conflict with the aims of environmental groups
or local communities where the drilling might take place.

Sample answers to exam-style


questions Paper 1
1 a) A (measurable) target for the business to aim for set by owners/managers.
b) i) Bank
ii) Customers
Other answers possible.
c) i) Survival: new, small business owned by Sunita and Sunil may not have had
much experience in this market.
ii) Break-even (at least) or profits: many competitors so break-even in first
year would be a reasonable objective for this business.
d) i) Having survived for some time, the owners now want to expand the
business as it seems to have been a successful business idea.
ii) The owners may have kept profits made over five years in the form of
savings and they now wish to use these to buy other shops/competitors in
order to gain market share.
e) It will make the business more likely to be successful: helps to give direction
to the owners and their decisions; can be communicated to employees and
this can be motivating; can assess progress against original objectives. Seem
to have helped S and S so far. But unlikely to guarantee success as, in
business, this can never be sure.
Overall conclusion/judgement needed.
Sample answers to Question 2 on the Teachers CD-ROM.

Cambridge IGCSE Business Studies 4th edition Hodder & Stoughton Ltd 2013 2