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Business Objectives

Lecturer: Mr Kiranpal Singh (QIUP)

Copyright 2002 by Harcourt, Inc. All rights reserved.

LEARNING GOALS

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5.

Key learning goals:


This topic will discuss the six major types of business
objective and explain why businesses may consider them
to be important.
State the definition and importance of business
objectives.
Explain the six major types of business objectives.
State in what circumstances businesses may consider
survival to be an important objective
Please list at least 5 examples of managerial objectives.
Tell why a business might pursue growth as an important
objective.

Copyright 2002 by Harcourt, Inc. All rights reserved.

Business Objectives
-Definition

Business objectives are the goals of business


what the business wants to achieve. All businesses
have their own objectives.
Different stakeholders or shareholders (people
who have some financial interest in the business)
may have different objectives in the business. For
example, the owners of the business may consider
making profit to be an important objective. But
employees may regard job security, good working
condition, and good reward as their important
objective.
Copyright 2002 by Harcourt, Inc. All rights reserved.

Business Objectives
-Importance

It is of great importance for a business to


have well-defined objectives. These
objectives will help the business to be clear
about what it wants to achieve or where it
wants to go.
With objectives, the performance of a
business can be assessed according to a
standard, that is to say, how effectively the
business has achieved its objectives.
Copyright 2002 by Harcourt, Inc. All rights reserved.

Business Objectives
-Major Types

1.
2.
3.
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5.
6.

There are six major types of business


objectives:
Survival,
Profit Maximization,
Growth,
Managerial Objectives,
Sales Revenue Maximization,
Image and Social responsibility.
Copyright 2002 by Harcourt, Inc. All rights reserved.

Business Objectives
-Survival

Objective of survival:
Survival objective is essential for any business in that no
survival means no today and no future.
Circumstances for a business to consider survival to be
important can be seen in the following table:

Copyright 2002 by Harcourt, Inc. All rights reserved.

Business Objectives
-Survival
Table 3-2 Circumstances for a business to consider survival
to be an important objective
Brief explanation

When
1) In the early stages of
trading

During such stages, businesses may face many


problems because they may lack experience and
resources, or they may meet with strong
competition from existing companies.

2) When trading becomes


difficult

During such periods, a business may face falling


demand for their products, bad debts, or low
confidence for its future.

3) when there is danger of


take-over

In case of the threat of being taken over by


another firm, survival may be the main
objective. Otherwise, the business may be a
business owned by some one else,

Copyright 2002 by Harcourt, Inc. All rights reserved.

Business Objectives
-Profit Maximization

Definition:
Profit maximization means increasing profit as
much as possible or producing a level of output
which brings the most profit for the business.
Usually, the main objective of a private sector
business may be to maximize its profits.
However, things may be different for a public
sector business. The main objective of a public
sector business may be to supply the best service
in the past, although nowadays, they are offering
services in a more and more business like way.
Copyright 2002 by Harcourt, Inc. All rights reserved.

Business Objectives
-Profit Maximization

Balance between short term and long term


profit maximization:
A business may sometimes sacrifice short-term
profit maximization for long-term profit
maximization.
Possible reasons why a business might sacrifice
short-term profit maximization for long-term
ones are, for example, lowering the price to
build a market share and increase it when
possible or operating a short term at loss to wait
for the pick-up of sales in the future.
Copyright 2002 by Harcourt, Inc. All rights reserved.

Business Objectives
-Objective of Growth

Definition:
Growth objective may refer to the goal of
a business to become larger, stronger or
more competitive.
Many businesses regard growth as their
main objectives. There are some reasons
why businesses must choose growth as an
important objective. Possible reasons are
listed in the following table:
Copyright 2002 by Harcourt, Inc. All rights reserved.

Business Objectives
-Objective of Growth

Possible reasons for a business to regard


growth as an objective:

1.
2.

To survive, no growth may mean final death.


To introduce new products in order to meet customer
changing needs.
To reduce risks of business: In fierce competition, if a
business can not become strong enough, it is more likely
to be eaten up by other stronger competitors.
To have low costs and more profits on a larger scale
(economy of scale).
To make employees, managers, and owners all feel
happy and secure

3.
4.
5.

Copyright 2002 by Harcourt, Inc. All rights reserved.

Business Objectives
-Objective of Growth

Possible reasons for a business to regard


growth as an objective:

1.
2.

To survive, no growth may mean final death.


To introduce new products in order to meet customer
changing needs.
To reduce risks of business: In fierce competition, if a
business can not become strong enough, it is more likely
to be eaten up by other stronger competitors.
To have low costs and more profits on a larger scale
(economy of scale).
To make employees, managers, and owners all feel
happy and secure

3.
4.
5.

Copyright 2002 by Harcourt, Inc. All rights reserved.

Business Objectives
-Objective of Growth

Question for your critical thinking:


Why and how do you think the growth of a
business may make its employees, managers and
owners all feel happy and secure?

Copyright 2002 by Harcourt, Inc. All rights reserved.

Business Objectives
-Managerial Objectives

Definition:
The managers own objectives in the business.
Importance:
As we know, the owners of the business do not
usually control the day to day running of the
business. It is the management that control and
run the company according to their own
objectives and the owners strategic decisions.
Common examples of managerial objectives are
seen in the following table:
Copyright 2002 by Harcourt, Inc. All rights reserved.

Business Objectives
-Managerial Objectives
Table 3-4 Examples of managerial objectives
Some common examples of managerial objectives:
Maximize their departmental budgets
Maximize number of employees under their control or in their charge
Maximize their personal benefits such as entertainment expenses or
company cars
Maximize their leisure or free time
Maximize their personal salary
Delegate as much work as possible
Improve their social status or position

Copyright 2002 by Harcourt, Inc. All rights reserved.

Business Objectives
-Managerial Objectives
Examples of managerial objectives
Questions for your critical thinking:
1) Why do managers need to work hard themselves ?
2) Please tell what delegate work means.

Copyright 2002 by Harcourt, Inc. All rights reserved.

Business Objectives
-Sales Revenue Maximization

Reasons:
1. Sometimes, when managers and employees are
2.

paid according to their sales revenues rather than


the created profit, sales revenue maximization
may become the main objective of the business.
The business wants to enlarge the market share
first and then benefits in the long run.
Shortcomings:
This may be a shortcoming for a business. Profit
maximization for a business should be more
important than sales revenue maximization in
whatever situations.
Copyright 2002 by Harcourt, Inc. All rights reserved.

Business Objectives
-Image and Social Responsibility

Social Responsibility definition: management


philosophy that highlights the social and economic
effects of managerial decisions. Or the managements
acceptance of the obligation to consider profit,
consumer satisfaction, and societal well-being of
equal value in evaluating the firms performance.
Image and social responsibility have become more
and more important objectives of businesses. There
are some reasons why businesses must consider
image and social responsibility to be their objectives,
which are illustrated in the following table:
Copyright 2002 by Harcourt, Inc. All rights reserved.

Table 3-5 Possible reasons for a businesses to pursue


image and social responsibility as its objectives
Brief Explanations

Possible Reasons
1) Government legislation

Many laws have been passed to protect workers


health and safety, reduce discrimination against
disabled workers and protect the environment.

2) Competitive pressure

Increasing competition has become a challenge for


modern businesses. If customers think badly of a
business, then the business is finished. The
businesss market share will be taken over by other
companies.

3) Benefits for the business

Good image may mean more sales and more profit.


A company can benefit a lot if it has a good relation
with its suppliers. Reliable supply of raw materials
is key to production.

4) Sustainable development

Paying attention to image and social responsibility


is key to long term development.

Copyright 2002 by Harcourt, Inc. All rights reserved.

Business Objectives
-Four Types of Business Social
Responsibility

Copyright 2002 by Harcourt, Inc. All rights reserved.

Business Objectives
-Image and Social Responsibility

Question for your critical thinking:


Discuss and give some examples for each of
the four business social responsibilities in the
above diagram.

Copyright 2002 by Harcourt, Inc. All rights reserved.