The meaning and purposes of business objectives

Business objectives represent the specific aims or targets that guide a company's activities and decisions.

Purposes of setting business objectives

• Providing clear targets - Objectives give employees specific goals to work towards.
• Measuring performance - They act as benchmarks, allowing businesses to compare actual results against planned targets.
• Unifying operations - Objectives ensure all parts of the business align towards common goals.

Key types of business objectives

Businesses pursue various objectives depending on their size, industry, and stage of development.

Main business objectives

• Survival - Essential for new businesses or during tough economic times.
• Profit - Involves generating revenue that exceeds costs, providing rewards for owners and funds for reinvestment.
• Growth - Aims to expand the business, often leading to larger operations and greater market presence.
• Market share - Seeks a larger portion of total market sales, offering advantages like better supplier deals.
• Shareholder returns - Focuses on delivering value to investors through dividends or rising share prices.
• Community service - Involves meeting social or environmental needs, sometimes alongside profit goals.

Objectives in different types of organisations

• Social enterprises - These businesses prioritise social aims, such as community support, while generating profit to reinvest in their operations.
• Public sector organisations - Objectives here include meeting government targets, maintaining financial efficiency, ensuring high service quality, and achieving positive social impacts.

Calculating market share

$\text{Market share (\%)}=\frac{\text{company sales}}{\text{total market sales}}\times 100$

Where:

• Company sales = Total sales value of the business (£)
• Total market sales = Combined sales value of all businesses in the market (£)

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Worked example - Calculating market share

A clothing retailer has sales of £360,000 in a market where total sales are £1,800,000. Calculate the retailer's market share.

Step 1: Identify the values

• Company sales = £360,000
• Total market sales = £1,800,000

Step 2: Apply the market share formula

$\text{Market share (\%)}=\frac{\pounds \mathrm{360,000}}{\pounds \mathrm{1,800,000}}\times 100$

Step 3: Calculate the market share

$\text{Market share (\%)}=0.20\times 100=20\%$

How business objectives change over time

Business objectives are not fixed; they evolve in response to internal developments or external pressures.

Reasons for changes in business objectives

• Business lifecycle stages - A new tech startup may initially focus on survival, then shift to growth and profit as it establishes itself.
• Economic conditions - During downturns, objectives might prioritise cost control over expansion.
• Market changes - Shifts in competition or customer needs can prompt a move from profit to increasing market share.
• External influences - Regulatory changes or social trends may lead to incorporating community service goals.

Internal and external stakeholders and their objectives

Stakeholders are individuals or groups with a direct interest in a business's performance. They can be internal (within the organisation) or external (outside it), each with specific objectives.

Internal stakeholders and their objectives

• Owners - Seek secure investments, steady profits, and business growth.
• Workers - Aim for job security, fair wages, and satisfying work conditions.
• Managers - Focus on competitive pay, opportunities for promotion, and professional development.

External stakeholders and their objectives

• Consumers - Want safe, high-quality products that offer good value.
• Banks - Require reliable loan repayments and evidence of financial stability.
• Suppliers - Expect regular orders and prompt payments.
• Government - Seeks tax contributions and adherence to laws.

Conflicts between stakeholder objectives

Stakeholder objectives can sometimes clash with each other or with the business's overall aims, requiring careful management to balance interests.

Examples of conflicts between stakeholders

• Owners vs workers - Owners may push for cost-cutting to boost profits, while workers seek higher pay, potentially leading to tension.
• Shareholders vs community - Shareholders might prioritise short-term dividends, conflicting with community demands for environmentally friendly practices.
• Consumers vs managers - Consumers want low prices, but managers may need to raise them to cover rising costs, though satisfied customers can benefit managers through repeat business.
• Business objectives vs stakeholders - A focus on maximum profit might overlook social goals important to the government or community.