2: Business Objectives
Businesses need to have objectives for:
- Employees work towards something and it helps motivate them.
- Owners may allow their businesses to drift without a clear objective which may result in business failure
- Objectives help to decide where to take a business and what steps are necessary to get there
- It helps assess the performance of a business if objectives are set.
Financial Objectives:
Survival: All businesses will consider survival as important and sometimes the most important objective. The survival of a business might be threatened when trading conditions become difficult or if a strong competitor emerges.
Profit: Most businesses aim to make profit because their owners want a financial return. Soe businesses try to reach profit maximisation.
Sales: Businesses with large volumes of sales may enjoy lower costs, have large market share, enjoy a higher public profile and generate more wealth for the owners. The growth of business might also benefit a wide range of stakeholders linked to the business.
Increase market share: They are able to increase market share if they can win customers from competitors and then they can be able to dominate the market.
Financial Security: Many business owners aim to make enough profit to give them financial security (profit satisficing).
Non-financial Objectives:
Social Objectives:
In the public sector, the objectives are designed to improve human well-being. Most businesses aim to provide a public service and the objectives will be linked to quality of service and reducing costs. And some non-profit organisations like charities aim to improve human and environmental well-being.
Personal Satisfaction:
Many people set up their own business as they will feel they will be happier working independently instead of working for an employer. Some take risks to see their idea develop and some owners like to see their hobbies develop into a business which brings personal satisfaction.
Challenge:
Some people start up businesses for the challenge and motivate them to develop skills like being committed, hard working and multi-skilled as a challenge to make the business successful and later on they receive more challenges in keeping it up to motivate them.
Independence and control:
These are entrepreneurs that are driven by the desire to be independent and in control of their own future. The freedom to make all decisions is very appealing to many people than working for an employer.
SMART objectives:
Specific - stating clearly what is to be achieved
Measurable - an outcome that can be measured in numbers
Achievable - possible to complete by the people involved \n Realistic - able to be achieved with the resources available
Time specific - stating a period of time to achieve it in
\n Why might objectives change as businesses evolve?
Market Conditions:
Businesses operate in dynamic markets. So when new changes happen in the market, like a new rival or the economy starts to decline, It is necessary for the business to set new objectives.
Technology:
As the pace of technological change increases businesses may have to adjust their objectives. A business may introduce new technology that changes the business and may want to exploit the economies of scale. Or they might start e-commerce.
Performance:
The performance of a business can not stay constant. Periods of sustained profitability may be interrupted by less successful periods. As the performance levels of a business changes, they might have to set new ones in order to manage with its performance.
Legislation:
New laws and legislation might impact a business’s objectives. In recent years, businesses had to become more socially responsible. This might be a reaction to new environmental, employment or consumer legislation. New legislation pressures businesses to become considerate to the wider community.
Internal reasons:
Sometimes businesses can change their objectives for internal reasons like a new ownership or management.