Flashcards: https://knowt.io/flashcards/d9557691-1124-452b-9c3d-25c4b793b27b

Business objectives

A business objective is a specific goal or aim that a business is striving to achieve.

These objectives will provide the business with direction, purpose and motivation and increase their chances of being successful.

Explain what each of these objectives entail:

To make a profit

Profit is the amount of money that is left over when a business subtracts its expenses from its revenues.

To increase market share

Market share refers to the number of sales a business has when compared to its competitors who are selling a similar product or service. It is usually represented as a percentage figure.

Explain what is meant by these terms and provide an example to support your explanation:

To improve efficiency:

Efficiency refers to how well a business is able to utilise its resources (natural, labour & capital). Businesses are continually looking for ways to improve efficiency as this will translate into reduced waste, costs savings and improved productivity.

Examples of how businesses can improve efficiency:

• Implementing new technology

• Training staff to become more skilful/knowledgeable in their job

• Implementing quality improvement strategies

To improve effectiveness:

Effectiveness refers to how successful a business has been in achieving its stated objectives.
It is therefore used as an overarching measurement of how well a business has gone when actual performance is compared against forecasted:

• Increase profit by 15% Yes / No

• Reduce the number of customer complaints by 5% Yes / No

• Reduce waste by 8% Yes / No

If a business has hasn’t been effective in achieving its stated
goals (more No’s than Yes’s) it will look change what it is doing.

To fulfil a market need:

To fulfil a market need refers to a business’s ability to meet/satisfy the needs and wants of customers.

An example of a business being able to fulfil a market need is Toyota. A car’s main purpose is to get its occupants from A to B safely and quickly. But Toyota has realised that in order to satisfy the needs and wants of customers (aka to fulfil a market need) it will need to provide a number of different makes and models to do this e.g.:

To fulfil a social need:

To fulfil a social need implies that as result of a business’s activities they are helping to improve society in some way shape or form.

An example of this is the business ThankYou Water. As a positive consequence of selling bottled water, they donate a portion of their profits to water sanitation projects (e.g. clean drinking water initiatives) in developing countries.

To meet shareholder expectations:

Shareholders are part owners of public and private companies.
Their expectations are that as a result of investing in a particular business they will see a return on their investment through way of profit distribution (dividends) and capital
growth. Therefore, they would expect that a business operates profitably, operates in accordance with the law, demonstrates corporate social responsibility etc. in order to meet these expectations.

Particular so with public listed companies, that can have tens of thousands of shareholders, meeting shareholder expectations can be a challenging thing to do.
As a starting point, shareholders will have the expectation that as a result of investing in a particular business they will see a return on their investment through way of profit distribution (dividends) and capital growth.
BUT…a business will need to balance these financial expectations with other expectations shareholders may have:

• operating in accordance with the law

• minimising the business’s impact on the environment

• treatment of employees