A goal is a desired outcome that an individual or business intends to achieve within a certain time frame.
Businesses use the S.M.A.R.T technique in setting goals:
S- SPECIFIC
M- MEASURABLE
A- ACHIEVABLE
R- REALISTIC
T- TIME BOUND
SMART Goals
Specific: Goals should be clear and focused. For example, 'obtain 500 new customers in the market'.
Measurable: Goals should be quantifiable (i.e., they should contain numbers to allow the business owner to know whether or not they are on track).
Attainable: Goals should be challenging but realistic. An attainable goal will usually address the question, 'How can the goal be accomplished?'
Relevant: Goals should be worthwhile, support other goals, and be based on current conditions in the market.
Time-bound: A deadline or time limit should be set.
Common Business Goals
Profits
Market share
Growth
Share price
Social
Environmental
Maximise Profits
A major indicator of a business's success is the size of its profit.
Only profitable businesses survive in the marketplace in the medium to long term.
Profit maximisation occurs when there is a maximum difference between total revenue (number of sales x by the price) coming into the business and total costs being paid out by the business.
Ways of maximising profits:
Increase sales by lowering the price to increase the amount consumers buy.
Increase sales through a well-targeted marketing campaign.
Creating more innovative products or delivering better services
Profit Maximisation Equation
Profit=TR−TC
Maximum profit = TR at maximum difference from TC
Where:
Total Revenue (TR) = Total sales × Price
Total Cost (TC) = total expenses incurred in operating the business
Calculating Maximising Profits
Joe Briggs Building
Joe constructs and sells 6 houses per year at a cost of $550000.00 each.
Costs: Labour - $1.2m, Materials - $1m, Insurance - $23000.00, Council development applications - $11500.00
Kingroy Angus Beef Stud
The owner of Kingroy Angus Beef Stud sells 50 head of cattle each week to a local feedlot.
Each cow sells for $1200.00.
Costs: Purchase price - $600.00, Drench - $23 per cow, Supplementary feed - $500, Ear tags - $1.50 per cow, Transport - $200 each way per 50 head of cattle
Profit Maximisation:
Total Sales X price = Total Revenue (TR)
Total expenses incurred in operating the business = Total costs (TC)
Profit = TR - TC
Maximum profit = TR at maximum difference from TC
Market Share
Market share refers to the business’ share of the total industry sales for a particular product or service.
In most industries, market share is usually a goal for only large businesses.
Such businesses often develop an extensive product range, using many different brand names to gain an extra few percentage points of market share.
Growth
Growth can be either internal or external.
Internal growth could involve employing more people, increasing sales, introducing innovative products, purchasing new equipment or establishing more outlets.
External growth is achieved by merging or acquiring other businesses. A merger occurs when two businesses join together to become one. Expansion can also take place through acquisition.
Need to:
Avoid the added pressures of expansion
Keep control over the business’ operation
Maintain personal contact with the customer.
Improve Share Price
A share is a part ownership of a public company. Shareholders therefore are the real owners of companies, not the management team.
Two reasons to buy shares:
Purchase shares in the hope of selling at a higher price.
Owning shares in a company entitles an investor to a part of the company’s profits, which is distributed in the form of a dividend.
For a company to be successful they need to maximise the returns of their shareholders.
Achieved through keeping the share price rising-constantly improving the share price-and paying back healthy dividends.
Businesses must be aware that they operate within a wider community that expects corporations to act ethically.
These requirements are embodied in companies legislation and are subject to strict compliance law.
Social Goals
All businesses operate within a community and have social responsibilities.
Many businesses develop social goals and adopt strategies that will benefit the community, while achieving financial goals.
Social goals:
Community Service
Provision of employment
Social Justice
Environmental Goals
People & businesses are becoming environmentally aware:
considering long term consequences
adapting to changes in order to sustain the environment
Processes to sustain the environment:
“recycle, renew, regenerate”.
environmentally friendly or ‘green’ attitudes.
Sustainable development
A balance between economic & environmental concerns.
Eg: Economic growth should not occur at the expense of polluting the air’.
When needs of the present population are met w/o endangering the ability of future generation.
Achieving a Mix of Business Goals
Businesses do not generally have only one specific goal; they have a range of goals because they have different stakeholders who each have different needs.
Managers therefore have a mix of goals that they try to achieve simultaneously.
Sometimes it can be difficult for a business to achieve all of its goals simultaneously because the links between the goals make some of them incompatible; that is, they conflict with each other.
Such a situation will force a business owner into deciding to adopt a compromised position — a trade off between conflicting goals.
A business owner may face the dilemma of having to choose whether to maximise profits or increase market share. It is sometimes a difficult decision that has many nuances.
Triple bottom line: is the economic, environmental and social performance of a business
Staff Involvement
All businesses should recognise the importance of:
Mentoring
Motivation
Training
Innovation
Innovation
Innovation occurs when a new idea is applied to improving an existing product or idea.
Businesses should encourage an innovative business culture by recognising and encouraging one of the most important sources of ideas - its employees.
Practices to help engage in staff innovation:
Rewards
Do not micromanage or control staff
Provide sufficient financial management, human and time resources to achieve goals
Not fearing mistakes
Use techniques such as brainstorming to encourage ideas.
Motivation
Motivation refers to the individuals, internal process that directs, energises and sustains a person’s behaviour.
Motivation drives a person to behave in a certain way to achieve a certain goal.
Mentoring
Mentoring is the process of developing another individual by offering tutoring, coaching and modelling acceptable behaviour.
Benefits of mentoring:
It ensures access to mentors for all employees, regardless of levels of experience, background etc.
The participants in the mentoring relationship know what is expected of them. This is the beneficial for new employees as it assists with their transition into the workplace.
It assists with the training and development of all employees and passes on the skills and abilities of the more experiences staff members.
It provides career and psychological support, a friend and counsellor, for experiences employees as well as allowing mentors to develop their interpersonal skills and provide a sense of satisfaction.
It increases the possibility of skill transfer.
Training
Training refers to the process of teaching staff how to perform their job more efficiently and effectively by boosting their knowledge and skills. Therefore, the goal of training is to improve employee productivity.
Training allows employees to:
Adapt to rapidly changing technological environment
Provide better customer service
Participate effectively in work teams.
Increased participation improves the range of ideas available to businesses keen to innovate to maintain their competitive advantage.
Gain promotion and therefore their commitment to the business is greater.