Grade 11DP Chapter 1.3 Topic - Common Business Objectives

Chapter 1.3: Common Business Objectives

Learning Objectives

• Use the SMART model to write an objective.

• Identify the 4 common business objectives.

• Discuss each of the 4 common business objectives:

  • Growth

  • Profit

  • Protecting Shareholder Value

  • Ethical Objectives

What are Business Objectives?

• Business objectives are clearly defined, measurable targets of an organization.

• Essential for all businesses as they foster a sense of common purpose and promote cohesiveness among team members.

• Enable managers and entrepreneurs to measure progress toward their stated vision or mission.

How to Write an Objective

• Based on the SMART criteria:

  • Specific: Focused on what the business does.

  • Measurable: Quantitative values to track progress.

  • Achievable: Realistically attainable within resources.

  • Realistic/Relevant: Relevant to the people responsible for achieving them.

  • Time-specific: Set a deadline for achieving the objective.

• Example: "To achieve sales of €10 million in European markets by 2023."

Types of Objectives

• Long-term (Strategic Objectives): Broader goals requiring significant investment.

• Short-term (Tactical Objectives): Specific targets that can be adjusted more easily.

• Objectives provide direction and motivation, enhancing employee productivity.

Common Business Objectives

1. Growth

   • Increase in size, operations, and sales revenue.

   • Benefits include higher sales revenue and profit, economies of scale, and reduced risks.

   • Internal Growth: Expanding using own resources.

   • External Growth: Using third-party resources.

   • Measurement: Sales revenue, volume, profits, number of customers, employees, and market share.

2. Profit

   • The positive difference between sales revenue and total costs.

   • Important for rewarding owners/investors and providing internal finance for growth.

   • Profit maximization is often the top priority for for-profit businesses.

   • Long-term liquidity is essential for business survival to avoid bankruptcy.

3. Protecting Shareholder Value

   • Responsibility of the CEO and board to earn a return on capital.

   • Includes strategies for survival, profit, growth, market share, and ethical practices.

   • Protecting shareholder value aligns with meeting the organization’s responsibilities.

4. Ethical Objectives

   • Organizational goals based on moral guidelines, influencing business decision-making.

   • Emphasize fairness and responsibility towards stakeholders (employees, customers, suppliers, the environment).

   • Examples include promoting worker well-being, fair treatment, and utilizing sustainable practices.

Importance of Ethical Objective Implementation

• Advantages:

  • Improved corporate image.

  • Higher sales revenue due to consumer preferences.

  • Increased customer loyalty.

  • Cost reductions through efficient practices.

  • Higher staff morale and loyalty.

  • Avoidance of legal penalties.

  • Benefits for the triple bottom line: people, planet, profits.

• Limitations:

  • High compliance costs and potential increase in prices.

  • Risk of lower profitability due to ethical investments.

  • Subjectivity of ethics leading to disagreements among stakeholders.

  • Conflicts between shareholder profit expectations and ethical practices.

Reflection and Practice Activities

• Set a SMART objective for yourself and evaluate it with a partner.

• Analyze how the pandemic influenced the objectives of a chosen organization, focusing on both protection of shareholder value and ethical practices.