Business Objectives (5.1)
Chapter 5 - Business Objectives and Stakeholder Objectives
Learning Objectives: To understand the various business objectives
Business Objectives!
Objectives are important since they give businesses a target to achieve.
When businesses run their operations to achieve their objectives, their activities will affect many different groups of people: stakeholders.
Different businesses have different objectives - here are some of the most common ones:
Survival:
The biggest first challenge of a business is stay in business (new businesses or industries going through crisis);
Another common use of survival as an objective is during economic recessions or moments of high competition.
Growth:
There are many benefits for a business to have growth as an objective (Chapter 3).
List 4 benefits of growth for businesses!
Profit
Important objective as it serves as reward to owners and shareholders (dividends) as well as a source of finance to fund further growth.
P = R - TC
P = (SP*Q) - (FC+VC)
Market Share:
Leads to increased influence over prices;
Higher brand popularity and reputation;
More ability to generate sales.
Example:
Social, Ethical, and Environmental Objectives
Businesses taking on socially, ethically, and environmentally responsible decisions.
It also means that businesses worry about other stakaholders (customers, workers, suppliers) rather than just profit.
Risks of not taking those into account:
Loss of brand reputation / bad publicity;
Loss of sales, revenues, and profits.
Business Objectives are of crucil importance for businesses, having a good objective can:
Provide a target/goal so that everyone knows how/what to do, giving the business a direction;
Help with decision making since managers don't need to waste time and resources on things that are not part of the objective;
Provide a measure of success so that there can be reference (how far or how close is the business of reaching it?);
Motivate workers since they also have something to work towards!
To-Do-List:
Explain two reasons why having objectives is important to a business. Which of the two reasons do you think is the most important? Justify your answer. [8 marks]
Chapter 5 - Business Objectives and Stakeholder Objectives
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