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Chapter 21 - Business Objectives

The document outlines the distinction between business aims and objectives, emphasizing that aims are long-term goals while objectives are specific targets to achieve those aims. It discusses various objectives such as survival, profit maximization, sales maximization, market share, cost efficiency, employee welfare, customer satisfaction, and social objectives, highlighting their importance for business motivation and direction. The document also notes that objectives may evolve as the business grows and responds to market conditions.

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3 views1 page

Chapter 21 - Business Objectives

The document outlines the distinction between business aims and objectives, emphasizing that aims are long-term goals while objectives are specific targets to achieve those aims. It discusses various objectives such as survival, profit maximization, sales maximization, market share, cost efficiency, employee welfare, customer satisfaction, and social objectives, highlighting their importance for business motivation and direction. The document also notes that objectives may evolve as the business grows and responds to market conditions.

Uploaded by

abdullahicloudz0
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

B-S Chapter 21 - Business Objectives

The aims of a business are what the business wants to achieve in the long term. Aims tend to be general and examples
might be to be the 'best' in the market or the `market leader'.
The objectives of a business are the goals or targets that need to be met in order to achieve an aim. For example, a
business might aim to grow and set annual sales targets as objectives to help achieve it.
Businesses need to have objectives for the following reasons:
✓ Employees need something to work towards. Objectives help to motivate people.
✓ Without objectives owners might not have the motivation needed to keep the business going.
✓ Objectives help owners decide where to take a business and what steps are necessary to get there.
Businesses can have a range of objectives when they start up. These objectives may change over time.
a) Survival
The aim of most start-up businesses is to survive the initial entry into the market and to generate enough cash flow to
remain in business. Effective cash flow management is more important than gaining an income or seeking profit
maximization.
b) Profit Maximisation
Once that has been achieved the business objective usually switches to profit maximization. However, some businesses
focus on profit more aggressively, usually because the owners want to make as much profit as they possibly can. This is
called profit maximisation. Many entrepreneurs are unlikely to pursue profit maximisation, they are more likely to pursue
profit satisficing.
If entrepreneurs want to maximise profit, they will focus on keeping costs as low as possible while raising prices as high as
they can before customer loyalty is damaged. Skim pricing is often used by profit maaximisers.
c) Other Objectives

Objective Explanation
Sales maximisation • The focus is on generating the maximum revenue possible by selling its products/services
• The firm should raise prices to achieve revenue maximisation when their product is price
inelastic in demand
• The firm should lower prices to achieve revenue maximisation when their product is price
elastic in demand
Market share • Market share refers to the percentage of total sales in a particular market that a
company holds
• A business may aim to increase its market share by producing and selling better quality
products than its competitors
Cost efficiency • Cost efficiency refers to a company's ability to produce and deliver its products at
the lowest possible cost
• This objective is crucial for companies that operate in highly competitive markets as low
costs enable them to compete with low prices
Employee welfare • This objective refers to a company's commitment to providing a healthy and safe working
environment for its employees
• A business may aim to promote employee welfare by offering competitive
wages, comprehensive benefits packages and promoting a healthy work-life balance
Customer satisfaction • A business may aim to achieve customer satisfaction by delivering high-quality products,
providing excellent customer service and offering attractive pricing
Social objectives • Social objectives refer to a company's commitment to addressing social or environmental
issues
• This objective is increasingly important for businesses that aim to operate sustainably
and build a positive reputation

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