business objectives outcome

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Topic 3 :Topic 3 :

Business ObjectivesBusiness Objectives


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LEARNING GOALS Key learning goals:

This topic will discuss the six major types ofbusiness objective and explain why businessesmay consider them to be important.

1. State the definition and importance of business

objectives.2. Explain the six major types of business objectives.3. State in what circumstances businesses may consider

survival to be an important objective4. Please list at least 5 examples of managerial

objectives.

5. Tell why a business might pursue growth as animportant objective.


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Business Objectives

-Definition Business objectives are the goals of business what the

business wants to achieve. All businesses have their ownobjectives.

Different stakeholders or shareholders (people who have some

financial interest in the business) may have differentobjectives in the business. For example, the owners of thebusiness may consider making profit to be an importantobjective. But employees may regard job security, goodworking condition, and good reward as their importantobjective.


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Business Objectives

-Importance It is of great importance for a business to

have well-defined objectives. Theseobjectives will help the business to be

clear about what it wants to achieve orwhere it wants to go. With objectives, the performance of a

business can be assessed according to astandard, that is to say, how effectively

the business has achieved its objectives.


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Business Objectives

-Major Types There are six major types of

business objectives:1. Survival,

2. Profit Maximization,3. Growth,4. Managerial Objectives,5. Sales Revenue Maximization,

6. Image and Social responsibility.


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Business Objectives

-Survival

Objective of survival:

Survival objective is essential for anybusiness in that no survival means notoday and no future.

Circumstances for a business to considersurvival to be important can be seen inthe following table:


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Table 3-2 Circumstances for a business to consider survivalto be an important objective


-Survival-Survival


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Business Objectives

-Profit Maximization Definition:

Profit maximization means increasing profit asmuch as possible or producing a level of outputwhich brings the most profit for the business.

Usually, the main objective of a private sectorbusiness may be to maximize its profits.However, things may be different for a publicsector business. The main objective of a publicsector business may be to supply the bestservice in the past, although nowadays, they areoffering services in a more and more businesslike way.


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Business Objectives

-Profit Maximization Balance between short term and long

term profit maximization:

A business may sometimes sacrifice

short-term profit maximization for long-term profit maximization.

Possible reasons why a business mightsacrifice short-term profit maximizationfor long-term ones are, for example,lowering the price to build a market shareand increase it when possible oroperating a short term at loss to wait forthe pick-up of sales in the future.


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Business Objectives

-Objective of Growth Definition:

Growth objective may refer to the

goal of a business to become larger,stronger or more competitive.

Many businesses regard growth as theirmain objectives. There are some

reasons why businesses must choosegrowth as an important objective.Possible reasons are listed in thefollowing table:


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Business Objectives

-Objective of Growth Possible reasons for a business to

regard growth as an objective:1. To survive, no growth may mean final death.

2. To introduce new products in order to meetcustomer changing needs.

3. To reduce risks of business: In fierce competition,if a business can not become strong enough,it is more likely to be eaten up by other

stronger competitors.4. To have low costs and more profits on a larger

scale (economy of scale).

5. To make employees, managers, and owners allfeel happy and secure


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Business Objectives

-Objective of Growth Possible reasons for a business to

regard growth as an objective:1. To survive, no growth may mean final death.

2. To introduce new products in order to meetcustomer changing needs.

3. To reduce risks of business: In fierce competition,if a business can not become strong enough,it is more likely to be eaten up by other

stronger competitors.4. To have low costs and more profits on a larger

scale (economy of scale).

5. To make employees, managers, and owners allfeel happy and secure


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Business Objectives

-Objective of Growth

Question for your critical thinking:

Why and how do you think thegrowth of a business may make itsemployees, managers and ownersall feel happy and secure?


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Business Objectives

-Managerial Objectives Definition:

The managers own objectives in thebusiness.

Importance:As we know, the owners of the business do

not usually control the day to day running ofthe business. It is the management that controland run the company according to their own

objectives and the owners strategic decisions. Common examples of managerial objectives areseen in the following table:


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-Managerial Objectives-Managerial Objectives

Table 3-4 Examples of managerial objectives


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-Managerial Objectives-Managerial Objectives

Examples of managerial objectives


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Business Objectives

-Sales Revenue Maximization Reasons:1. Sometimes, when managers and employees

are paid according to their salesrevenues rather than the created profit,

sales revenue maximization may becomethe main objective of the business.2. The business wants to enlarge the market

share first and then benefits in the longrun.

Shortcomings:This may be a shortcoming for abusiness. Profit maximization for abusiness should be more important thansales revenue maximization in whateversituations.


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Business Objectives

-Image and Social Responsibility Social Responsibility definition:Social Responsibility definition: managementmanagement

philosophy that highlights the social and economicphilosophy that highlights the social and economiceffects of managerial decisions. Or theeffects of managerial decisions. Or themanagements acceptance of the obligation tomanagements acceptance of the obligation to

consider profit, consumer satisfaction, and societalconsider profit, consumer satisfaction, and societalwell-being of equal value in evaluating the firmswell-being of equal value in evaluating the firmsperformance.performance.

Image and social responsibility have become more andmore important objectives of businesses. There aresome reasons why businesses must consider image

and social responsibility to be their objectives, whichare illustrated in the following table:


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Table 3-5 Possible reasons for a businesses to pursueimage and social responsibility as its objectives


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Business Objectives-Four Types of Business Social

Responsibility


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Business Objectives

-Image and Social Responsibility Question for your critical thinking:

Discuss and give some examples for eachof the four business social responsibilitiesin the above diagram.

business objectives outcome

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