Business in Contemporary Society Business Objectives

Business Objectives Businesses may have a range of objectives that they wish to achieve. Objectives depend on the size of the organisations; PESTEC factors and whether the business is in the public or private sector.

Business Objectives Objectives may be split in any organisation and identified as either: General – determined by top level management and outline the general goals and aims (do not necessarily outline how these will be achieved. Specific – are more focussed and they identify how the general objectives can be achieved through the performance of each department

Profit Maximisation Business must at some point start making a profit in order to survive. However, profit maximisation is not enough for the continual success of the business – growth and development as a whole are also important.

Satisficing Instead of making the maximum amount of profit possible, it will aim to make a level of profit to keep stakeholders satisfied ie enough to pay acceptable dividends or provide funds for investment Particularly relevant to public sector organisations which have to operate within budget guidelines.

Growth By becoming larger, companies can take advantage of economies of scale (savings due to decrease in cost) To gain monopoly power – company who dominates a market can set the price in that market. May sacrifice profit to reduce prices in order to destroy any competitors in the market (Destroyer pricings) It is not a prerequisite for businesses to grow however they need to ‘develop’ if they wish to survive

Survival This is usually the aim of a small family business. Keeping the business safe from takeover by larger companies rather than moving huge profit.

Corporate/Social Responsibility Also known as creating a good corporate image Improving what the public think of them. Sponsoring a worthy cause or environmentally friendly work practices. By improving public relations this will reduce profitability in the short term but will help the chances of survival. Pressure groups have influenced the emphasis for social responsibility within business

Maximising Sales Managers salaries are sometimes linked to profit and sales. Therefore in order to generate a higher salary or bonus, the aim of the managers would be to increase sales.

Managerial Objectives Managers have their own aims which may vary depending upon what each manager wishes to achieve. To increase the no. of staff reporting to them. More perks (expense account, company car) Developed prestige and status (new projects)

Provision of a service Provide a service in the best way possible to meet the needs and wants of the consumers. Charities, hospitals, schools.

Other Business Objectives Innovation Market position Management performance and development Productivity Physical and financial resources Public responsibility Employee performance and relations Environmental concerns Maximise use of available resources Public profile

Question Describe the possible objectives of a private limited company. (4)

Answer Profit maximisation – trying to achieve the largest profit possible. Sales maximisation – trying to achieve the largest amount of sales possible. Survival – to continue to be in business. This is especially important in a recession. Provision of a service Growth – to have more outlets, staff and higher turnover Socially responsible – to have a good image in the eyes of consumers or local communities

Question Compare the objectives of a private sector organisation with those of a public sector organisation. (4)

Answer Private sector organisations’ objectives will focus on profit maximisation whereas public sector will require to operate within a specific budget Private sector will focus on sales maximisation but public sector organisations will focus on provision of a specific product or service Private sector organisations will be responsive to shareholders’ opinions however public sector will have local or national government priorities and objectives 

Answer Private sector will focus on increase market share whereas public sector will have little or no concern with market share Private sector will focus on expanding globally but public sector operate on a local or national basis only Both will look to provide a quality service Both will look to be socially responsible Both will try to be as efficient as possible On a point of distinction must show both parts and not just “and the other one doesn’t”