Abdul Kadir Molla

International School

Grade-9
Chapter-5 Business objectives and stakeholder objectives
Need for business objectives and the importance of them.
An objective is an aim or a target to work towards. All businesses should have objectives.

There are many benefits of setting objectives:

 Objectives give workers and managers a clear target and guidance towards work towards
and this helps motivate people.
 Clear and measurable objectives help unite the whole business towards the same goal.
 Business managers can compare how the business has performed to their objectives – to
see if they have been successful or not.
Need for business objectives and the importance of them

Objectives need to be SMART

Specific - specific to the business

Measurable - how much they want this objective to affect their business e.g. 85% of seats in an airline are
economy class

Achievable - owners must discuss how they want to act on these objectives

Realistic - should be able to be financed by the business

Time-specific - set a date for the objective to be achieved by

Different business objectives

A business may have been formed by an entrepreneur to provide employment and security for the owner
or his/her family. It could have been started to make as big a profit as possible for the owner. On the other
hand, the business might have a more charitable aim in mind – many of the leading world charities are
very large businesses indeed.

Different business objectives are

1. Survival: Initially the objective of new firms will be to survive in the market. Moreover,
established business in a recession (Pandemic) time could set survival as the business
objective. Lowering the prices, providing promotional discounts and offering personal
services to customer will enable firms to achieve the survival objectives.
2. Growth: After business achieved the survival objectives, firms target growth as their objective;
Growth objective will allow business:
 to make jobs more secure if the business is larger
 increase the salaries and status of managers leading to higher motivation

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 Abdul Kadir Molla
International School
 open up new possibilities and help to spread the risks of the business by moving into
new products and new markets
 obtain a higher market share from growth in sales
 obtain cost advantages, called economies of scale, from business expansion.
3. Increase market share: Market share is the percentage of total market sales held by one
brand or business.
If the total value of sales in a market is $100 million in one year and Company A sold $20
million, then Company A’s market share is 20 per cent.

Increased market share gives a business:

• good publicity, as it could claim that it is becoming ‘the most popular’
• increased influence over suppliers, as they will be very keen to sell to a business that is
becoming relatively larger than others in the industry
• increased influence over customers (for example, in setting prices).
4. Profit: When a business is owned by private individuals rather than the government it is
usually the case that the business is operated with the aim of making a profit. Profits are
needed to: • pay a return to the owners of the business for the capital invested and the risk
taken • provide finance for further investment in the business. Without any profit at all, the
owners are likely to close the business.
Limitations of making profit as business objective: if a business put up its prices to raise
profits. It may find that consumers stop buying its goods. Other people will be encouraged to
set up in competition, which will reduce profits in the long term for the original business. It is
often said that the owners of a business will aim for a satisfactory level of profits which will
avoid them having to work too many hours or pay too much in tax to the government.
5. Returns to shareholders: Shareholders own limited companies. The managers of companies
will often set the objective of ‘increasing returns to shareholders. This is to discourage
shareholders from selling their shares and helps managers keep their jobs.
Returns to shareholders are increased in two ways:
• Increasing profit and the share of profit paid to shareholders as dividends.
• Increasing share price – a profitable business with planning to grow further will increase the
brand value of the company leading to higher value of shares that shareholder can sell with
higher price.
6. Corporate Social responsibility: people operating the social enterprise often set three objectives
for their business:
 Social: to provide jobs and support for disadvantaged groups in society, such as the
disabled or homeless.

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 Abdul Kadir Molla
International School
 Environmental: to protect the environment.
 Financial: to make a profit to invest back into the social enterprise to expand the social
work that it performs.
A social enterprise is in the private sector and has social objectives as well as an aim to make a profit to
reinvest back into the business.

Why business objectives could change

It is most unusual for a business to have the same objective forever!

Here are some examples of situations in which a business might change its objective.

 A business set up recently has survived for three years and the owner now aims to work towards
higher profit.
 A business has achieved higher market share and now has the objective of earning higher
returns for shareholders.
 A profit-making business operates in a country facing a serious economic recession so now
has the short-term objective of survival.
The main internal and external stakeholder groups and their objectives
Stakeholder are those people who are directly or indirectly related with business operation.

Stakeholders Roles Rights and Objectives Responsibilities

Customers  to purchase goods  safe and reliable  not to make false
(External) and services products claims about poor
 Without enough  value for money service,
customers, a business  well-designed underperforming
will make losses and products of good goods or failed
will eventually fail. quality items
 reliability of service  to be honest – to
and maintenance pay for goods
bought or services
received when
requested
 not to steal

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 Abdul Kadir Molla
International School
Government  It passes laws to  to expect the  to treat businesses
(External) protect workers and business to meet all equally under the
consumers legal constraints, law
such as producing  to prevent unfair
only legal goods and competition that
to receive taxes on could damage
time chances of
 Successful businesses business survival
will employ workers,  to establish good
pay taxes and trading link with
increase the country’s other countries to
output allow international
trade
Lenders  to provide finance to  to be repaid on the  to provide the
(External) the business in agreed date to be agreed amount of
different forms paid finance finance on the
charges, e.g., interest agreed date for the
on loans agreed time period
Local  to provide the labour  jobs for the working  to cooperate with
community services required by population the business,
(External) the business  production that does where reasonable
not damage the to do so, on
environment expansion and
 safe products that are other plans
socially responsible
Suppliers  to supply goods and  to be paid on time as  to supply goods
(External) services to allow the stated in the service and services
business to offer its agreement between ordered by the
products to its own the business and business in the
customers suppliers time and condition
 to be treated fairly laid down by the
and not to be purchase contract
exploited by the
customer business
Owners/  to provide finance  to receive a share of  to set targets for
Shareholders profits; managers; give
(External)  to receive accurate manager adequate
reports on business time and resources
performance to meet targets
Managers  to control, command  to have sufficient  to report to
(Internal) and direct resources authority to fulfil stakeholders; to
roles act legally and
ethically
Employees  to provide manual  be offered  to be honest
(Internal) and other labour employment  to meet the
services to the contracts that meet conditions and
business legal standards, e.g. requirements of
minimum wage rate the employment
 to be treated and paid contract
in the ways described

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 Abdul Kadir Molla
International School
in the employment  to cooperate with
contract management in all
reasonable
requests

Objectives of public sector businesses

Financial: Meet profit targets set by government – the profit is reinvested back in the business and on
other occasions it is handed over to the government as the ‘owner’ of the organization. Profits are also
made to cover the loss of other public sectors corporations.

Service: Provide a service to the public at an affordable rate and meet quality targets set by government.
For example, health services and education services

Social and environment: Protect environment and create employment in certain areas

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