1.5:  Business Objectives and Stakeholder Objectives Notes:

OBJECTIVES:

The aim/target a business works for is called an objective

BENEFITS:

• Gives the workers a clear target so it increases their motivation

• Decisions revolve around "will this help reach the objective?"

• A clear objective unites the business towards the same goal

• Managers can compare business' objectives to its performance to see if any goals are achieved

But what are the most common objectives found in private sector businesses?

1. SURVIVAL

• New businesses are very likely to have this as their primary objective due to high competition and other profitable businesses in the market

• To achieve survival, new businesses can lower their selling price to gain more customers. However, this can decrease their profit

2. PROFIT

• It is needed to pay return to business owners for capital invested and the risk taken as well as providing finance for further business investment

3. RETURNS TO SHAREHOLDERS

• Manager's objectives is to "increase returns to shareholders"

• Returns are increased by increasing profits so that profit is paid to shareholders as dividends

4. GROWTH

• Makes the worker's jobs more secure

• Increases salary and status

• Opens up new possibilities

• Increases market share

• Obtain cost advantage called economies of scale from business expansion

5. MARKET SHARE

• Market share percentage calculation: company's sales/total sales x 100

• Increase in market share leads to: good publicity and higher influence over suppliers and customers

6. SERVICE TO THE COMMUNITY

• Social enterprise: operated by private individuals (private sector but doesn't aim for profit)

• Objectives: social (providing jobs for the disadvantaged), environmental (protect the environment), or financial (make profit to invest back into enterprise to expand social work)

STAKEHOLDERS:

• Any person or group that is interested in or directly affected by performance/activity of a business

• They can be either internal or external stakeholders

INTERNAL STAKEHOLDERS:

• They're groups that work for or own the business. They include:

1. Shareholder/owner: they're the risk takers and they invest capital to set up and expand. Objectives: shareholders have profit maximization and business growth

2. Workers: they're the people employed. objectives: Contract of employment, regular payment, job satisfaction, and job security

3. Managers: they're employees that control the work of others and make business decisions. Objectives: secure jobs, high salaries, and business growth

EXTERNAL STAKEHOLDERS:

• They're groups outside the business. They include:

1. Customers: they purchase and invest in goods/services. 

Objectives: 

1. Price that reflects quality

2. Get a product that's safe and and reliable

3. Product that is well designed

2. Government: protect workers and customers from business activities. 

Objectives: 

1. Wanting the business to succeed to increase business output, employment, and government revenue

3. Banks: they provide financial help. 

Objective: 

1. Business liquidity to repay the amount of money lent

4. Community: has all the stakeholder groups. 

Objectives: 

1. They want the business to offer jobs and employ local employees

2. Avoid harming the environment

3. Become socially responsible

• It is important to note that conflicts can occur since stakeholders don't have the same interests

• Objectives of public sector include: financial, service, and social.

Credit for the images: from "Cambridge IGCSE and O Level Business Studies 5th edition (Karen Borrington  Peter Stimpson)" 

NOTES DONE BY FARIDA SABET

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