Business Objectives

Lecturer: Abdel Mahmoud B. M(SIU)

Copyright 2002 by Harcourt, Inc. All rights reserved.

Business Objectives
-Definition

Business objectives are the goals of business what the business wants to achieve. All businesses have their own objectives. Different stakeholders or shareholders (people who have some financial interest in the business) may have different objectives in the business. For example, the owners of the business may consider making profit to be an important objective. But employees may regard job security, good working condition, and good reward as their important objective.

Copyright 2002 by Harcourt, Inc. All rights reserved.

Business Objectives
-Importance

It is of great importance for a business to

have well-defined objectives. These objectives will help the business to be clear about what it wants to achieve or where it wants to go. With objectives, the performance of a business can be assessed according to a standard, that is to say, how effectively the business has achieved its objectives.

Copyright 2002 by Harcourt, Inc. All rights reserved.

Business Objectives
-Major Types

There are six major types of business

1. 2. 3. 4. 5. 6.

objectives: Survival, Profit Maximization, Growth, Managerial Objectives, Sales Revenue Maximization, Image and Social responsibility.

Copyright 2002 by Harcourt, Inc. All rights reserved.

Business Objectives
-Survival

Objective of survival:

Survival objective is essential for any business in that no survival means no today and no future. Circumstances for a business to consider survival to be important can be seen in the following table:

Copyright 2002 by Harcourt, Inc. All rights reserved.

Business Objectives
-Profit Maximization

Definition: Profit maximization means increasing profit as much as possible or producing a level of output which brings the most profit for the business. Usually, the main objective of a private sector business may be to maximize its profits. However, things may be different for a public sector business. The main objective of a public sector business may be to supply the best service in the past, although nowadays, they are offering services in a more and more business like way.
Copyright 2002 by Harcourt, Inc. All rights reserved.

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 their main objectives. There are some reasons why businesses must choose growth as an important objective. Possible reasons are listed in the following table:
Copyright 2002 by Harcourt, Inc. All rights reserved.

Business Objectives
-Objective of Growth

Possible reasons for a business to regard growth as an objective:

changing needs. 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. To have low costs and more profits on a larger scale (economy of scale). To make employees, managers, and owners all feel happy and secure
Copyright 2002 by Harcourt, Inc. All rights reserved.

1. To survive, no growth may mean final death. 2. To introduce new products in order to meet customer
3. 4.

5.

Business Objectives
-Objective of Growth

Question for your critical thinking:

Why and how do you think the growth of a business may make its employees, managers and owners all feel happy and secure?

Copyright 2002 by Harcourt, Inc. All rights reserved.

Business Objectives
-Managerial Objectives

Definition: The managers own objectives in the business. Importance: As we know, the owners of the business do not usually control the day to day running of the business. It is the management that control and run the company according to their own objectives and the owners strategic decisions. Common examples of managerial objectives are seen in the following table:
Copyright 2002 by Harcourt, Inc. All rights reserved.

Business Objectives
-Sales Revenue Maximization

1. 2.

Reasons: Sometimes, when managers and employees are paid according to their sales revenues rather than the created profit, sales revenue maximization may become the main objective of the business. The business wants to enlarge the market share first and then benefits in the long run. Shortcomings: This may be a shortcoming for a business. Profit maximization for a business should be more important than sales revenue maximization in whatever situations.
Copyright 2002 by Harcourt, Inc. All rights reserved.

Business Objectives
-Image and Social Responsibility

Social Responsibility definition: management philosophy that highlights the social and economic effects of managerial decisions. Or the managements acceptance of the obligation to consider profit, consumer satisfaction, and societal well-being of equal value in evaluating the firms performance. Image and social responsibility have become more and more important objectives of businesses. There are some reasons why businesses must consider image and social responsibility to be their objectives, which are illustrated in the following table:
Copyright 2002 by Harcourt, Inc. All rights reserved.

Business Objectives
-Four Types of Business Social Responsibility

Copyright 2002 by Harcourt, Inc. All rights reserved.