Objectives of Business

Unit-I
• Objectives explain why people enter into business
and stay in it.

• Objectives serve as the ends towards which all

business activities are to be directed.

• It is the objectives which guide and govern the

actions and behaviour of businessmen

• In the words of Drucker, “ Objectives in the key

areas are the instruments necessary to pilot the
business enterprise.
Classification of Business Objectives
• As stated earlier , business is an economic institution
operating in a socio-economic system.
• Therefore, objectives of business should be defined
keeping in view its prevailing environment and its needs
for survival and growth.
• Like any other institution , business has several rather
than a single objective.
• Objectives of business are multi – dimensional in nature.
• Business is established and it exists to achieve multiple
objectives.
• People enter into business and stay in business because
they want to earn money, social power and prestige , joy
of achievement and other goals.
• Generally , profit motive is considered to be the primary
objective of business.
• But profit-making is not the sole or only objective of a
business.
• Every business has to lay down its multiple objectives to
justify its existence.
The various objectives of business may be broadly be
classified as follows.
1.Organic objectives
2.Economic objectives
3.Social objectives
4.Human objectives
5.National objectives.
 The realisation of economic and organic objectives helps
the business directly and immediately whereas the social ,
human and national objectives help the business
indirectly and in the long run.
1.Organic Objectives
• As an organic entity a business enterprise has its own
stages of infancy , childhood , adolescence , adulthood
and maturity.
• Like a human being, the first concern of business
enterprise is to ensure its survival. When the enterprise
is assured of the survival, it will aim at growth and
expansion.
• To accomplish this objective, it will attempt to win
prestige , recognition and goodwill from the society in
which it operates.
 Organic objectives are the foundation for achieving all
other objectives of business.
(i)Survival – First of all, a business enterprise tries to
maintain its existence. Survival objective implies the
maintenance of a firms competitive position or earning
capacity or market standing. Unless an enterprise
survives, no other objective can be accomplished.
(ii) Growth – Growth and diversification is one of the
major objectives of business.
• Growth may be measured in terms of size , investment ,
market share, etc.
• Market share which a business enterprise commands
reflects its standing in the market .
• A business enterprise may identify new customers , new
products or new markets or increase its market share in
the present market .
• Growth brings higher profits, economic and social power
etc.
(iii)Prestige and Recognition – Prestige and
recognition help to ensure the survival and growth of
a firm.
• A business enterprise with good image or goodwill
can easily attract customers, investors and competent
employees.
2.Economic Objectives
Business is an economic activity and therefore, its
major objectives are economic. Economic objectives
refer to those goals which determine a persons conduct
in the business part of life. Economic objectives of
business are as follows:
(i)Profit – Making – Risk is inherent in business and
profit is the reward for undertaking risk.
• A business must earn profits in order to stay in
business and to maintain intact the wealth-producing
capacity of its resources.
• Often the common man believes that profit-making is
the sole objectives of business. This is far from truth.
• A business enterprise uses various factors of
production and it can succeed only when every factor
is given its due reward.
• Profit is the reward for entrepreneurship and
therefore, profit cannot be the only goal of business.
(ii)Creation of Customer
• Business can earn profits only when it provides goods
or services which people are able and willing to buy.
• Every business enterprise is conceived in terms of a
product or service that meets the needs of public.
• A business enterprise cannot survive unless there are
enough people to buy the products and services
offered by it.
• Customer is the generator of revenue for business by
paying for goods and services.
• Business earns profits by satisfying the needs of the
customers.
(iii)Innovation
• Modern business is highly dynamic and an enterprise can
continue to be successful only by adapting itself to
changes in its to changes in its environment, it must on
its own create conditions favourable to survival and
growth.
• The highly competitive nature of modern business puts a
premium on innovation and creativity which implies the
introduction of new and better products , improved means
of production and distribution, new technology, new
methods and procedures of management.
• Innovation results in better and cheaper products and
more employment for the society.
3.Social Objectives
• The economic objectives of business can be realized only
by serving the society.
• Business is an organ of society and it draws its resources
from the society. Therefore it must satisfy the wants and
aspirations of society.
• A business enterprise can survive and grow only when it
caters to the needs of the society.
• A really successful business can be built on the
foundation of social service.
• Social objectives of business refer to the obligations of
business towards customers , employees , investors ,
suppliers in which all stake holders must share in
proportion to their contributions. The social objectives of
business are as follows:
(i)Quality Goods at Fair Prices
The first and foremost social objective of business is to
provide regularly the goods and services of proper
quality and quantity to consumers at reasonable prices.
Today consumers are conscious of the quality of goods
they buy . When the goods are of sub-standard quality or
adulterated, they stop patronising the enterprise and the
enterprise faces eventual closure.
Therefore,the business units must always maintain a
continuous and adequate supply of articles of standard
quality.
Businessmen who keep their customers satisfied are
likely to earn profits.
(ii) Providing Employment
Another social objective of business is to create
opportunities for gainful employment of the people.
Sometimes this objective may conflict with the economic
objective of cutting down costs and improving profits by
introducing mechanisation or automation.
(iii)Avoidance of Profiteering and Anti-social Practices
It is legitimate for a business enterprise to work for
legitimate profit. But it must not over-charge the
customers or indulge in hoarding , black-marketing,
adulteration and other anti-social practices.
In times of scarcity, it should ensure fair and euitable
distribution.
4.Human Objectives
• A business enterprise is an institution carried in by
people
( entrepreneurs and managers), through people
(employees) and for people (consumers and public).
• Therefore ,human factor pervades all business
activities. Business is not an end in itself but a means
towards human welfare.
• People are the success of a business depends upon
the quality of people working in it.
• In order to win the cooperation of employees business
must fulfill their expectations.
• The human objectives of business arise from these
expectations.
The important human objectives of business are given below.
(i) Fair Deal to Employees – The first human objectives of
business is to pay fair wages , salaries and incentives to the
employees at different levels.
• Fair working and living conditions and security of service
are necessary for securing the whole hearted efforts of the
employees. Employee welfare is no less important than
customers satisfaction.
(ii) Job Satisfaction – It is the obligation of a business
enterprise to make the jobs interesting and challenging so that
employee may get job satisfaction while performing their jobs.
Selection of right man for the right job and reducing
unpleasantness of jobs help to offer job satisfaction which in
turn ensures retention of an employee on the job for a long
period.
A business enterprise fulfills its human objective when it
recognises the dignity of labour.
(iii)Participation
• Workers will put forth their best efforts only when
they are given an opportunity to participate in making
decisions which affect them.
• Workers participation in management facilitates
redressal of employee grievances quickly and at the
lowest possible level.
• Recognition of worker representatives and their
legitimate activities helps to maintain healthy trade
union practices and sound industrial relations.
(iv) Development of Human Resources
• Business can accomplish its economic objectives of
innovation and productivity only when the employees
are given adequate opportunities for developing new
skills and capabilities.
• Business should create proper climate wherein the
talents of workers are allowed to grow and mature.
5. National Objectives
Present day business is expected to serve as an
instrument for the fulfillment of national needs and
aspirations and implementation of national plans and
policies in accordance with the accepted priorities.
Keeping in view the overall national objective of
establishing a democratic , secular and socialist society
and fostering growth stability and social justice ,
business in India has to serve the following national
objectives:
(i)Ensuring Social Justice
As a responsible citizen , a business enterprise is
expected to remove inequalities of opportunities and to
provide a fair opportunity to all to work and progress.
For this purpose , special attention must be given to the
neglected , weaker and backward sections of the
society.
(ii) Development of Small Enterprises
In tune with the national policy of decentralised development ,
large business houses are responsible for encouraging the
growth and development of small scale and cottage industries.
Such industries can be used as ancillary units and their products
should be patronised.
Large business concerns are expected to desist from assuming
monopolistic position.
(iii)Production According to National Priorities
In keeping with national plan objectives ,business enterprises
should manufacture and supply goods necessary for the country’s
development. It is also the national objective of business to
manufacture and distribute cheaper varieties of essential
commodities like soap ,cloth , edible oils etc. so as to help the
weaker sections of the society.
(iv)National Self –sufficiency and Export Promotion
• In order to enable the country to become self reliant it is the
responsibility of business to produce such articles as have hither to
been imported.
• Business should aim at import substitution, specially in the case of
machinery , equipment and technology.
• Every business should take adequate steps to boost exports and
thereby augment the foreign exchange reserves of the country.
(v)Development of skilled Personnel
Every country needs trained and skilled personnel for the
development of its industry. Business houses can provide technical
knowledge and training to their employees. This helps in skill
formation for the country’s growth and development.
In addition to the above objectives , business is also
expected to promote national integration balanced
regional development , family planning , public health
, education , sports and culture in the country.
The above description reveals that the operation of
business requires reconciliation of several micro and
macro level objectives.
Essentials of A Successful Business
• A business has to coordinate various factors of
production for achieving a given objective.
• All factors are equally important for making the
business a success.
• Various departments should work in coordination with
each other and organizational and financial planning
should be properly determined.
• Modern business has become complex and complicated.
• The improvements in technology and changing
consumer preferences are creating more challenges for
the businessman.
• All aspects of an enterprise, i.e, production , financing ,
organization and marketing should be properly
arranged and coordinated to make a business
successful.
Some pre-requisites of the success of business are as under:
1.Setting Objectives
• The setting up of business objectives is the first thing to
be done by the management. One must know as to what
is to be done.
• Only after deciding the objective, the ways and the
means will be determined to achieve the objectives.
• If it is a producing business , the nature of product to be
produced , whether to produce the whole product or part
of it , should be decided.
• In case of service business the nature and type of service
to be provided should be decided.
• It is not only the management which should be conversant
with the business objectives but every person in the
concern should know the aims and goals of the business.
2.Proper Planning
After determining the objectives, the work should be
planned in all its perspectives . Planning involves
forecasting and laying down the course of action.
It involves planning for both present and future. What
is to be achieved and how it is to be achieved is of
primary significance for the present.
Future is always uncertain and the estimation of future
happenings is very difficult.
In planning for the future, an effort is made to estimate
the future uncertainties and determine the possible
course of action for the coming period.
Thus , planning also helps the management to prepare
itself for facing the uncertanties of tomorrow.
3.Sound Organization
• Organization is an arrangement by which tasks are
assigned to employees so that their individual efforts
contribute effectively to the achievement of clearly
defined purposes.
• The duties and responsibilities of all persons are defined
and they are to do.
• An effective organization system is essential for the
success of a business. Firstly, a decision should be taken
about the form of ownership, i.e, sole trader , partnership,
joint stock company. Then a suitable internal organization
should be developed.
• No work should be left unassigned. The supervisors and
subordinates should know their roles in the business.
4.Proper Financial Planning
• The requirements of finance and its possible sources
should be decided at the time of starting the enterprise.
• The purpose of financial planning is to make sure that
adequate funds are raised at the minimum of cost.
• The required capital should be made available at all
times , otherwise it will hamper the work. The scarcity of
capital and too much of it both will be bad for the
concern.
• The availability of excess capital may tempt the
management to spend more money on inventory and on
fixed assets.
• A proper plan is necessary for providing funds for the
present needs and future development plans.
A financial plan will determine:
(a) The needs of capital
(b) Sources for collecting funds and
(c) Administration of capital structure.
5.Location and Layout of Plant
One of the important decisions to be made by the
management at the time of starting a concern is regarding
the location of the plant.
The plant should be located at a place where all factors of
production are available at lowest costs.
The aim of reaching an optimum point will be achieved
only if the place of location of the business is suitable.
Raw materials , labour , power and markets for the finished
products should be available near the place of location
After deciding about location, a decision is made about
layout of the plant. The setting up of the machinery and
equipment should be systematic
So that the flow of production should be smooth and
uninterrupted.
The office building and warehouse etc should be
located near the factory. Proper layout will enable the
economical use of available space .
Proper location and layout of the business are necessary
for the success of a business.
6. Marketing System
• The marketing aspect of a business is more
important than even production.
• There is no use of producing a thing if it cannot be
sold. Marketing management is essential for
earning Profits.
• Management should decide about the channels of
distribution.
• Whether to sell directly to consumers or to sell
through wholesalers?
• It should be decided after taking into consideration
various aspects of goods.
7.Research
• In the changing technological world, it is essential to use
latest devices for production and marketing of goods.
Change is the essence of business.
• Everyday, new production methods are found.
• Consumers needs and preferences should be taken into
consideration in devising production and marketing
policies.
• Research and development should be given due place in
the business. One can compete with changing business
world only through research programmes.
• If attention is not given to research work then it will
become difficult to stay in business for a large period. So
research activities are necessary for the success of an
enterprise.
8. Dynamic Leadership
• The success of an enterprise will depend upon the
efficiency of its management.
• The task of management is to plan, organize, co-ordinate
and direct various activities for achieving business
objectives.
• This will be possible only if the leadership is dynamic.
• The operation managing the concern should have
foresight, initiative , courage and aptitude for a change.
• These qualities are necessary in the leadership to take the
concern on the road of progress.