Business Objectives (Cambridge International IGCSE Business)

The Importance of Business Objectives

Spec point — 1.5.3 · "• Need for business objectives and the importance of them • Different business objectives, e.g. survival, growth, profit and market share • Objectives of social enterprises • Differences in the objectives of private sector and public sector enterprises"

The importance of business objectives

• Business aims are the long-term aspirations of an organisation
• Business objectives are specific, measurable, achievable, relevant, and time-bound targets (SMART targets) that must be achieved to realise business aims

Objectives are derived from a business's overall aim

• Every successful business needs to have clear aims and objectives that guide its operations and focus the efforts of all employees towards the same goal

  • Aims and objectives are critical for businesses to function effectively and achieve long-term success
  • A business aim may be to become the market leader in a particular industry
  • The corresponding objectives may include increasing sales by 25% over the next three years, improving customer satisfaction by 15%, and expanding into new geographic markets

The Most Common Business Objectives

• Objectives provide a focus or target for managers and employees

  • Managers can determine how well the business or particular departments have performed over a period of time
  • Employees may be rewarded for their progress towards meeting objectives

Common business objectives

• As businesses grow, their objectives often change over time

  • E.g. They may shift from survival and break-even to growth and profit maximisation

Exam Hint Avoid suggesting that ‘making as much profit as possible’ is always the most likely objective of a business

• It often depends on economic conditions and the original aims of the owners
• Many entrepreneurs are more focused on helping groups in society than making money
• As markets can be very dynamic objectives are very likely to change over time

The Objectives of Social Enterprise

The objectives of social enterprises

• Social entrepreneurs set socially-focused objectives for their business. They are in the private sector but do not have making a profit as their primary focus

  • They seek to make a profit in order to spend the money on achieving their social objective

• Objectives may include

  • Social: to provide jobs and support for disadvantaged groups in society, such as the disabled or homeless
  • Environmental: to protect the environment
  • Ethical: to operate the business in a responsible way
  • Financial: to make a profit to invest back into the social enterprise to expand the social work that it performs

• Butterfly Books is a social enterprise that publishes children’s educational books in the UK

  • Their aim is to 'work to educate, inspire and entertain children, aiming to change future generations by reducing gender bias in job roles'
  • A recent book entitled 'My Mummy is an Engineer' challenges gender stereotypes

Differences in Private & Public Sector Business Objectives

Differences in private and public sector business objectives

• As discussed in Topic 1.2 (Classification using the public and private pector), businesses in the public and private sector have a different focus in terms of business objectives due to their ownership

• Firms in the private sector are owned by individuals or other firms, while those in the public sector are owned and controlled by the government

  • Goals and objectives are mainly financial in the private sector, whereas the public sector's are generally for the greater good of society

Public versus private sector objectives

• Public sector objectives

  • Usually focused on providing services to the local community, such as healthcare or education

  • Objectives are measurable, similar to private sector targets

    • E.g. patient waiting times for operations or railway punctuality targets

  • Social objectives

    • Improving community access to services (e.g. public libraries)
    • Creating employment opportunities in poorer areas

  • Financial objectives

    • Generating financial returns for the government to reinvest
    • Achieving a positive financial return, although not the primary aim

• Private sector objectives

  • The main objective is often profit maximisation

  • Other common objectives include

    • Growth
    • Increasing shareholder returns
    • Increasing market share
    • Survival
    • Providing a service to the community