Business Objectives Key Vocabulary * Objectives: goals or targets assigned by a business. * Profits satisficing: making sufficient profits to satisfy the needs of the owner. * Revenues: money generated from sale of goods and services. * Large businesses: Business that employs more than 250 people. * Small businesses: Business that employs less than 50 people. * Profit maximization: making as much profit at a given period of time. * Dividends: shares of profit paid to shareholders in a business. Importance of clear objectives * Objectives help business owners to assess their weaknesses and take steps to overcome them and achieve their objectives easily. * Employees need something to work towards and if they had objectives then everyone in the organization may have the common goal and can achieve it easily. * Owners need motivation in order to keep the business running. If not they may allow the business to drift.Financial Objectives All businesses that set clear objectives could make them either financial or non- financial. The businesses in the private sector have the main objective as to make profits but there are other financial objectives to consider such as: * Survival - One of the main objective of many small businesses is survival in the first few years of their trading. They may be operating in a competitive environment in which they may threatened by trading conditions such as, competition. * Revenue - Some of the business owners may want their businesses to grow significantly in order to enjoy the benefits of growth in revenues. Examples: economies of scale, etc. Many stakeholders may want the business that they have stake on, to grow as they may enjoy benefits such as employment opportunities, tax revenues etc. * Increase market share - All businesses may want to build a higher market share. This is because when they have a higher market share they will be able to charge higher prices, increase their reputation and win over their competitors all of which will help them increase their revenues and hence, increase their profits. They will be able to dominate the market. * Financial security - Most business may not want to make huge amount of profits but may make profits that may be sufficient for the owner. One reason is because the owners may not want to take risk of expanding their business as they have to go through many lengthy legal procedures which are time- consuming and cost a lot.Non - financial objectives Some businesses may have non-financial objectives which may depend on the nature of the business and the owner. Examples are: * Social objectives - Social objectives are designed to improve the well-being of humans, Most public service business such as government owned businesses aim to provide public services. However, these services may not be of high quality as they may be produced at lower costs. Challenge - Some people may love to take challenges and may try starting a business. As starting is very challenging. Even after facing many failures and finally becoming successful, they may want to take more challenges and risks as they become more motivated by this. * Independence and control - Some people may want to be independent and do their work as they wish. They may not want other people to interfere in their work and be instructed. They may want to take control of their own futures and achieve their objectives. * Personal satisfaction - Some people may want to work for themselves as they may find it uncomfortable to work for others such as, an employer. This may bring satisfaction for them. There are other people who want to develop their interests and hobbies into business.Why might objectives change as business evolves? ‘As businesses operate in a competitive environment their objectives may change frequently depending on the environment and external factors example, changes in consumer spending patterns. Reasons could be: ‘+ Market conditions - Market conditions can change from time to time. For example, new entrants can enter into the market and offer better quality products for cheaper which may result in businesses losing their market share. If the business wants to keep their products competitive then they may have to lower their prices below the cost or so on. * Legislation - Legislations imposed by governments may influence the objectives of the business. For example, more businesses are becoming. environmentally friendly which is because of the emerging legislation for protecting environment. * Internal reasons - Businesses may change their objectives due to other reasons such as changes in the form of business. For example, if they change from sole trader to private limited company they may have to increase their production. * Technology - Technology is evolving in the last 30 years and more businesses have to operate efficiently in this modern world. Businesses can purchase more machineries and produce more. This way business have to change their objectives as to increase their production as to enjoy lower costs. * Performance - Business may face times of great profitability followed by times of difficulties. Businesses have to change their objectives according to their performance. For example, at times of profitability business can set objectives such as, expansion or increase in revenues. However, at times of difficulties businesses can set objectives such as, survival. Objectives may evolve according to the business performance.