Business objectives and stakeholder objectives

Understand why business can have several objectives and the importance of them

  • A business objective is a goal or aim the owners,managers and employees in a business work towards. A business cannot exist without knowing its purpose
  • Objectives are also important for monitoring and measuring the performance of the business
  • Many businesses publish mission statements which summarise their main aims and objectives. A mission statement enables employees, managers, customers and suppliers to understand the ambitions of the business

Understand different business objectives for the private sector

  • Profitability
    • The ability of a business to continually generate revenues from the sale of its goods and services. Many owners in the private sector aim to maximise their profits
    • Before a business can increase its profits, it may first need to increase its total sales and capture a sizable share of the market for the production it supplies.
    • This is why many businesses aim to achieve long-run profit maximization.
    • Profit is important because;
      • It is necessary for risk taking in business
      • It provides a source of finance
      • It is a measure of business success
  • Growth
    • Business owners may want to increase the size of their business to increase sales, market share and profits.
    • A large business can have many advantages
      • Banks more money
      • Revenue increase
      • Suppliers make discounts
      • More financial resources
    • Growth is easier if the demand for goods and services is increasing
  • Increasing Market Share
    • Firms will compete for a larger share of total consumer spending on a product
    • Competition will raise costs and reduce profits
    • A business that is successful in increasing its market share will achieve higher sales and will not worry to much about these problems
    • The benefits of increasing market share;
      • Increased market power
      • Increased influence over suppliers
      • Reduced threat of competition
  • Survival
    • Most important for new businesses and large businesses during economic recession
    • This problem is caused by change in people demands, liquidity problems and lack of management skill

Understand the objectives of social enterprises

  • Social entrepreneurs are people who set up and run business activities primarily to help social environmental issues. They usually reinvest all profits
  • They are known as social enterprises
  • Objectives;
    • Social Objectives= Support the disadvantaged people in society
    • Environmental Objectives= Protect the natural environment
    • Financial Objectives= Earn profits to reinvest back into the business

Understand different business objectives for the public sector

  • Achieve financial targets (because they are runned by taxes, they are set the objective to reduce their running costs)
  • Provide good quality public services
  • Achieve social objectives (supporting people)
  • Achieve environmental objectives (reducing waste)

Describe the role of stakeholder groups involved in business activity

  • Business Stakeholders are people and organisations with a direct or indirect interest in business activities and performance

Describe the main internal and external stakeholders groups

  • Internal Business Stakeholders
    • Owners and Shareholders
      • The people that own the business
    • Managers
      • People that own a senior position in the business
    • Employees
      • People that work for the business. Their interests may be represented by the Trade union
  • External Business Stakeholders
    • Creditors
      • People and Organisations that help finance the organisations like banks and suppliers
    • Employees
      • People that work for the business. Their interests may be represented by the Trade union
    • Government
      • Comprises authorities and elected officials

Describe the objectives of different stakeholders groups

  • Owners and Shareholders
    • They are important because;
      • Invest money in the business and will lose it if it fails
    • Their main objective are;
      • Earn a good profit and grow to increase it
  • Managers
    • They are important because;
      • They take important decisions in the business and the business could fail if they take bad ones
    • Their main objective are;
      • Grow the business giving them more power and status
  • Employees
    • They are important because;
      • Employed by the business and gain salaries
    • Their main objective are;
      • Good wages and job satisfaction
  • Creditors
    • They are important because;
      • Lend money to a business and if it fails they are not repaid
    • Their main objective are;
      • To be involved in a good business and growth
  • Government
    • They are important because;
      • Control the economy, laws and taxes
    • Their main objective are;
      • Encourage successful businesses and support them

How can stakeholders conflict with each other

  • Increasing wages can motivate employees to work better but it will increase costs and reduce profits for owners. This is why stakeholders objectives conflicts, and compromises need to be made


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