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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