Business and Stakeholder Objectives
Differentiate between Aims and Objectives
Aims are the general and long-term goals of an organization, whereas Objectives are the short to medium term and specific targets an organization sets in order to achieve its aims. Without having clear aims and objectives, organizations have no sense of direction or purpose.
Examples of Objectives:
- To increase awareness of the business
- To grow the reputation of the business
- To be an ethical trader
- To be a market leader
- To increase customer satisfaction levels
- To be innovative and introduce new products to the market
Examples of Aims:
- To increase profits and increase returns on investment
- To increase market share
- To achieve market dominance
- To increase shareholder value
- Survival
- To expand internationally
Why are Business Aims and Objectives and important?
Organizational aims and objectives are important for three reasons:
To measure and control:
Aims and objectives help to control a firm’s plans as they set the boundaries for business activity. They provide the basis for measuring and controlling the performance of the business as a whole.
To motivate:
Aims and objectives can help to inspire managers and employees to reach a common goal, thus helping to unify and motivate the workforce. They also encourage managers to think strategically and plan for the long term.
To direct:
Aims and objectives provide an agreed clear focus (or sense of purpose) for all individuals and departments of an organization. They are the foundation for decision-making and are used to devise business strategies.
Who is a stakeholder?
A stakeholder is any person or group who has a direct interest in the performance and activities of a particular business
Examples include:
- Creditors
- Directors
- Employees
- Suppliers
- Shareholders
- Governments
- Community
- Customers
Survival of a Business:
When a business has recently been set up, the objectives of the business will be more concerned with survival than anything else. New competitors can also make a business feel less secure. The managers of a business threatened in this way could decide to lower prices in order to survive, even though this would lower the profit on each item sold.
Profit:
Total income of a business (revenue) less total costs. Profits are needed to:
- pay a return to the owners of the business for the capital invested
- provide finance for further investment in the business.
Return to Shareholder:
Will often set objectives of ‘increasing returns to shareholders. This is to discourage shareholders from selling their shares and helps managers keep their jobs. Returns to the shareholder is increased in two ways which are:
Company Growth:
Usually measured by the vale of sales or output – in order to:
- Make jobs more secure if the business is larger
- Increase the salaries and status of managers as the business expands
- Open up new possibilities and help to spread the risks of the business by moving into new products and new markets.
- Obtain a higher market share from growth in sales
- Obtain cost advantages, called the economics of scale, from business expansion.
Market share:
The Market share percentage can be described as the company sales divided by total market sales times 100
Increased market shares give a business:
- Good publicity
- Increased influence over suppliers
- Increased influencers over customers
Providing a service to the community
Social enterprises are operated by private individuals – they are in the private sector – but they do not just have profit and objectives.
An example of a social enterprise is Rang Sutra in India. This helps very poor rural communities develop skills in craftwork and clothing products and helps them market their products at a fair price.
