Business objectives
A business objective is a goal it aims to achieve. Common objectives include survival (especially for new firms), profit (revenue greater than costs), growth in size and market share, increasing sales, and providing a service to the community. Objectives can change over time: a start-up may focus on survival, then aim for growth once it is established. Social enterprises may put social or environmental aims alongside profit.
Key idea
Profit = total revenue - total costs. Profit rewards the owners for taking risks and can be reinvested to help the firm grow.
Stakeholders
A stakeholder is any group or individual with an interest in a business. Internal stakeholders include owners, managers and employees. External stakeholders include customers, suppliers, the local community, the government and banks. Each has different needs.
Example
Employees want fair pay and job security, customers want good value and quality, and owners want profit. These aims can conflict, for example higher wages may reduce short-term profit.
Conflicting interests
Because stakeholders want different things, managers must balance their interests. A decision that pleases one group, such as cutting costs, may upset another, such as workers. Good businesses try to meet the most important stakeholder needs while staying profitable. Clear objectives also help a firm measure its success, plan ahead and give employees a shared sense of direction.
Remember
- Objectives: survival, profit, growth, sales, service.
- Stakeholder = any group with an interest in the business.
- Stakeholder interests often conflict and must be balanced.