Business Objectives and Profit Maximisation
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Questions and Answers

What is one main objective of businesses pursuing profit maximisation?

  • To decrease market competition
  • To pay a return to the shareholders (correct)
  • To cut employee salaries
  • To reduce operational costs

When do businesses typically set survival as a primary objective?

  • During stable economic conditions
  • Only during times of high employee turnover
  • When there is intense market competition (correct)
  • When profits are exceeding expectations

How do objectives provide a sense of purpose within a business?

  • They help to excuse any failures
  • They hinder employee motivation
  • They complicate the business structure
  • They create clear instructions for employees (correct)

Which of the following is NOT a reason for a business to aim for profit maximisation?

<p>To maintain employee loyalty (B)</p> Signup and view all the answers

What can negatively impact a business's survival objective?

<p>High levels of market competition (D)</p> Signup and view all the answers

Which factor is a possible reason a business adjusts its objectives to focus on survival?

<p>Economic changes such as a recession (D)</p> Signup and view all the answers

What role do objectives play in assessing business performance?

<p>They provide benchmarks to measure results (D)</p> Signup and view all the answers

Why might a business prioritize profit maximisation over survival objectives?

<p>To invest in innovative technologies (D)</p> Signup and view all the answers

What is the primary objective of increasing returns to shareholders?

<p>To motivate shareholders to invest more (C)</p> Signup and view all the answers

Which of the following is a method to increase returns to shareholders?

<p>Increasing dividends (C)</p> Signup and view all the answers

How can a business increase its overall profits?

<p>By enhancing product quality (C)</p> Signup and view all the answers

What is one way a business can influence its size in the market?

<p>By increasing its product range (C)</p> Signup and view all the answers

What could be an expected outcome of decreasing the cost of production?

<p>Increased market share (D)</p> Signup and view all the answers

Which option best describes the goal of increasing market share?

<p>To outperform competitors (D)</p> Signup and view all the answers

What is NOT a method for a business to increase its influence in the market?

<p>Limiting staff training programs (D)</p> Signup and view all the answers

What financial metric is used to calculate returns to shareholders through dividends?

<p>Profit per share (B)</p> Signup and view all the answers

What percentage was calculated for sales in the given context?

<p>16.67% (B)</p> Signup and view all the answers

Which of the following is NOT an objective of providing community services?

<p>Environmental pollution increase (A)</p> Signup and view all the answers

What does 'Ak' represent in the calculation from the content?

<p>Percentage of market sales (C)</p> Signup and view all the answers

Why do businesses reinvest money according to the objectives outlined?

<p>To assist in helping others (D)</p> Signup and view all the answers

In a dynamic business environment, how often do business objectives change?

<p>That depends on market trends (C)</p> Signup and view all the answers

What is a primary focus within the environmental objectives of community service provisions?

<p>Promoting green production methods (D)</p> Signup and view all the answers

Which of the following types of unemployment is specifically addressed through community services?

<p>Unemployment among disadvantaged people (B)</p> Signup and view all the answers

Which of the following is NOT considered an internal stakeholder?

<p>Consumers (A)</p> Signup and view all the answers

What role do suppliers play in relation to a business?

<p>They offer credit or loans (A)</p> Signup and view all the answers

What is emphasized by the phrase 'Fastchanging Business' in the content?

<p>Adaptability to market conditions (A)</p> Signup and view all the answers

Which entity is specifically mentioned as affecting the tax responsibilities of a business?

<p>Government (B)</p> Signup and view all the answers

Who among the following is classified as an external stakeholder?

<p>Local community (D)</p> Signup and view all the answers

What is the primary function of internal stakeholders in a business?

<p>Providing services (B)</p> Signup and view all the answers

What is the formula for calculating market share?

<p>sales of business / sales of industry x 100 (C)</p> Signup and view all the answers

If a business has sales of $600 and the total sales in the industry are $1800, what is its market share?

<p>33.33% (B)</p> Signup and view all the answers

Which of the following businesses has the highest market share based on the provided sales figures?

<p>Bonanza (C)</p> Signup and view all the answers

Why would a business want to increase its market share?

<p>To become a market leader (B)</p> Signup and view all the answers

What market share percentage does Khaadi hold based on the information provided?

<p>44.44% (A)</p> Signup and view all the answers

What total sales figure corresponds to Al-Karam's market share?

<p>$800 (D)</p> Signup and view all the answers

What does maintaining a competitive market share allow a business to achieve?

<p>Market stability (C)</p> Signup and view all the answers

What is the total sales figure for the entire clothing industry based on the provided data?

<p>$1800 (C)</p> Signup and view all the answers

What changes to business objectives are influenced by stakeholders?

<p>They may result in higher prices for consumers. (C)</p> Signup and view all the answers

How does an increase in price affect consumer demand?

<p>It generally decreases demand. (D)</p> Signup and view all the answers

Which of the following best describes the role of stakeholders in a business?

<p>They have interests in and are impacted by business operations. (B)</p> Signup and view all the answers

What might happen to employees if technology is advanced too quickly?

<p>Job loss could occur if they can't adapt. (C)</p> Signup and view all the answers

What can be concluded about the relationship between demand and quality?

<p>Increased quality can lead to increased demand. (B)</p> Signup and view all the answers

Which factor is unlikely to influence employee motivation?

<p>Increasing consumer prices. (A)</p> Signup and view all the answers

How might stakeholders respond to changes in business objectives?

<p>They may oppose changes if it affects their interests. (A)</p> Signup and view all the answers

What is a potential consequence of a business acting solely in the interest of owners?

<p>Neglect of stakeholder concerns. (C)</p> Signup and view all the answers

Flashcards

Business Objectives

Goals set by a business that provide a clear direction for management and employees. These goals are essential for guiding actions and ensuring the company's success.

Profit Maximisation

A key objective for businesses where the aim is to maximize profits. This means generating as much profit as possible.

Benefits of Profit Maximisation

Profit maximisation allows businesses to pay dividends to shareholders, cover expenses, and reinvest in growth. It ensures long-term viability and success.

Survival

Ensuring a business's continued existence despite challenges like competition, recessions, or unexpected events.

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Importance of Survival

Survival means a business can adapt to changing conditions, overcome obstacles, and continue operating.

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Competition as a Challenge

Competitive pressures from other businesses in the market can force companies to adapt and innovate to stay ahead.

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Economic Changes

Economic downturns, like recessions, can negatively impact businesses by decreasing demand, leading to financial difficulties.

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Uncertain Conditions

Unexpected events, like wars or pandemics, can disrupt business operations and create uncertainty for the future.

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Return to Shareholders

Aiming to boost the value received by investors, primarily through higher dividends or increased share prices.

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Dividends

A portion of a company's profits distributed to shareholders as a reward for their investment.

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Share Price

The current market value of a single share of a company, representing a share of ownership.

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Profit

The total amount of money a company earns from its operations after deducting expenses.

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Reducing Cost of Production

Strategies to reduce the cost of producing goods or services, aiming to increase profitability.

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Business Growth

Expanding a company's presence in the market by increasing its size, market share, or influence.

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Market Share

The proportion of the total market controlled by a specific company, often compared to its competitors.

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Reducing Competition

Actions taken to lessen the intensity of competition in a particular market, typically through strategies such as pricing, innovation, or marketing.

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What is Market Share?

A measure of a business's success in a market, calculated as the company's sales divided by the total industry sales. A higher market share means the company holds a larger portion of the market.

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What is Increasing Market Share?

A key goal for businesses aimed at increasing their market share and becoming a dominant player in their industry.

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What does it mean to be Competitive?

The ability of a business to remain successful and competitive in the market, often achieved by having a strong market share and adapting to changes.

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What are Business Sales?

The sales generated by a specific business in a particular market.

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What are Industry Sales?

The total sales achieved by all companies within a specific industry.

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What is a Market Leader?

A company that aims to dominate a particular market with a large market share and substantial influence.

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How can a Market Leader Influence the Market?

A company that uses its market share to influence and shape the market, setting trends and influencing consumer choices.

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How is Market Share Calculated?

The calculation of market share involves dividing the company's sales by the total industry sales and then multiplying the result by 100 to express it as a percentage.

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Social Objective

A business objective focusing on giving back to the community through actions like creating jobs for the unemployed and disadvantaged.

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Economic Objective

A business objective that involves using profits to expand operations and support other initiatives.

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Environmental Objective

A business objective that focuses on minimizing environmental impact through environmentally friendly production methods.

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Dynamic Business

The ability of a business to change and adjust to the constantly evolving market conditions.

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Business Achievements

When a business successfully accomplishes its goals and objectives.

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Evolving Business

The process of achieving business goals while adapting to changes in the business landscape.

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Survival Objective

A business objective that focuses on ensuring a company's survival in a competitive marketplace.

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Stakeholders

Individuals or organizations that have a vested interest in the success of a business.

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Owners

People who own shares in a company and receive a portion of the company's profits.

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Employees

Individuals who work for a company and contribute their skills and efforts to its operations.

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Consumers

People who buy goods or services from a business.

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Suppliers

Organizations or individuals that supply goods or services to a business, like raw materials or components.

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What are stakeholders?

The individuals or groups who are affected by the decisions of a business and have an interest in its success.

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What are business objectives?

These are the goals or objectives that a business sets out to achieve. They provide a clear direction for the company's activities.

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What does it mean to change objectives?

When a company's objectives are adjusted to align with the changing needs of the business and its environment.

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Who are consumers?

Individuals or groups that purchase goods or services from a business. They impact the business's success through their purchasing decisions.

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What is an increase in demand?

When consumers purchase more goods or services due to a change in price or other factors.

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What is an increase in quality?

When a business strives to increase the quality of its products or services to cater to the needs and expectations of its customers.

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Who are employees?

The individuals who work within a company to deliver its products or services. Their motivation and performance directly impact the business's success.

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How does technology affect employees?

When advancements in technology lead to changes within a business, and employees are at risk of potential job losses due to those changes.

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Study Notes

Business Objectives

  • Businesses set objectives for clear direction for management and employees
  • Objectives give managers and employees a sense of purpose
  • Objectives help assess worker performance

Common Business Objectives

  • Profit Maximization: This goal allows businesses to:

    • Pay returns to shareholders
    • Cover operating costs
    • Reinvest in the business

  • Survival: Businesses prioritize survival when facing:

    • Market competition
    • Economic downturns (recessions)
    • Uncertain events (wars, pandemics)

Return to Shareholders

  • Businesses aim to increase shareholder returns to motivate investment
  • Methods to increase returns include:
    • Increasing profits (dividends)
    • Increasing share price

Growth

  • Businesses may set growth as an objective to:
    • Increase profits
    • Lower production costs
    • Enhance market influence
    • Increase market share
    • Reduce competition

Increasing Market Share

  • Businesses increase market share to stay competitive and become market leaders
  • Calculated as (Business Sales / Industry Sales) x 100

Community Services

  • Businesses may aim to give back to society by:
    • Providing jobs to the unemployed and disadvantaged
    • Investing in the community
    • Using environmentally friendly practices

Changing Business Objectives

  • Business environments are dynamic, leading to changes in objectives
  • Objectives shift based on achievements
  • Owner goals influence business objectives

Stakeholders

  • Stakeholders are individuals impacted by business decisions
  • Stakeholders keep an active interest in business
  • Key stakeholders include:
    • Consumers: Their reactions to price and quality affect demand
    • Employees: Motivated by wages and job security
    • Technology can potentially reduce the amount of workers needed, impacting job security for employees

Types of Stakeholders

  • Internal:
    • Owners (investors)
    • Employees
    • Managers
  • External:
    • Consumers (buyers)
    • Suppliers (providers)
    • Local Community
    • Government

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Description

This quiz covers key concepts related to business objectives, specifically focusing on profit maximisation and survival strategies. It explores the roles these objectives play in assessing business performance and influencing market presence. Test your understanding of how businesses prioritize objectives to achieve success.

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