Business Objectives Quiz PDF

Survival Survival as a business objective Survival is a short-term objective of a business and is usually applied to a new business or start-up Having objectives helps the employees to focus on the shared aims of the business Different businesses have different objectives, it can...

Survival Survival as a business objective Survival is a short-term objective of a business and is usually applied to a new business or start-up Having objectives helps the employees to focus on the shared aims of the business Different businesses have different objectives, it can depend on the product, service or industry and even on the goals of the entrepreneur starting the business Survival The business in the first year may just have survival as the objective while it builds a customer base and establishes itself in the market The objective is to reach a sustainable level of sales that allows the business to reach its break-even point This may involve penetration pricing of products or services at the outset to establish the business This may not mean much profit at the start, but when the business starts to grow it will able to comfortably raise prices Profit maximisation Profit maximisation Profit maximisation is when a business wants to make the most profit possible from a given amount of resources Profit maximisation is important as an objective because it helps a business to recoup any research and development costs (R&D) Profit maximisation is needed to help a business to maintain high levels of product development and innovation Which stakeholder would profit maximisation be most important to? Profit maximisation - shrinkflation Lots of supermarket items are getting smaller This is known as shrinkflation – where a manufacturer keeps the price the same but makes the product smaller This is instead of passing on a price rise to the customer which would have a negative impact on demand Can you link this to profit maximisation? Other objectives #1 sales maximisation Some businesses may set their objective as sales maximisation Profit figures tend to be annually so sales figures can be examined on a daily, weekly or monthly basis Managers find sales figures more satisfying as targets as profits go to owners and salaries are often linked to sales levels Anyone interested in investing in the business may want to see the sales data and judge it as an indicator of performance Often found in a sales driven environment like an estate agents or a car dealership #2 market share Market share is the % of a market that a business has, either in revenue or in units sold This may be an objective in a very competitive market where consumers switch between suppliers (supermarkets) Very important for investors to judge how a business is doing against competitors Loss in market share can be an indicator of long-term serious financial problems #3 cost efficiency The most common objective in transport and construction industries where goods and services make up 70% of the cost of a project is to achieve cost efficiency Cost efficiency can be achieved by: Paying minimum wage to unskilled workers Subcontracting where economically viable Lean production or construction where material, time and process waste is eliminated to save costs Increase the perceived value of the product through strong branding Lower the quality and the price of the product Lowering the average costs means economies of scale #4 employee welfare Some businesses seek the harmonious relations with their workforce as an objective, and they aim to achieve this through employee welfare External examples: Medical insurance, housing, education for family Internal examples: Canteen, crèche, toilets, uniform Employees that are satisfied are loyal and hard working, they have increased morale, motivation and productivity The business also benefits from an enhanced public image as a good place to work – which makes recruitment easier #5 customer satisfaction This objective is common in service industry and the coffee corner shop competitive market Businesses who follow this objective wills eek to monitor customer service levels through surveys and will focus on quality They will attempt to identify and understand what the customer wants and then provide this They also aim to reduce the number of complaints A customer centred approach will: Ensure repeat sales Create brand loyalty to prevent customers from switching to similar brands Satisfied customers will tell others and reputation and word of mouth are very cheap ways of highly effective marketing to improve sales #6 social objectives Social objectives are also known as corporate social responsibility or CSR objectives This may involve: Reducing impact on the environment Fair wages in developing countries Helping society Compliance with laws to minimise externalities like operating sensible hours so not as to noise pollute the local community