G-9 Business Lecture Note on Chapter-5 PDF

Grade-9 | Business | Lecture Note on Chapter-5 Chapter-5 Business objectives and stakeholder objectives Need for business objectives and the importance of them An objective is an aim or a target to work towards. All businesses should have objectives. There are many benefits of setting objectives:...

Grade-9 | Business | Lecture Note on Chapter-5 Chapter-5 Business objectives and stakeholder objectives Need for business objectives and the importance of them An objective is an aim or a target to work towards. All businesses should have objectives. There are many benefits of setting objectives:  Objectives give workers and managers a clear target and guidance towards work towards and this helps motivate people.  Clear and measurable objectives help unite the whole business towards the same goal.  Business managers can compare how the business has performed to their objectives – to see if they have been successful or not. Need for business objectives and the importance of them Objectives need to be SMART Specific - specific to the business Measurable - how much they want this objective to affect their business e.g. 85% of seats in an airline are economy class Achievable - owners must discuss how they want to act on these objectives Realistic - should be able to be financed by the business Time-specific - set a date for the objective to be achieved by Different business objectives A business may have been formed by an entrepreneur to provide employment and security for the owner or his/her family. It could have been started to make as big a profit as possible for the owner. On the other hand, the business might have a more charitable aim in mind – many of the leading world charities are very large businesses indeed. Different business objectives are 1. Survival: Initially the objective of new firms will be to survive in the market. Moreover, established business in a recession (Pandemic) time could set survival as the business objective. Lowering the prices, providing promotional discounts and offering personal services to customer will enable firms to achieve the survival objectives. 2. Growth: After business achieved the survival objectives, firms target growth as their objective; Growth objective will allow business:  to make jobs more secure if the business is larger  increase the salaries and status of managers leading to higher motivation  open up new possibilities and help to spread the risks of the business by moving into new products and new markets 1  Grade-9 | Business | Lecture Note on Chapter-5  obtain a higher market share from growth in sales  obtain cost advantages, called economies of scale, from business expansion. 3. Increase market share: Market share is the percentage of total market sales held by one brand or business. If the total value of sales in a market is $100 million in one year and Company A sold $20 million, then Company A’s market share is 20 per cent. Increased market share gives a business: good publicity, as it could claim that it is becoming ‘the most popular’ increased influence over suppliers, as they will be very keen to sell to a business that is becoming relatively larger than others in the industry increased influence over customers (for example, in setting prices). 4. Profit: When a business is owned by private individuals rather than the government it is usually the case that the business is operated with the aim of making a profit. Profits are needed to: pay a return to the owners of the business for the capital invested and the risk taken provide finance for further investment in the business. Without any profit at all, the owners are likely to close the business. Limitations of making profit as business objective: if a business put up its prices to raise profits. It may find that consumers stop buying its goods. Other people will be encouraged to set up in competition, which will reduce profits in the long term for the original business. It is often said that the owners of a business will aim for a satisfactory level of profits which will avoid them having to work too many hours or pay too much in tax to the government. 5. Returns to shareholders: Shareholders own limited companies. The managers of companies will often set the objective of ‘increasing returns to shareholders. This is to discourage shareholders from selling their shares and helps managers keep their jobs. Returns to shareholders are increased in two ways: Increasing profit and the share of profit paid to shareholders as dividends. Increasing share price – a profitable business with planning to grow further will increase the brand value of the company leading to higher value of shares that shareholder can sell with higher price. 6. Corporate Social responsibility: people operating the social enterprise often set three objectives for their business:  Social: to provide jobs and support for disadvantaged groups in society, such as the disabled or homeless.  Environmental: to protect the environment. 2  Grade-9 | Business | Lecture Note on Chapter-5  Financial: to make a profit to invest back into the social enterprise to expand the social work that it performs. A social enterprise is in the private sector and has social objectives as well as an aim to make a profit to reinvest back into the business. Why business objectives could change It is most unusual for a business to have the same objective forever! Here are some examples of situations in which a business might change its objective.  A business set up recently has survived for three years and the owner now aims to work towards higher profit.  A business has achieved higher market share and now has the objective of earning higher returns for shareholders.  A profit-making business operates in a country facing a serious economic recession so now has the short-term objective of survival. Objectives of public sector businesses Financial: Meet profit targets set by government – the profit is reinvested back in the business and on other occasions it is handed over to the government as the ‘owner’ of the organisation. Profits are also made to cover the loss of other public sectors corporations. Service: Provide a service to the public at an affordable rate and meet quality targets set by government. For example, health services and education services Social and environment: Protect environment and create employment in certain areas The main internal and external stakeholder groups and their objectives Stakeholder are those people who are directly or indirectly related with business operation. 3  Grade-9 | Business | Lecture Note on Chapter-5 Stakeholders Roles Rights and Objectives Responsibilities Customers  to purchase  safe and reliable  not to make false (External) goods and products claims about poor services  value for money service,  Without enough  well-designed products underperforming customers, a of good quality goods or failed business will  reliability of service items make losses and and maintenance  to be honest – to pay will eventually for goods bought or fail. services received when requested  not to steal Government  It passes laws to  to expect the business  to treat businesses (External) protect workers to meet all legal equally under the and consumers constraints, such as law producing only legal  to prevent unfair goods and to receive competition that taxes on time could damage  Successful businesses chances of business will employ workers, survival pay taxes and increase  to establish good the country’s output trading link with other countries to allow international trade Lenders  to provide  to be repaid on the  to provide the (External) finance to the agreed date to be paid agreed amount of business in finance charges, e.g., finance on the different forms interest on loans agreed date for the agreed time period Local  to provide the  jobs for the working  to cooperate with community labour services population the business, where (External) required by the  production that does reasonable to do so, business not damage the on expansion and environment other plans  safe products that are socially responsible Suppliers  to supply goods  to be paid on time as  to supply goods and (External) and services to stated in the service services ordered by allow the the business in the 4  Grade-9 | Business | Lecture Note on Chapter-5 business to agreement between the time and condition offer its business and suppliers laid down by the products to its  to be treated fairly and purchase contract own customers not to be exploited by the customer business Owners/  to provide  to receive a share of  to set targets for Shareholders finance profits; managers; give (External)  to receive accurate manager adequate reports on business time and resources performance to meet targets Managers  to control,  to have sufficient  to report to (Internal) command and authority to fulfil roles stakeholders; to act direct legally and ethically resources Employees  to provide  be offered employment  to be honest (Internal) manual and contracts that meet  to meet the other labour legal standards, e.g. conditions and services to the minimum wage rate requirements of the business  to be treated and paid employment in the ways described contract in the employment  to cooperate with contract management in all reasonable requests Conflict of stakeholders’ objectives (Examples)  Company Management vs. Employees:  Management Objective: Reduce costs by limiting salary increases or benefits.  Employee Objective: Increase salaries and improve benefits. Conflict: Management aims to maximize profits, which might involve cutting costs, while employees seek higher compensation, creating a tension between these goals.  Shareholders vs. Environmental Groups or Local Community:  Shareholder Objective: Maximize short-term profits and dividends.  Environmental Group Objective: Reduce environmental impact, even if it means higher operational costs. Conflict: Shareholders may prioritize immediate financial returns, whereas environmental groups may push for sustainable practices that could reduce profits in the short term. 5