Business Objectives and Stakeholder Objectives
This chapter explains the aims businesses work towards, why objectives matter, how private-sector and public-sector objectives differ, and why stakeholders often want different things from the same business.
Topic 1: Business Objectives
Start with the meaning of an objective and why it is useful for decision-making and performance measurement.
1. Business Objectives
Why are objectives important?
Business objectives:
- Give employees and managers a clear target to work towards.
- Help guide business decisions.
- Allow performance to be measured by comparing actual results with the objectives.
Topic 2: Main Business Objectives
Private-sector businesses can pursue several objectives. The best answer often depends on the situation facing the business.
2. Main Business Objectives
The main objectives of private-sector businesses include:
🛟Survival
Keeping the business operating, especially when risk is high.
💰Profit
Earning more revenue than total costs.
📊Returns to shareholders
Providing dividends or increasing the value of shares.
🚀Growth
Becoming larger and more secure.
🏆Market share
Increasing the percentage of total market sales held by the business.
🤲Service to the community
Providing benefits to society or supporting community needs.
3. Survival
Survival is often the main objective when:
- a business has recently started
- the economy is in recession
- competition has increased.
4. Profit
Profit is important because it:
- provides a return to owners for the money and risk involved
- provides finance that can be reinvested in the business.
5. Returns to Shareholders
Shareholders invest money in limited companies and expect a return.
Returns can be increased through:
- higher dividends
- an increase in the share price.
6. Growth
A business may aim to become larger.
Growth may lead to:
- higher market share
- economies of scale and lower average costs
- greater security and opportunities for the business.
7. Market Share
Example
If a business has sales of $20 million and total market sales are $100 million:
Topic 3: Social Enterprises
Social enterprises combine business methods with social, environmental and financial objectives.
8. Social Enterprises
Social enterprises commonly have three objectives:
Topic 4: Why Business Objectives Change
A business will not necessarily keep the same objectives forever.
9. Why Business Objectives Change
A business will not necessarily keep the same objectives forever.
Objectives may change because:
- The business becomes established – survival may be replaced by profit or growth.
- Previous objectives have been achieved – for example, after increasing market share, the business may focus on shareholder returns.
- Economic conditions change – during a recession, survival may become more important.
Topic 5: Stakeholders and Their Objectives
Stakeholders are people or groups affected by the business and interested in its performance.
10. Stakeholders
Stakeholders can be divided into:
🏢Internal stakeholders
People inside the business:
- Owners
- Workers
- Managers
🌐External stakeholders
People or groups outside the business:
- Customers
- Government
- Community
- Banks.
11. Objectives of Different Stakeholders
| Stakeholder | Main objectives |
|---|---|
| Owners | Profit and growth in the value of their investment |
| Workers | Good wages, job security and satisfying work |
| Managers | High salaries, job security and business growth |
| Customers | Good quality, safe products and value for money |
| Government | Employment, tax revenue, economic growth and businesses following the law |
| Community | Jobs, safe products and low pollution |
| Banks | Loans and interest to be repaid on time |
12. Conflict Between Stakeholder Objectives
Different stakeholder groups often want different things. Their objectives can therefore conflict.
Example 1: Owners vs Workers
Workers may want higher wages, but this increases costs and could reduce profits for owners.
Example 2: Owners vs Community
A cheap production method may increase profits but cause more pollution, which affects the local community.
Example 3: Workers vs Business Owners
Introducing machinery may reduce costs and increase profit but could cause workers to lose their jobs.
Topic 6: Private-Sector and Public-Sector Objectives
Ownership can affect the objectives a business or organisation is likely to pursue.
13. Private-Sector and Public-Sector Objectives
🏪Private-Sector Businesses
Private-sector businesses commonly focus on:
- profit
- survival
- growth
- market share
- shareholder returns.
🏛️Public-Sector Businesses
Public-sector organisations are owned or controlled by the government.
Their main objectives may include:
- Financial objectives – meet profit or financial targets set by the government.
- Service objectives – provide reliable and good-quality services to the public.
- Social objectives – protect or create employment, especially in areas where there are few other jobs.
Examples of public services
Topic 7: Key Definitions to Learn
Use these short definitions for quick revision before tests and exams.
Key Definitions
| Term | Meaning |
|---|---|
| Business objective | An aim or target a business works towards |
| Profit | Revenue minus total costs |
| Market share | Percentage of total market sales held by one business or brand |
| Social enterprise | Business with social objectives as well as an aim to make profit for reinvestment |
| Stakeholder | Person or group with a direct interest in a business |
Topic 8: What Students Must Know for the Examination
These are the skills and knowledge students should be able to show in answers.
Exam Checklist
Students should be able to:
- define a business objective
- explain why objectives are important
- explain the main objectives of businesses
- calculate market share
- explain the objectives of a social enterprise
- explain why business objectives can change
- distinguish between internal and external stakeholders
- identify the objectives of different stakeholder groups
- explain how stakeholder objectives may conflict
- distinguish between the objectives of private-sector and public-sector businesses.