Firms exist for a variety of reasons and must balance the expectations of different groups. Clear objectives provide direction and help measure performance.
Why objectives matter
Objectives give a sense of purpose and act as targets for decision‑making. They allow owners and managers to measure progress and motivate employees. Objectives may change over the life of a business – for example, a start‑up may focus on survival, whereas a mature company might pursue growth or market leadership.
Common business objectives
- Survival – particularly important for new businesses or during economic downturns.
- Profit – the reward for risk taking and a source of finance for reinvestment.
- Growth – to achieve economies of scale, increase market share and reduce vulnerability.
- Increasing market share – to gain influence in the market and bargain more effectively with suppliers and distributors.
- Service provision – many public sector and non‑profit organisations aim to provide high quality services rather than maximise profit.
- Social and ethical goals – reflecting values such as protecting the environment, supporting communities and fair trading.
- Return to shareholders – maximising dividends and share price for investors.
Stakeholders and their objectives
Stakeholders are individuals or groups with an interest in the activities of a business. Each stakeholder has its own objectives:
- Owners/shareholders – want high profits and growth to increase dividends and share value.
- Managers and employees – aim for job security, fair wages, good working conditions and opportunities for promotion.
- Customers – seek reliable products and services at reasonable prices, good quality and customer service.
- Suppliers – desire regular orders and prompt payment.
- Government – seeks businesses to create employment, generate tax revenues and comply with regulations.
- Local community – benefits from employment opportunities but may be concerned about environmental impacts.
- Creditors (lenders) – want assurance that loans will be repaid on time.
| Stakeholder | Primary objectives | Possible conflicting interests |
|---|---|---|
| Owners/shareholders | Profit maximisation; growth; rising share price. | May conflict with employees seeking higher wages and customers demanding lower prices. |
| Managers/employees | Job security; fair pay; safe working conditions; career development. | Higher wages may reduce profits; staff may resist changes aimed at increasing efficiency. |
| Customers | High quality products; fair prices; good service. | Demand for low prices may squeeze suppliers and reduce profit margins. |
| Suppliers | Regular orders; prompt payment; long‑term relationships. | Businesses may negotiate lower prices or extended payment terms. |
| Government | Tax revenue; law compliance; employment; economic growth. | Higher taxes and regulations may increase business costs. |
| Local community | Jobs; environmental protection; community support. | Community may oppose expansion that causes traffic or pollution. |
| Creditors | Repayment of capital and interest; financial stability. | Pressure to repay debts quickly may restrict investment in growth. |
Because these objectives differ, conflicts often arise. For example, shareholders may want higher profits while employees ask for higher wages, or customers demand lower prices that reduce profits. Managers must balance these competing interests to achieve long‑term success, often through negotiation and compromise.
Examples and applications
Real businesses often juggle multiple objectives at the same time. A family‑owned bakery may initially focus on survival and building a loyal customer base. Once established, it might set a growth objective by opening a second branch. During a recession many firms temporarily switch from profit maximisation to survival as demand falls.
Conflicts between stakeholder objectives are common. For example, when a retail giant like Amazon introduces warehouse automation, shareholders welcome the potential cost savings and higher profits, but employees fear job losses. A company may decide to raise workers’ wages to improve morale and productivity even if this reduces short‑term profits, as happy staff can lead to better service and customer satisfaction. Ethical businesses like Fairtrade coffee producers pay higher prices to farmers; as a result, customers pay slightly more for coffee but support sustainable livelihoods for growers. Balancing these interests requires clear communication and sometimes compromise.
