1.5.1 1.5.

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1.5.1 Business can have several objectives and the importance of
them can change
The importance of business objectives
The business objective is a goal or aim a business wants to achieve that gives a
purpose and direction for the organization and its employees.

There are short and long-term business objectives:

● Short-term aims are designed to give specific targets that should be achieved;
these are usually SMART and are focused on specific department
○ S - Specific
○ M - Measurable
○ A - Achievable
○ R - Realistic
○ T - Time-bound

Long-term aims are strategic and requires less detail. These aims are general guidance
for all departments within a business, such as a mission statement.

Mission statement - a brief written statement of the purpose and objective of a business
organization.

Many business objectives involve clear and measurable targets that guide
decision-making at all levels in a business.
Different business objective
The most common business objective in the private sector are:

● Survival - Often the first and most important objective of most new business. This
may have a specific focus, such as achieving positive cash flow or gaining a
consumer base.
● Profitability - The ability to sell their products and services at a price that is higher
than the cost of delivery. This may be either profit satisficing or profit
maximization.
 ● Growth - To increase the size of their, consumer base, sales, market share
and/or profits. Benefits of growth include greater economies of scale and a
reduction of business risk.

● Increased market share - to gain a larger percentage of the total market by

providing goods and services that are more desirable than a business competitor.

Business objective may change overtime

Some of main reason why business objective change over time:

 ● Starting and running a business can be difficult
● business costs can be high
● consumer tastes and spending patterns can change quickly
● competitive from large business can be feirce(aggressive).

Survival is the most important objective for newly created business organizations.

Survival also becomes an important objective even for large and established business
during an economic recession(ex. covid 19 pandemic) when unemployment rises and
consumer spending falls for many goods and services.

Technological change can mean that products and production processes need to be
re-designed. Production, sales, growth and profit targets may need to change as a
result.

New source of competition can cause an established business to rethink its objective
ex. from new start-ups or from business overseas. It may have to cut its prices and earn
less profit in order to compete for sales and maintain its market share.

1.5.2 Differences in the objective of the private sector and

public sector enterprises

Some private-sector enterprises aim to maximize social

and environmental welfare rather than profit
Social entrepreneurs are people who set up and run business activities primarily to help
solve social and environmental issues rather than to maximize profit.

Social enterprises prioritize social needs and environmental issues over shareholder
dividends. Although social enterprises aim to make a profit, not all of these profits are
used for reinvestment for growth or shareholder dividends - social enterprises aim to
maximize well-being and sustainability.

Most public sector organizations are non-trading,

non-profit making
Public sector enterprises that earn revenue from the services they provided may be set
revenue or possibly profit targets by the government which are set a combination of non
profit objective and targets covering the cost and quality of the public services they
provide.

Some example objectives are:

● Achieve financial targets - they are often set strict financial targets to achieve to
control or reduce their running costs.
● Provide good-quality public services - any socially and economically desirable
services funded or organized by the government.
● Achieve social objectives - it includes protecting or increasing employment and
supporting people who are out of work, sick, disabled or on low incomes
● Achieve environmental objectives - this is for environmental protection which
includes water, paper and energy consumption.