Business objectives and stakeholder objectives Key objectives ‘The objectives ofthis chapter are to revise «@ the need for and importance of business objectives, © about different business objectives © about the objectives of social enterprises the main internal and external stakeholder groups © the objectives of diferent stakeholder groups {© how these objectives might conflict with eachother, with examples the differences in the objectives of private and public sector enterprises. Key definitions Ee | “Business objectives ‘The aims or targets that a business works towards. Profit Total income (revenue ofa business less total costs ‘Market share ‘The percentage of total market sales held by one brand or business. Merk share «COMBED S13, 19 Teal mare sles Social enterprieAscial enterprise has social objectives ax well xan aim to make a profit reivest back into the business. Stakeholder ‘Any person or group witha direct intrest inthe perormance and actives o business. 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Conflicts between stakeholder {groups and their objectives might exist. ‘Owners rena) Security of investment profit to pay returns ses growth Consumers (ern Communty fren ‘Safe ad rela prods ois vale for money “frotecton of enonment iter ses sere Eclrepeniy g ste cmb poo eaany Workers tert Banks (steal / fb secuty ‘repayment of loans on tne Stakeholder reasonable ond regula {pymentot interest on ars objectives ett a {bathe mt emain 00 stefacon and motiaton Managers erat Government (externa shpat {sce and gowig nes dpb secur ‘hay ol tes deg pot tax {ase gto ote her {pete lea €5 ow ptuton pay and at Suppers exes += uk payment for goodssewices regular orders Target your revision Eazy | ‘© There are several important benefits for a business of having clear objectives. © Businesses may change their objectives over time. ‘© Stakeholders can be either internal or external to a business and they take @ close interest in its decisions and performance. © All stakeholder groups will also have objectives ~ and sometimes these might conflict with those of the business or with other stakeholders, ‘© Public sector businesses often have objectives different to those set by private sector businesses. 1 State two benefits to a business of having clear objectives, 2 List four objectives a private sector business might have, 3 List two internal stakeholders and two external stakeholders to a business. % Suggest one way in which the objectives of a stakeholder group can conflict with those of a business. 5 List two possible objectives of a public sector business. Answers on page 1455 Business objectives Common errors [error Why itis wrong. Confusing the terms Shareholders owners a tmited companies] are just one ofthe stakeholder “Takelde’ ond sharcholder’_| groups -but here ar sewrat thereto ‘AU business organisations | Nat necessarily -e 9, survival might be more important fr anew business aim to make as much proftas | and many businesses, such as socal enterprises, wil have other objectives in possible. aukition to prof [consumers objectives always | Managers want to keep customers satisfied - that way they will return to buy conflict with those of managers. | again! Managers want the business tobe profitable ~ but consumers might benefit i profits are used to develop new and better products. Sample questions and answers zy Luis and Jez are partners in a business that operates a parcel delivery service. There is increasing competition in this industry. The partners aimed to build up customer numbers and just ‘survive’ during the first two years ‘of business. Now in its third year of operation, the partners have decided to set new objectives of ‘growth’ and ‘profit. They plan to buy three new motor vehicles to offer more delivery routes to customers. The government encourages small businesses to expand but also allows the state owned reAWhe scien i ernie parcel delivery business to operate a public service without making a profit. | ° two factors/reasons, make sure that these 1 Explain two reasons why Luis and Jez changed the objectives really are different of the business as it expanded. (8) L {from each other. Student's answer Reason one: profits a source of finance. (K] When the busines was set up survival was important. Now that the partners have completed two years in business they have set other objectives. Profit wil help the partners finance ‘the three new vehicles [Ap] as they wllnat have to borrow ifthe profit are high enough. [Ar] Reason two: growth wil mean that the busince6 increases sales eachyear.[K] Growth willbe able to achieve more success against increasing competition [AP ‘This growth might help the businesa increase marketshare. [An] Teacher's comments i 1d answer. The student makes realy good use of the evidence rovided Both of ithe ‘new’ objectives are referred to and understood. The {impact of setting each of these two objectives is explained — profit as a Source of finance and growth leading (possibly) to increased market share, Full marks.Samp 2 Do you think that clear objectives will make sure a business is successful? Justify your answer. [6] Student's answer The objectives will help them make decisions as they know what: they are aiming for [k] Also, all of the employees will be able to work towards the eame targets and ‘this wll make the business more united. For these reasons the business is more likely to be successful. [An} However, if other businesses started offering similar products or services then the business is less likely to be successful. [K] They might have to reduce prices too much, [An] The business cannot be sure of success there is increasing competition [Ev] soalthough clear objectives are important for business success, they cannot make ‘urea business is successful as factors such as competitorsare important: too. [EV] Teacher's comments This answer briefly explains the benefits of setting objectives. These benefits will help the business achieve success. However, the student recognises that success cannot be ‘guaranteed’. In particular, increasing competition will, make life more difficult for the business and it may not make a profit. Full marks. CsA “if we start exploring for oil in this national park all stakeholders will benefit and there will be no conflict between them,’ said Myriam, the Chief Executive of SureOil. This public limited company is one of the most profitable oil businesses in the country. Its employees are well paid and the government receives much tax revenue from SureOil. Some customers think that they pay too much for petrol from SureOil garages. a. Define ‘public limited company’. 2 b Identify two of SureOil’s stakeholder groups, other than shareholders. 2) c Outline two objectives that the directors of a company could set other than making profits. a d_ Explain two benefits to SureOil of being profitable. s) Do you agree that ‘all stakeholders will benefit and there will be no conflict between them if a business starts explo} ‘ (6) for oil in a national park? Justify your answer, Answers on page 145