Yi Makes It Easy: Business Objectives and Stakeholder Objectives (Specification 1.5)

Learning Objectives

By the end of this lesson, you should be able to:

• Describe various business objectives and their changing importance (1.5.1)
• Understand the role of stakeholder groups in business activity (1.5.2)
• Differentiate between private and public sector enterprise objectives (1.5.3)

1.5.1 Business Objectives and the Change in Importance

Importance of Business Objectives

• Definition: Business objectives are the aims or targets a business works towards.
• Benefits of Setting Objectives:
  • Provides a clear target or direction for decision making.
  • Helps unite the business towards a common goal.
  • Allows business managers to measure performance against objectives.
  • Provides a sense of direction for the business.

Common Business Objectives

1. Survival

   • Essential for new businesses or during economic recessions.
   • Managers may lower prices to survive despite reduced profits.

2. Profit

   • A primary goal for privately owned businesses.
   • Needed for returns to owners, reinvestment, and covering risks.

3. Return to Shareholders (Dividends)

   • Managers aim to increase shareholder returns by boosting profits and share prices.

4. Growth

   • Measured by sales value/output; enhances job security and opens new opportunities.
   • Achieved through customer satisfaction and expansion.

5. Market Share

   • Defined as a percentage of total market sales held by a company.
   • Increased market share can lead to better supplier/customer influence and publicity.

Objectives of Social Enterprises

• Focus on providing services to the community.
• Aim for social (support disadvantaged), environmental (protection), and financial (profit for reinvestment) objectives.

Changing Business Objectives

• Objectives may evolve due to various factors:
  1. After establishing a business, the focus may shift to higher profits.
  2. A business with increased market share might aim for higher shareholder returns.
  3. Economic downturns may shift priorities to survival.

1.5.2 Role of Stakeholder Groups in Business Activity

Stakeholder Groups

• Internal Stakeholders:

  • Owners: Seek profit and growth of their investment.
  • Workers: Expect job security, regular payments, and job satisfaction.
  • Managers: Aim for high salaries, job security, and business growth.

• External Stakeholders:

  • Customers: Demand quality products and services at good value.
  • Government: Wishes for business success, compliance with laws, and economic growth.
  • Community: Expects job creation and socially responsible products/services.
  • Banks: Provide financing and expect repayment and business liquidity.

Conflicts Among Stakeholder Objectives

• Businesses often strive to meet multiple stakeholder objectives, which may conflict.
• Managers must balance these interests and adapt objectives as needed.

1.5.3 Differences in Objectives of Private and Public Sector Enterprises

Objectives of Public Sector Businesses

1. Financial: Meet profit targets set by the government.
2. Service: Provide essential services (e.g., health, utilities) to the public.
3. Social: Create employment in underserved areas.

Objectives of Private Sector Businesses

1. Financial: Focus on profit, growth, shareholder returns, and market share.
2. Service: Provide community services.
3. Social: Ensure business survival.

Key Terminology

• Business Objectives: Aims or targets businesses strive to achieve.
• Profit: Total income minus total costs.
• Market Share: Percentage of total market sales held by a business.
• Social Enterprise: Business with social objectives and profit reinvestment.
• Stakeholder: Any individual or group with a vested interest in a business's performance.

Conclusion

• This video covered the importance of business objectives and stakeholder roles.
• For further questions or feedback, viewers are encouraged to engage in the comments and follow on social media.