Business and Stakeholder Objectives Overview

Hey friends, my name is Yi and you're watching Yi Makes It Easy. Welcome to the specification 1.5 which is business objectives and stakeholder objectives. And this video is our last video on section 1, understanding business activity. So in our next lesson, we'll move on to a new section. But anyways, by the end of the lesson, you should be able to describe 1.5.1. Businesses can have several objectives. and the importance of them can change. 1.5.2 The role of stakeholder groups involved in business activity. And 1.5.3 The differences in the objectives of private sector and public sector enterprises. So check the pinned comment for all the timestamps. And we'll move on now to 1.5.1, Business Objectives and the Change in Importance. Here's the heading, the need for business objectives and the importance of them. Business objectives are the aims or targets that a business works towards to. And all businesses should have objectives like a JIS course, and they help to make a business successful. And there are many benefits of setting objectives, including the gift word. workers and manages a clear target or direction towards towards to taking decisions will be focused on will it achieve our objectives a clear measurable objectives help unite the whole business towards the same goal Business managers can compare how the business has performed to their objectives to see if they have been successful or not in the right direction And lastly, it gives a sense of direction So setting objectives is very important for all businesses, whether it's a small or large business Uniform or well-established Then we have different business objectives like survival, growth, profit and market share. Objectives are different for different business and the most common objectives for businesses in the private sector are to achieve business survival, profit, return to shareholders or dividend, growth of the business, the market share, and the service to the community. And here's looking more into survival. When the business has been recently set up, or when the economy is moving into recession, the objective of the new business will be the new or the existing business will be more concerned with survival than anything else because they have to survive in order to make a profit and new competitors can also make a business feel less secure and the managers of a business threatened in this way could decide to lower prices in order to survive even though this would lower the profit on each item sold Then we have profit. When a business is owned by a private individual rather than a government, it is usually the case that a business is operating with an aim of making a profit. And profits are needed to pay a return to the owners of the business for the capital invested. and the risk taken, and provide finance for further investment in the business. So they can use that money to advertise or do any marketing or any other development. And return to shareholders or dividend. Shareholders own limited companies, and the managers of companies will often set the objective of increasing returns to shareholders. And this is to discourage shareholders from selling their shares and helps managers to keep their jobs. And returns to the shareholders are increased in two ways, by increasing profit and the share of profit paid to shareholders as dividends, as well as increasing share price, where the managers can try to achieve this not just by making profit, but by putting plans in place that give a business a good chance of growth and higher profits in the future. Then we have growth. The owners and managers of a business may aim for growth in the size of the business and is usually measured by the value of sales or output and this is in order to make jobs more secure if the business is larger. It increases the salaries and status of managers as the business expand. It opens up new possibilities and helps to spread the risk of the new business by moving into new products and new markets. And it obtains a higher market share from growth in sales. And it obtains cost advantage, called economies of scale, from business expansion. And the growth will only be achieved if the business customers are satisfied with the products or services being provided. Then we have market share. If the total value of the sales in the market is 100 million a year, for example, and company A sold 20 million of those, then company A's market share is 20%. And the formula is that market share equals total sales of the company and the total sales of the market times 100 to make it a percent. An increased market share gives a business good publicity as it could be claimed that it is the most popular. An increased influence over suppliers as they will be very keen to sell the business that is becoming relatively large than others in the industry. An increased influence over the customers, for example in setting prices. Then we have objectives of social enterprises. And here's providing a service to the community, the objectives of social enterprises. Social enterprises are operated by private individuals. They are in the private sector. But they do not just have the profits as their objectives. When people operate in a social enterprise, they often set three objectives for the business. Which includes social, which is to provide jobs and support for the disadvantaged groups in society. Environmental, to protect the environment. and financial to make a profit to invest back into the social enterprise. And here's why business objectives could change. It is most unusual for a business to have the same objective forever. Here are some examples of situations in which a business might change its objective. Number one, a business that recently has survived for 3 years and the owner now aims to work towards higher profit. So like a change in their structure and business model perhaps. A business has achieved higher market share and now has the objective of earning higher returns for shareholders. Number three, a profit-making business operates in a country facing a serious economic recession, so now has a short-term objective of survival. Then here we have 1.5.2, the role of stakeholder groups involved in business activity. So here's the main internal and external stakeholder groups. The following groups of people are involved in the business activity in one way or another or are affected by it, which includes owners, workers, managers, consumers, government, the whole community, and banks. These groups are sometimes called the stakeholder groups of the business as they have an interest in how the business is run. Then we have important and objectives of different stakeholder groups. Objectives. Let's say we have here owner, its internal stakeholder group, and his main feature and most likely objective. And I'll just skim through this. For owner, the main feature is they put in capital to set up the business and expand the business and they will take a share of the profit. And if the business doesn't attract enough customers, they may lose the money they invested. The most likely objective is that they share profits so they gain a rate of return for the money they put into the business. and the growth of the business so that the value of their investment increases. Then I have workers for internal stakeholder groups and the main features they are employed by the business and they have to follow instructions of managers and they may need training to do work efficiently and may be employed on full or part-time contracts and on a temporary or permanent basis. And if there's not enough work for all workers, some may be redundant or retrenchment and told to leave the business. So this can be seen in some companies during this pandemic, COVID-19, where lots of businesses lose money, so some workers may have to be redundant. And the most likely objective, which is regular payment for their work, their contract of employment. Job security as workers do not want to look for new jobs frequently And their job that gives satisfaction and provides motivation And here's managers internal So the main features are they are also employees of the business And they control the work of other workers, as I discussed a few videos before, like different types of managers, like line managers. And they take important decisions, and their successful decisions could lead to business expanding. But a consequence is that if they make poor decisions, the business could fail. And the most likely objective for the stakeholder group, and they have high salaries because of the important work they do. and job security and this depends on how successful and good they do the job and how successful they are and the growth of the business so that the managers can control the bigger and better known business giving them more status and more power then they have customers external they are important to every business and they buy the goods and the business produce the goods that the business produces or the services that the businesses provide. And without enough customers, a business will make losses and eventually fail. And the most successful businesses often find out what customers want before making goods or providing services. This is called market research or market-oriented. And their most likely objectives are safe and reliable product for them, their value for money, a well-designed product for the good quality for their goods and reliability of service and maintenance. Then we have government external groups, external stakeholder group and they are responsible for the economy of the country and it passes law to protect workers and consumers and for the workers it's called the labor laws and the most likely objective They want a business to succeed in this country as successful businesses will employ workers and they will pay tax and increases the country's output and it's called the multiply effect in geographical terms and as they pay more taxes the tax revenue increases and the other objective is that it expects more all firms to stay within the laws as the laws affect business activity And then here's the whole community external And then here's the main features So number one, the community is greatly affected by business activity. For example, dangerous products might harm the population, and factories can produce pollution that damages rivers, the sea, and air quality. And number two, businesses also create jobs and allow workers to raise their living standards, and many products are beneficial to the community, such as medicines or public transport. And then number two, not number two, the second section, the objectives is that jobs for the working population, the production that does not damage the environment, and number three, safe products that are socially responsible. Then we have banks as external, and the main feature is that they provide finance for the business operations by lending them a loan with interest. And their most likely objective is that they expect the business to be able to pay interest and repay capital and the business may remain liquid. Then we have this here right here, how these objectives might conflict with each other by using examples. And most businesses are trying to satisfy the objectives of more than one group, whether it's internal or external. And managers therefore have to compromise when they come to decide on the best objectives for the business they are running. And managers will also have to be prepared to change the objective over time. The growth could be the best option during a period of expansion in the economy, but survival by cost might be better if the economy is in recession, as seen in 2020-2021. So here's just like a concentric diagram. and the business stakeholders. Then we have 1.5.3, the differences in objectives of private and public sector enterprises. So here's the differences and here's the objectives of public sector businesses. The government owns and controls many businesses and other activities. in mixed economies. These were the public sector. And what are the likely objectives for the public sector businesses and organisations? There could be 3. 1. Financial, they meet profit targets set by the government, and sometimes profit is reinvested into the business. 2. Service, they provide a service to the public and meet quality targets set by the government, for example health services. And often public sector businesses are things that are necessary for the population such as water supply and any other health services. And number three, social. They would protect or create employment in certain areas, especially in poorer regions with few other business employers. And here's number two, objectives of private sector businesses. And they may change over time as well. Number one, financial. They make profit and growth of the business as it's very important for a business to grow to make profit so that they can get to break even point as well as increasing shareholder returns and increasing market share. Number two service by providing a service to the community and number three social basically for survival and then we have lastly some key terms for 1.5 business objectives and stakeholder objectives. Number one, business objectives. Business objectives are the aims or targets that a business works towards to. A profit. A profit is the total income of a business or revenue, less or minus total costs. The market share. The market share is a percentage of a total market sales held by one brand or business using the formula I showed just now. And number four, social enterprise. A social enterprise has social objectives as well as an aim to make a profit to reinvest back into the business. And lastly, stakeholder. A stakeholder is any person or group with a direct interest in the performance and activities of a business. And that's it for this 1.5 specification for business objectives and stakeholder objectives video for IGCSE Business Studies. And I hope you guys found it useful and found it helpful and if you did, please leave a like and subscribe and comment down below if you have any questions or criticisms. And also check out my Instagram in the description for more daily content. And I hope you guys found it useful and I'll see you guys in the next video. Until then, stay safe and happy learning.

But anyways, by the end of the lesson, you should be able to describe 1.5.1. Businesses can have several objectives. and the importance of them can change.

1.5.2 The role of stakeholder groups involved in business activity. And 1.5.3 The differences in the objectives of private sector and public sector enterprises. So check the pinned comment for all the timestamps. And we'll move on now to 1.5.1, Business Objectives and the Change in Importance.

Here's the heading, the need for business objectives and the importance of them. Business objectives are the aims or targets that a business works towards to. And all businesses should have objectives like a JIS course, and they help to make a business successful. And there are many benefits of setting objectives, including the gift word.

workers and manages a clear target or direction towards towards to taking decisions will be focused on will it achieve our objectives a clear measurable objectives help unite the whole business towards the same goal Business managers can compare how the business has performed to their objectives to see if they have been successful or not in the right direction And lastly, it gives a sense of direction So setting objectives is very important for all businesses, whether it's a small or large business Uniform or well-established Then we have different business objectives like survival, growth, profit and market share. Objectives are different for different business and the most common objectives for businesses in the private sector are to achieve business survival, profit, return to shareholders or dividend, growth of the business, the market share, and the service to the community. And here's looking more into survival. When the business has been recently set up, or when the economy is moving into recession, the objective of the new business will be the new or the existing business will be more concerned with survival than anything else because they have to survive in order to make a profit and new competitors can also make a business feel less secure and the managers of a business threatened in this way could decide to lower prices in order to survive even though this would lower the profit on each item sold Then we have profit.

When a business is owned by a private individual rather than a government, it is usually the case that a business is operating with an aim of making a profit. And profits are needed to pay a return to the owners of the business for the capital invested. and the risk taken, and provide finance for further investment in the business. So they can use that money to advertise or do any marketing or any other development.

And return to shareholders or dividend. Shareholders own limited companies, and the managers of companies will often set the objective of increasing returns to shareholders. And this is to discourage shareholders from selling their shares and helps managers to keep their jobs.

And returns to the shareholders are increased in two ways, by increasing profit and the share of profit paid to shareholders as dividends, as well as increasing share price, where the managers can try to achieve this not just by making profit, but by putting plans in place that give a business a good chance of growth and higher profits in the future. Then we have growth. The owners and managers of a business may aim for growth in the size of the business and is usually measured by the value of sales or output and this is in order to make jobs more secure if the business is larger. It increases the salaries and status of managers as the business expand.

It opens up new possibilities and helps to spread the risk of the new business by moving into new products and new markets. And it obtains a higher market share from growth in sales. And it obtains cost advantage, called economies of scale, from business expansion. And the growth will only be achieved if the business customers are satisfied with the products or services being provided.

Then we have market share. If the total value of the sales in the market is 100 million a year, for example, and company A sold 20 million of those, then company A's market share is 20%. And the formula is that market share equals total sales of the company and the total sales of the market times 100 to make it a percent. An increased market share gives a business good publicity as it could be claimed that it is the most popular. An increased influence over suppliers as they will be very keen to sell the business that is becoming relatively large than others in the industry.

An increased influence over the customers, for example in setting prices. Then we have objectives of social enterprises. And here's providing a service to the community, the objectives of social enterprises.

Social enterprises are operated by private individuals. They are in the private sector. But they do not just have the profits as their objectives.

When people operate in a social enterprise, they often set three objectives for the business. Which includes social, which is to provide jobs and support for the disadvantaged groups in society. Environmental, to protect the environment.

and financial to make a profit to invest back into the social enterprise. And here's why business objectives could change. It is most unusual for a business to have the same objective forever. Here are some examples of situations in which a business might change its objective.

Number one, a business that recently has survived for 3 years and the owner now aims to work towards higher profit. So like a change in their structure and business model perhaps. A business has achieved higher market share and now has the objective of earning higher returns for shareholders. Number three, a profit-making business operates in a country facing a serious economic recession, so now has a short-term objective of survival.

Then here we have 1.5.2, the role of stakeholder groups involved in business activity. So here's the main internal and external stakeholder groups. The following groups of people are involved in the business activity in one way or another or are affected by it, which includes owners, workers, managers, consumers, government, the whole community, and banks. These groups are sometimes called the stakeholder groups of the business as they have an interest in how the business is run.

Then we have important and objectives of different stakeholder groups. Objectives. Let's say we have here owner, its internal stakeholder group, and his main feature and most likely objective.

And I'll just skim through this. For owner, the main feature is they put in capital to set up the business and expand the business and they will take a share of the profit. And if the business doesn't attract enough customers, they may lose the money they invested. The most likely objective is that they share profits so they gain a rate of return for the money they put into the business.

and the growth of the business so that the value of their investment increases. Then I have workers for internal stakeholder groups and the main features they are employed by the business and they have to follow instructions of managers and they may need training to do work efficiently and may be employed on full or part-time contracts and on a temporary or permanent basis. And if there's not enough work for all workers, some may be redundant or retrenchment and told to leave the business. So this can be seen in some companies during this pandemic, COVID-19, where lots of businesses lose money, so some workers may have to be redundant. And the most likely objective, which is regular payment for their work, their contract of employment.

Job security as workers do not want to look for new jobs frequently And their job that gives satisfaction and provides motivation And here's managers internal So the main features are they are also employees of the business And they control the work of other workers, as I discussed a few videos before, like different types of managers, like line managers. And they take important decisions, and their successful decisions could lead to business expanding. But a consequence is that if they make poor decisions, the business could fail.

And the most likely objective for the stakeholder group, and they have high salaries because of the important work they do. and job security and this depends on how successful and good they do the job and how successful they are and the growth of the business so that the managers can control the bigger and better known business giving them more status and more power then they have customers external they are important to every business and they buy the goods and the business produce the goods that the business produces or the services that the businesses provide. And without enough customers, a business will make losses and eventually fail.

And the most successful businesses often find out what customers want before making goods or providing services. This is called market research or market-oriented. And their most likely objectives are safe and reliable product for them, their value for money, a well-designed product for the good quality for their goods and reliability of service and maintenance.

Then we have government external groups, external stakeholder group and they are responsible for the economy of the country and it passes law to protect workers and consumers and for the workers it's called the labor laws and the most likely objective They want a business to succeed in this country as successful businesses will employ workers and they will pay tax and increases the country's output and it's called the multiply effect in geographical terms and as they pay more taxes the tax revenue increases and the other objective is that it expects more all firms to stay within the laws as the laws affect business activity And then here's the whole community external And then here's the main features So number one, the community is greatly affected by business activity. For example, dangerous products might harm the population, and factories can produce pollution that damages rivers, the sea, and air quality. And number two, businesses also create jobs and allow workers to raise their living standards, and many products are beneficial to the community, such as medicines or public transport. And then number two, not number two, the second section, the objectives is that jobs for the working population, the production that does not damage the environment, and number three, safe products that are socially responsible. Then we have banks as external, and the main feature is that they provide finance for the business operations by lending them a loan with interest.

And their most likely objective is that they expect the business to be able to pay interest and repay capital and the business may remain liquid. Then we have this here right here, how these objectives might conflict with each other by using examples. And most businesses are trying to satisfy the objectives of more than one group, whether it's internal or external.

And managers therefore have to compromise when they come to decide on the best objectives for the business they are running. And managers will also have to be prepared to change the objective over time. The growth could be the best option during a period of expansion in the economy, but survival by cost might be better if the economy is in recession, as seen in 2020-2021.

So here's just like a concentric diagram. and the business stakeholders. Then we have 1.5.3, the differences in objectives of private and public sector enterprises.

So here's the differences and here's the objectives of public sector businesses. The government owns and controls many businesses and other activities. in mixed economies.

These were the public sector. And what are the likely objectives for the public sector businesses and organisations? There could be 3. 1. Financial, they meet profit targets set by the government, and sometimes profit is reinvested into the business. 2. Service, they provide a service to the public and meet quality targets set by the government, for example health services. And often public sector businesses are things that are necessary for the population such as water supply and any other health services.

And number three, social. They would protect or create employment in certain areas, especially in poorer regions with few other business employers. And here's number two, objectives of private sector businesses. And they may change over time as well.

Number one, financial. They make profit and growth of the business as it's very important for a business to grow to make profit so that they can get to break even point as well as increasing shareholder returns and increasing market share. Number two service by providing a service to the community and number three social basically for survival and then we have lastly some key terms for 1.5 business objectives and stakeholder objectives.

Number one, business objectives. Business objectives are the aims or targets that a business works towards to. A profit. A profit is the total income of a business or revenue, less or minus total costs. The market share.

The market share is a percentage of a total market sales held by one brand or business using the formula I showed just now. And number four, social enterprise. A social enterprise has social objectives as well as an aim to make a profit to reinvest back into the business. And lastly, stakeholder. A stakeholder is any person or group with a direct interest in the performance and activities of a business.

And that's it for this 1.5 specification for business objectives and stakeholder objectives video for IGCSE Business Studies. And I hope you guys found it useful and found it helpful and if you did, please leave a like and subscribe and comment down below if you have any questions or criticisms. And also check out my Instagram in the description for more daily content.

And I hope you guys found it useful and I'll see you guys in the next video. Until then, stay safe and happy learning.

Transcript for:Business and Stakeholder Objectives Overview

Transcript for:
Business and Stakeholder Objectives Overview