Business Objectives

Business objectives are the goals of business what the business wants to achieve. All businesses have their own objectives.
Different stakeholders or shareholders (people who have some financial interest in the business) may have different objectives in the business. For example, the owners of the business may consider making profit to be an important objective. But employees may regard job security, good working condition, and good reward as their important objective.

27-09-2012

TGG

Directional Move you toward the general objectives of

our vision statement Reasonable Are practical and obtainable; not extreme Inspiring Are challenging; affect you positively Visible Are easy to visualize Eventual Will be fulfilled at a future time

27-09-2012

TGG

Specific The objective achieves a particular,

detailed result. Measurable There is a means to determine the objective. Attainable They are within economic and physical capabilities. Rewarding They are profitable and self-satisfying. Timed They have a deadline

27-09-2012

TGG

Determine strategy Provide a guide to action Provide a sense of direction and units Provide a framework for decision making Coordinate activities Facilitate prioritization and resolve conflicts between departments.

27-09-2012

TGG

Measure and control performance Encourage a concentration of long term factors Motivate employees Provide shareholders with a clear idea of the business in which they have invested.

27-09-2012

TGG

 1. 2. 3. 4. 5. 6.

There are six major types of business objectives:

Survival, Profit Maximization, Growth, Managerial Objectives, Sales Revenue Maximization, Image and Social responsibility.

27-09-2012

TGG

Objective of survival:
Survival objective is essential for any business in that no survival means no today and no future.

Circumstances for a business to consider survival to be important can be seen in the following table:

27-09-2012

TGG

Business Objectives-Survival Circumstances for a business to consider survival to be an important objective

When
1) In the early stages of trading

Brief explanation
During such stages, businesses may face many problems because they may lack experience and resources, or they may meet with strong competition from existing companies. During such periods, a business may face falling demand for their products, bad debts, or low confidence for its future. In case of the threat of being taken over by another firm, survival may be the main objective. Otherwise, the business may be a business owned by some one else,

2) When trading becomes difficult 3) when there is danger of takeover

27-09-2012

TGG

Definition: Profit maximization means increasing profit as much as possible or producing a level of output which brings the most profit for the business. Usually, the main objective of a private sector business may be to maximize its profits. However, things may be different for a public sector business. The main objective of a public sector business may be to supply the best service in the past, although nowadays, they are offering services in a more and more business like way.

27-09-2012

TGG

10

Balance between short term and long term profit maximization: A business may sometimes sacrifice short-term profit maximization for long-term profit maximization. Possible reasons why a business might sacrifice shortterm profit maximization for long-term ones are, for example, lowering the price to build a market share and increase it when possible or operating a short term at loss to wait for the pick-up of sales in the future.
TGG 11

27-09-2012

Definition: Growth objective may refer to the goal of a business to become larger, stronger or more competitive. Many businesses regard growth as their main objectives. There are some reasons why businesses must choose growth as an important objective. Possible reasons are listed in the following table:
TGG 12

27-09-2012


1. 2.
3.

Possible reasons for a business to regard growth as an objective:

To survive, no growth may mean final death. To introduce new products in order to meet customer changing needs. To reduce risks of business: In competition, if a business can not become strong enough, it is more likely to be eaten up by other stronger competitors. To have low costs and more profits on a larger scale (economy of scale). To make employees, managers, and owners all feel happy and secure
TGG 13

4. 5.

27-09-2012

Definition: The managers own objectives in the business. Importance: As we know, the owners of the business do not usually control the day to day running of the business. It is the management that control and run the company according to their own objectives and the owners strategic decisions.

27-09-2012

TGG

14

Business Objectives -Managerial Objectives

Examples of managerial objectives

Some common examples of managerial objectives:

Maximize their departmental budgets Maximize number of employees under their control or in their charge Maximize their personal benefits such as entertainment expenses or company cars Maximize their leisure or free time Maximize their personal salary Delegate as much work as possible Improve their social status or position
27-09-2012 TGG 15

Reasons: Sometimes, when managers and employees are paid according to their sales revenues rather than the created profit, sales revenue maximization may become the main objective of the business.

Shortcomings: This may be a shortcoming for a business. Profit maximization for a business should be more important than sales revenue maximization in whatever situations.

27-09-2012

TGG

16

Social Responsibility definition: management philosophy that highlights the social and economic effects of managerial decisions. Or the managements acceptance of the obligation to consider profit, consumer satisfaction, and societal wellbeing of equal value in evaluating the firms performance. Image and social responsibility have become more and more important objectives of businesses. There are some reasons why businesses must consider image and social responsibility to be their objectives, which are illustrated in the following table:
TGG 17

27-09-2012

Possible reasons for a businesses to pursue image and social responsibility as its objectives
Possible Reasons
1) Government legislation Brief Explanations Many laws have been passed to protect workers health and safety, reduce discrimination against disabled workers and protect the environment. Increasing competition has become a challenge for modern businesses. If customers think badly of a business, then the business is finished. The businesss market share will be taken over by other companies. Good image may mean more sales and more profit. A company can benefit a lot if it has a good relation with its suppliers. Reliable supply of raw materials is key to production. Paying attention to image and social responsibility is key to long term development.
18

2) Competitive pressure

3) Benefits for the business

4) Sustainable development

27-09-2012

TGG

27-09-2012

TGG

19

THE HIERARCHY OF OBJECTIVES

The business over all purpose. The long-term goals which a business hopes to achieve. No two companies will have the same corporate aims.

27-09-2012

Management By Objectives (MBO)

AIMS

MISSION

A statement of the businesss core aims, phrased in a way to motivate employees and to stimulate interest by outside groups. Its an attempt to condense the purpose of the businesss existence into one statement.
These are the goals of the business. They are the outcomes or targets the business want to gain in order to achieve its aims. The objective of a business can be derived from its aims

CORPORATE OBJECTIVES

Specific targets for separate divisions.

DIVISIONAL OBJECTIVES DEPARTMENTAL OBJECTIVES

Targets for each department

INDIVIDUAL TARGETS
TGG

Individual goals/targets

A Hierarchy of Objectives

20

THE HIERARCHY OF OBJECTIVES

TO MAXIMISE SHAREHOLDERS VALUE

AIMS

27-09-2012

Management By Objectives (MBO)

CORPORATE OBJECTIVES

TO INCREASE PROFITS OFF ALL DIVISIONS BY 10% PER YEAR

DIVISIONAL OBJECTIVES

WITHIN ONE REGION, TO INCREASE MARKET SHARE BY 10% AND CUT OVERHEADS BY 5%

DEPARTMENTAL OBJECTIVES

MARKETING: Increase Profits by 10%; FINANCE : Reduce Longterm borrowing by 5%; R&D: Develop one innovative product each year.

E.G IN THE MARKETING DEPARTMENT

INDIVIDUAL TARGETS
How Corporate Aim is divided at every level of the organisation
TGG

Increase Sales by an average of 5% per client. Introduce five more clients to the business each year.

21

These are the outcomes or targets the business wants to gain in order to achieve its objectives: Survival, Profit, social responsibility Growth , Image, reputation and

Market share, Core Activities

sales Revenue, Shareholder Value,

27-09-2012 TGG 22

This relates to the organizations responses to major change or improvement, competitiveness or social issues, and business advantages.
They are generally focused internally and externally and relate to significant customer, market, product, service or technological opportunities and challenges. They are what the organization must achieve to remain or become competitive and ensure its long term sustainability. It sets the organizations long term directions and guide resource allocation and redistribution.

27-09-2012

TGG

23

A bigger market share. Quicker design-to-market times than rivals. Higher product quality than rivals. Better customer service than rivals Recognition as a leader in technology

27-09-2012

TGG

24

These objectives are less far reaching than strategic objectives. They are short term departmental performance targets . For example, A company may have a corporate objective of becoming a global operator in ten years, getting established in Europe within one year may be a tactical objective.

27-09-2012

TGG

25

These are low level objectives which are addressed to small groups and individuals. They carry little risk, require less planning and can be achieved fairly quickly. For example, completing a customer order by the end of the day might be an operational objective.

Signing up ten new dealers by the end of the month is another operational objective

27-09-2012

TGG

26

Market standing Productivity Physical and financial resources Profitability Innovation Manager performance and development Worker performance and attitudes Public and social responsibilities

27-09-2012

TGG

27

Market - What products to sell and who to sell them too. Productivity or efficiency - Ratio of inputs to output. Several measures are used. Physical and Financial - How will the farms resources be generated and utilized? Profitability - Important to accomplishing other objectives. What is your ROI, gross profit margin?

27-09-2012

TGG

28

Innovation - Risk and rewards of being first. Where will you want to be a leader? How will you keep up on what is going on? Manager performance - How will you assess the quality of your management. What will you do to insure that your management performance improves? Most important job of a small business manager is to be sure that there will be continued management. Worker performance - What can you do to be sure that your employees are happy and productive? Public and social responsibility The public is requesting more than just cheap food from agriculture. What will your farms role be in providing these other attributes that society wants?
TGG 29

27-09-2012