Business Essentials - Chapter 4.ppt
Embed Size (px)
Citation preview
PowerPoint PresentationBusiness Objectives
Copyright © 2002 by Harcourt, Inc. All rights reserved.
Key learning goals:
This topic will discuss the six major types of business objective
and explain why businesses may consider them to be important.
State the definition and importance of business objectives.
Explain the six major types of business objectives.
State in what circumstances businesses may consider survival to be
an important objective
Please list at least 5 examples of managerial objectives.
Tell why a business might pursue growth as an important
objective.
LEARNING GOALS
Copyright © 2002 by Harcourt, Inc. All rights reserved.
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.
Business Objectives
Copyright © 2002 by Harcourt, Inc. All rights reserved.
It is of great importance for a business to have well-defined
objectives. These objectives will help the business to be clear
about what it wants to achieve or where it wants to go.
With objectives, the performance of a business can be assessed
according to a standard, that is to say, how effectively the
business has achieved its objectives.
Business Objectives
Survival,
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:
Business Objectives
Copyright © 2002 by Harcourt, Inc. All rights reserved.
Table 3-2 Circumstances for a business to consider survival to be
an important objective
Business Objectives
1) In the early stages of trading
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.
2) When trading becomes difficult
During such periods, a business may face falling demand for their
products, bad debts, or low confidence for its future.
3) when there is danger of take-over
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,
Copyright © 2002 by Harcourt, Inc. All rights reserved.
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.
Business Objectives
-Profit Maximization
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 short-term 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.
Business Objectives
-Profit Maximization
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:
Business Objectives
Copyright © 2002 by Harcourt, Inc. All rights reserved.
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 fierce 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…
Business Objectives
Copyright © 2002 by Harcourt, Inc. All rights reserved.
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 fierce 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…
Business Objectives
Question for your critical thinking:
Why and how do you think the growth of a business may make its
employees, managers and owners all feel happy and secure?
Business Objectives
Definition:
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.
Common examples of managerial objectives are seen in the following
table:
Business Objectives
-Managerial Objectives
Business Objectives
-Managerial Objectives
Table 3-4 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 …
Copyright © 2002 by Harcourt, Inc. All rights reserved.
Business Objectives
-Managerial Objectives
Examples of managerial objectives
Questions for your critical thinking: 1) Why do managers need to
work hard themselves ? 2) Please tell what “delegate work”
means.
Copyright © 2002 by Harcourt, Inc. All rights reserved.
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.
The business wants to enlarge the market share first and then
benefits in the long run.
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.
Business Objectives
Social Responsibility definition: management philosophy that
highlights the social and economic effects of managerial decisions.
Or the management’s acceptance of the obligation to consider
profit, consumer satisfaction, and societal well-being of equal
value in evaluating the firm’s 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:
Business Objectives
Copyright © 2002 by Harcourt, Inc. All rights reserved.
Table 3-5 Possible reasons for a businesses to pursue image and
social responsibility as its objectives
Possible Reasons
Brief Explanations
1) Government legislation
Many laws have been passed to protect workers’ health and safety,
reduce discrimination against disabled workers and protect the
environment.
2) Competitive pressure
Increasing competition has become a challenge for modern
businesses. If customers think badly of a business, then the
business is finished. The business’s market share will be taken
over by other companies.
3) Benefits for the business
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.
4) Sustainable development
Paying attention to image and social responsibility is key to long
term development.
Copyright © 2002 by Harcourt, Inc. All rights reserved.
Business Objectives
Copyright © 2002 by Harcourt, Inc. All rights reserved.
Question for your critical thinking:
Discuss and give some examples for each of the four business’
social responsibilities in the above diagram.
Business Objectives