BUSINESS OBJECTIVES
The Business Objectives column is the 'what' - what will you achieve in your
business and by when?
KEY BUSINESS OBJECTIVES –
ASSOCIATED STRATEGIES
YEAR ONE
1. Rent workshop or factory space with a lock up storage area
1. To establish a workplace that functions at
2. Ensure all raw materials are on regular auto-order
optimum capacity
3. Test workshop equipment to ensure maximum functionality
1. Supply stock to forty retail outlets throughout Melbourne and
surrounding tourist areas
2. Start a stall at Caribbean market every Saturday and Sunday
2. Have $30,000 turnover in first year of
operation 3. Offer free product to a variety of home ware and home decorator
stores as a form of promotion
4. Develop a referral reward program for those retail outlets that refer
me to other potential suppliers
1. Ensure that raw materials are purchased from suppliers of the
highest quality
3. Build a reputation for quality, error-free
2. Organise workshop space to ensure optimum production efficiency
products and service
and quality
3. Encourage constructive feedback from customers and suppliers
1. Undertake networking activities to build up name and reputation
2. Always provide exceptional, on-time, error-free service to
4. Build a solid customer base on which to
customers
expand product range
3. Keep up to date with trends in theindustry and constantly provide
new and exciting products for customers to choose from.
5. Have product range expand to include a 1. Spend time each week sourcing new product
variety of handmade homeware by the end of
the first twelve months 2. Take short courses to learn how to produce items that interest me
3. Encourage continued feedback from retailers on shelf life of various
products and consumer buying patterns
4. Subscribe to home decorator magazines and publications to keep
up with new and changing trends.
Introduction
When a sole trader sets up they may have some unstated aims or objectives - for
example to survive for the first year. Other businesses may wish to state exactly what
they are aiming to do, such as Amazon, the Internet CD and bookseller, who wants to
“make history and have fun”.
An aim is where the business wants to go in the future, its goals. It is a statement of
purpose, e.g. we want to grow the business into Europe.
Business objectives are the stated, measurable targets of how to achieve business
aims. For instance, we want to achieve sales of €10 million in European markets in 2004.
A mission statement sets out the business vision and values that enables employees,
managers, customers and even suppliers to understand the underlying basis for the
actions of the business.
Business Objectives
Objectives give the business a clearly defined target. Plans can then be made to achieve
these targets. This can motivate the employees. It also enables the business to measure
the progress towards to its stated aims.
The most effective business objectives meet the following criteria:
S – Specific – objectives are aimed at what the business does, e.g. a hotel might have an
objective of filling 60% of its beds a night during October, an objective specific to that
business.
M - Measurable – the business can put a value to the objective, e.g. €10,000 in sales in
the next half year of trading.
A - Agreed by all those concerned in trying to achieve the objective.
R - Realistic – the objective should be challenging, but it should also be able to be
achieved by the resources available.
T- Time specific – they have a time limit of when the objective should be achieved, e.g.
by the end of the year.
The main objectives that a business might have are:
Survival – a short term objective, probably for small business just starting out, or when a
new firm enters the market or at a time of crisis.
Profit maximisation – try to make the most profit possible – most like to be the aim of
the owners and shareholders.
Profit satisficing – try to make enough profit to keep the owners comfortable – probably
the aim of smaller businesses whose owners do not want to work longer hours.
Sales growth – where the business tries to make as many sales as possible. This may be
because the managers believe that the survival of the business depends on being large.
Large businesses can also benefit from economies of scale.
A business may find that some of their objectives conflict with one and other:
Growth versus profit: for example, achieving higher sales in the short term (e.g. by
cutting prices) will reduce short-term profit.
Short-term versus long-term: for example, a business may decide to accept lower cash
flows in the short-term whilst it invests heavily in new products or plant and equipment.
Large investors in the Stock Exchange are often accused of looking too much at short-
term objectives and company performance rather than investing in a business for the
long-term.
Alternative Aims and Objectives
Not all businesses seek profit or growth. Some organisations have alternative objectives.
Examples of other objectives:
Ethical and socially responsible objectives – organisations like the Co-op or the Body
Shop have objectives which are based on their beliefs on how one should treat the
environment and people who are less fortunate.
Public sector corporations are run to not only generate a profit but provide a service to
the public. This service will need to meet the needs of the less well off in society or help
improve the ability of the economy to function: e.g. cheap and accessible transport
service.
Public sector organisations that monitor or control private sector activities have
objectives that are to ensure that the business they are monitoring comply with the laws
laid down.
Health care and education establishments – their objectives are to provide a service –
most private schools for instance have charitable status. Their aim is the enhancement of
their pupils through education.
Charities and voluntary organisations – their aims and objectives are led by the beliefs
they stand for.
Changing Objectives
A business may change its objectives over time due to the following reasons:
A business may achieve an objective and will need to move onto another one (e.g.
survival in the first year may lead to an objective of increasing profit in the second year).
The competitive environment might change, with the launch of new products from
competitors.
Technology might change product designs, so sales and production targets might need to
change.
A company entering the market with a goal to do business shall have the
following objectives:
• Maximizing the returns on stockholders capital (wealth maximization) & and;
• Profit Maximization
Unlike traditional business theories where maximum importance was given to profit
maximization, modern theories lays down facts stressing on the maximization of wealth of its
stock holders. Which means, maximizing the price of the stock/shares.
Profit maximization is a short term goal mainly for a period of one year or less. A company can
maximize its short term profits at the expense of its long term wealth maximization. Stock
holders wealth maximization is along term goal as stockholders are investing in a company
expecting good-future-returns. Wealth maximization is preferable because it considers (1)
wealth for long term, (2) risks, (3) stockholders returns and timing of the returns. Timing of the
returns is important, as earlier the return is received, the better. A quick-positive return reduces
the risk involved in the investment due to time factor. Also, if you have quick cash in hand you
can reinvest the same.
When we are discussing long and short term business objectives, we must keep in mind that very
often profit maximization and wealth maximization are conflicting objectives. It is very
important for an entrepreneur to decide that what is his priority, longer term business or short
term business. Very often you will find business starting off very well but ultimately going down
to competition. They never invest in modernization and expansion of their business process.
Hence better companies with good technology took over it. A costly investment may create losses
in short term but yield substantial profits in long run. A company who wants to show short term
profits may continuously postpone its capital repairs or equipment replacement. These
postponements will certainly hurt the long term profitability. As an investor, important is to
analyze a companies business objective and find out if it is focusing more on short term and long
term growth.
The biggest obstacle in the way of long term wealth maximization is our thought process. And if
you have overcome your mind then the second obstacle you will face is Financial Risk linked
with any investment. Risk refers to the variability of expected returns (sales, earnings etc) and its
profitability. Hence risk analysis is very important. Risk analysis is a process if measuring and
analyzing the risk associated with financial and investment decisions. It is important to consider
risk in making capital investment decisions because of the large amount of capital involved and
also because of long term nature of the investment (time factor). Compare rate of return with
amount of risk involved. Investor agreeing to take risk must be rewarded with good returns and
vise versa. Management of Risk and returns is a key to create a long term wealth Maximization.
CONCLUSION
SINCE FROM ABOVE INFORMMATION IT IS PROVED THAT THE OBEJETIVES OF
BUSINESS IS TO MAXIMISE PROFIT, INCREASE THE BUSINESS IN THE
EXISISTING MARKET.
