HBM Unit 1 - Objectives

Objectives

Objectives are long-term goals which businesses aim to achieve.

Why set objectives?

• Objectives are used to measure how successful an organisation is (e.g - have targets/objectives been met)
• Lets employees know what the organisation plans to do so employees can think about how it may impact on their jobs.
• Can be used to raise the profile of the organisation and might attract media attention and, in the long run, increase sales (e.g - become the first cosmetics company to ban the use of microbeads)
• Prospective employees might want to decide whether their own values match those of a company before deciding to apply for jobs
• Objectives allow employees, customers and suppliers know what the business is working towards

Different types of businesses may have different objectives. Different objectives are:

• Profit Maximisation
• Survival
• Growth
• Corporate Social Responsibility
• Satisficing
• Managerial Objectives
• Provide a quality service

Profit Maximisation

Profit Maximisation is the objective to making the maximum amount of profit. It is the main objective for many private sector organisations. Profit maximisations can be achieved by having:

• Lower costs
• Higher prices
• Aggressive advertising
• More production (staff working longer hours/take on more staff)

Profit maximisation can be difficult to achieve due to:

• The need for financial investment in the company (new products, new IT, new transport)
• Higher selling prices attracting negative publicity
• The need for more staff or for existing staff to work longer hours
• Buying cheaper raw materials which results in poor quality products being made

Survival

Businesses exist to make a profit but, for some, simply surviving is more important. Businesses would have an objective of survival:

• During the early stages of trading
• During times of economic slowdown

Growth

Businesses can grow due to two methods; Internal Growth and External Growth. Businesses grow:

• To avoid being a takeover target (shares become more expensive to buy)
• For a better chance of survival as growth reduces the risk of business failure (larger firms may make more profit which strengthens the company)
• To become the market leader (become better known and increase sales further)
• To be able to take advantage of economies of scale
• To expand a firm's product range (product portfolio) which increases sales and, therefore, profit

Corporate Social Responsibilty

Being responsible in business is very important as business that are seen to be irresponsible tend to gain a bad reputation and can suffer from decreased sales as a result. Examples of CSR are:

• The Body Shop does not test on animals
• The Co-op sells a number of fairtrade products
• McDonalds place bins outside their restaurants
• Car manufacturing companies are now trying to reduce their fuel emissions

All businesses are now expected to be environmentally friendly (e.g - reduce waste by minimising packaging)

Advantages of CSR:

• The business gains a good reputation for its caring nature
• Customers who agree are more likely to use the business
• The business can attract high quality staff who believe in the ethics of the business
• It helps society which in turn will herlp the business and us all…