Objectives of the business

• All businesses are formed to fulfill a particular main purpose and accomplish certain objectives.
• Different businesses have different objectives.
• Objectives are aims or targets to work towards.
• While the importance and types of objectives vary from business to business there are objectives that are common to most businesses.
• These objectives can be summarized as:

Addition of Value/ Added value

• this is the difference between the selling price and the cost of inputs used in the production process.
• For example a product sells for $8 when the inputs (land, labour, capital and enterprise) cost $5 the added value is $3.
• Business exist mainly to add value.
• For example a mining company extracts iron ore from within the earth and passes it on to a processing factory which increases the value of the ore which is turned into pig iron.
• The iron is then processed into steel which further enhances the value of the product.
•  Many businesses want to add more value to their products.

Maximize profit (Profit Maximization)

• Common for business owned by private individuals. It involves improving profit margins, improving the rate of return on investment

Grow or expand (Growth and Expansion)

• It involves increasing the operations of the business, expanding to other regions or countries, gaining the market share.

Survival

•  especially relevant for new businesses

Provide a service

•  especially for public sector businesses whose main objective is to provide services, create employment and welfare of the general public

Importance/Conflict/ Change in objectives

•  A business’s objectives are not always as clear cut as outlined above.
• They tend to change from time to time depending on the operating environment.
• For example during a recession (period of low economic activity such as 2008) the business might be interested more in surviving than in making profit.
• Objectives also vary according to the type business involved for example a public corporation is mostly interested in providing a service rather than making profit.
• Different stakeholders have different objectives within the business.

To access more topics go to the O Level Business Studies Notes Page.