Welcome to the World of Business Objectives!
Ever wondered why some businesses seem to have a clear path to success while others wander aimlessly? It usually comes down to their objectives. Think of business objectives as a GPS for a company—without them, the business doesn't know where it's going or how to measure if it has arrived. In this chapter, we will explore what businesses aim to achieve and how these goals help them make big decisions.
1.4.1 Business Objectives in the Private and Public Sector
Not all businesses want the same thing. A small corner shop has different goals than a government-run hospital or a charity.
Objectives of Different Types of Businesses
1. Private Sector Businesses: These are owned by individuals or groups. Their main goals often include:
• Survival: Especially for new businesses or during a crisis (like a recession).
• Profit Maximisation: Making as much profit as possible for the owners.
• Growth: Increasing the size of the business through more sales or new locations.
• Market Share: Trying to own a larger percentage of the total sales in the industry.
2. Public Sector Businesses: These are owned by the government. Their goals are usually focused on:
• Service Provision: Ensuring everyone has access to essential services like education or police.
• Efficiency: Using taxpayer money wisely without wasting resources.
• Social Benefit: Improving the quality of life for citizens rather than just making money.
3. Social Enterprises: These are "businesses with a conscience." They trade like normal businesses but use their profits to help society.
• They often follow the Triple Bottom Line approach:
- Economic (Financial): Staying profitable so the business can keep running.
- Social: Providing jobs or supporting local communities.
- Environmental: Protecting the planet and using sustainable resources.
The Importance of Business Objectives
Why bother setting goals?
• They provide direction for the managers and employees.
• They act as a motivator for staff (everyone likes winning!).
• They allow a business to measure success at the end of the year.
Corporate Social Responsibility (CSR)
CSR is when a business goes above and beyond the law to act ethically and responsibly toward stakeholders. For example, a coffee shop might decide to only use 100% recyclable cups even if it costs them a little more.
Analogy: CSR is like being a "good neighbor" in the business world. You don't have to help your neighbor carry their groceries, but doing so makes the neighborhood better for everyone.
The Hierarchy of Objectives
Businesses use a "ladder" of goals. Don't worry if this seems tricky; just remember it goes from the "Big Picture" down to the "Small Tasks":
1. Mission Statement: A brief summary of why the business exists. It’s the "Big Dream."
2. Corporate Aims: Long-term goals the business wants to reach.
3. Objectives: Specific targets to help reach those aims.
4. Strategy: The long-term plan to achieve the objectives.
5. Tactics: Short-term, day-to-day actions (the "how-to" steps).
Key Takeaway:
Private businesses usually chase profit, public organizations chase service, and social enterprises balance profit with people and the planet (the Triple Bottom Line).
1.4.2 Objectives and Business Decisions
Objectives aren't just posters on a wall; they are the foundation of every decision a manager makes.
SMART Objectives
A good objective isn't vague. It must be SMART. Use this mnemonic to remember the criteria:
• S - Specific: Clearly state what is to be achieved.
• M - Measurable: It should have a number (e.g., "Increase sales by 10%").
• A - Achievable: It should be possible to do.
• R - Realistic: The business must have the resources to do it.
• T - Time-limited: There must be a deadline (e.g., "by December 2025").
Example: "I want to be rich" is a bad objective. "I want to earn \( \$5,000 \) in profit by December 31st" is a SMART objective.
How Objectives Influence Decision-Making
Managers follow a process:
1. Set Objectives.
2. Identify options to reach them.
3. Make a Decision.
4. Implement the plan.
5. Review and see if the objective was met.
Why Objectives Change Over Time
A business doesn't keep the same goals forever. They might change because:
• Internal changes: The business has grown so large it now wants to expand internationally.
• External changes: A new competitor enters the market, forcing the business to change its goal from "Growth" to "Survival."
• Economic climate: A recession might make "Profit Maximisation" impossible, so the business focuses on "Cost-cutting" instead.
Communication, Targets, and Budgets
Objectives must be communicated to the workforce. If employees don't know the goal, they can't help achieve it!
• Objectives are translated into targets for specific departments.
• Budgets (financial plans) are then set to give departments the money they need to meet those targets.
Ethics and Objectives
Ethics are the moral values of a business. Sometimes, a business might choose an objective that isn't the most profitable because it's the "right thing to do."
Example: A toy company might refuse to use cheap, low-quality plastic because it could be harmful, even though using it would increase their profits.
Quick Review: Common Mistakes to Avoid
• Confusing Aims and Objectives: Remember, Aims are general/long-term (like "to be the best"), while Objectives are SMART (like "to sell 500 units this month").
• Ignoring the "T" in SMART: Without a deadline, there is no pressure to succeed!
Key Takeaway:
Objectives must be SMART to be effective. They guide the decision-making process and must be communicated clearly to the whole team through targets and budgets.
Quick Summary Checklist
• Do you know the difference between private, public, and social enterprise goals?
• Can you explain the Triple Bottom Line?
• Can you list the SMART criteria?
• Do you understand the hierarchy: Mission -> Aim -> Objective -> Strategy -> Tactic?
• Can you explain why a business might change its goals (e.g., because of a new competitor)?
You've got this! Business objectives are all about knowing where you want to go and having a clear plan to get there. Keep practicing writing SMART objectives, and you'll master this chapter in no time!