Unit (5)

1. Unit (5) Business objectives What are objectives ? - All business have objectives. - The objectives are the goals which are se out by people who conduct the organization. - The performance of a business, could be judged on, how effectively it achieves it's objectives. - The objectives of a business in the private sector used to be different from those in the public sector.

2. Most of the following focuses on objectives in the private sector. ( 1 ) Survival, All businesses consider survival important. The owners of a new firm will be happy to see the firm survive in its first few month of trading. - When trading becomes difficult and may jeopardize the existence of a business? - a lack of experiences . - a lack of resources. - Competition fro mother firms. - Un foreseen problem such as unexpected costs. - Limited recognition by customers. - Mistakes made by decision makers. - Trading becomes difficult during recession. - Threat of takeover, firms some times become targets for other firms to takeover.

3. ( 2 ) Profit maximization : - The main aim of each business in the private sector is to maximize the profit. - Profits are maximized when the difference between the total revenue and the total costs is the greatest. - The accountants definition for profit (where total revenue – total cost is the greatest). - It is reasonable to assume that the firms aim at maximizing its profit as much as possible. - A business might sacrifice short term profit maximizing for long term profit.

4. Small business may not want to expand their out put to a point where their profits, are maximized. This is because : - This process needs to increase, workers, time of work. - The owners are happy with their profit and lifestyle. - Avoiding the need to charge their customers van and filling in vat returns. - It is difficult to identify exactly the level of out put than will maximize profit.

5. ( 3 ) Growth : - Many businesses consider growth as a main objective. - It is argued, that the firm must grow in order to survive. - Failure to grow, might result in, a sloes of competitiveness a decline in demand and eventual closure. - By growing, the business may dominate market and may enjoy some monopoly and raise its price. - Growth enables firms to reduce the risk. - It can sell to different markets and introduce new products. - Firms can exploit economies of scale if they grow enough. - Growth results in reducing costs and be efficient.

6. A number of people involved in business activity might benefit from growth. - Employees contributes in rising up the level of jobs security. This might not always be in the case if growth involves purchasing more machinery. - Managers and directors will have more power and status. - The salaries of directors and the chair person will be improved since it linked to the size of firm. - The owners of companies will benefit from the achieved, profit, part of these profits, have to be invested to fund the expansion, and the rest will benefit the owners.

7. ( 4 ) Managerial objectives : - Managers have their own objectives. - For this to happen, there must be some divorce of ownership and control. - This may be possible, when there is a very large number of joint owners as in a public limited company. - Each owner has a small part of the firm, so he will not be able to exert much control over the company.

8. ( 5 ) Managerial objectives are the following: - Allocate themselves. - Maximize personal salary. - Maximize their departmental budgets. - Improve their status and reorganization. - Maximize their leisure time. - Delegate works as much as possible. - Maximize fringe benefits such as expense account for entertaining.

9. Sale revenue maximization : - It is argued that an objective of firms may be to gain the highest possible sales revenue. - This objective will be favored by those (employees) whose salaries are linked to sales. - Sales revenue maximization is not the same as profit maximization. - The businesses may maximized profit at different level of out puts that would maximized it's sales revenue.

10. Image and social responsibility : - The firms have started to appreciate how important their mage is. - Many have also seen the benefit of showing responsibility to the people involved the business activity.

11. Why has happened ? - Legislation may be passed in accidence with consumers favors. - The change in social attitudes. - Competitive pressure has forced businesses to take into account the needs of others. Behavioral theories : - Be habitual theories assume that business objectives are not determined by only owners and managers. - They suggest also that others may affect the firms objectives such as government, consumers and pressure groups. - It is argued that groups inside and outside the business may influence the business objectives and have certain goals as follows.

12. ( 1 ) The owners will require a certain level of profit to retain their interest in the business. ( 2 ) workers will demand a minimum level of payment and acceptable working conditions. ( 3 ) managers will require enough resource to carry out their tasks. ( 4 ) The government will require the company to obey laws and pay taxes. ( 5 ) Consumers will insist on high quality products at a reasonable prices. ( 6 ) Environmentalists will insist that pollution should be avoided.

13. What determines business objectives? Theories suggest that the dominant grout in the business will determine the objectives. However there are other factors that may influence the choice of objective. ( 1 ) The size and status of the firm. Small companies may be content with low profit or survival, and large companies may aim at dominating market. ( 2 ) The age of the business. Businesses starting off may be content with survival. Later when they are established, they may be pressured to achieve other objectives.

14. ( 3 ) The sate of the economy . - During the recession periods, bother small and large business may be content with survival. - During the Become periods, other objectives will be important. ( 4 ) Whether a business is in private or public sector . - Firms in the public sector were set up to provide a service, where as firms in the private sector attempted to achieve other objectives such as profit maximization.

15. Objectives in the public sector. The objectives in the public sector falls into two major items. ( 1 ) providing a service to the nation : They aimed to provide services like rail links and bus routes which would be unprofitable. The private sector would not supply to these regions as they would not make profits. ( 2 ) To break-even taking one year to another : Many of nationalized industries did not break even. Many of them made a loss. So the government started encouraging them to a more commercial approach.