Sri Kuala Lumpur Secondary School

Prepared by: Pn Samantha Yau

0450 Business Studies

Source: Cambridge IGCSE Business Studies, 4th edition, Karen Borrington & Peter Stimpson

NotesChapter 5: Business Objectives and Stakeholder Objectives

Business objectives are targets or aims for the business to work towards. They affect business decisions as well as worker motivation. Some common objectives for businesses are: Business survival

Profit

Returns to shareholders

Business growth

Market Share

Community Service

Survival

If the economy is low or the business is new, the owners will want to focus on survival more than anything else. This leads to reduced prices, as well as more promotions in a bid to raise business.

Profit

Profit is the total income of revenue minus the total costs. Profit is needed to pay a return to the owners, and to provide finance to expand the business further. If a business goes without profit, they close down. But they cannot earn too much profit either. If a business raises its prices too high in the hopes of a huge turnover, people will stop buying their products. Most owners aim for a satisfactory level of profit which avoids them having to do too much work or pay too much tax to the government.

Shareholder Returns

There are two ways to increase returns to shareholders. One is increasing profit, as the returns then increase due to dividends. Another way is increasing share prices, so that the shareholders can make money by selling the shares at a higher price than what they bought it for.

Growth

Some companies have the aim of growing large. There are many reasons for this.

Jobs are more secure if the business is larger (less chance of shutting down).

Higher salaries and status Spread risks by using new capital to venture into different markets. Obtain higher market share by putting your fingers into all the different pies.

Obtain cost advantages thanks to economies of scale.Market Share

Market share determines how well your company is doing versus all the other companies. Because of this, many companies would want to increase their market share. Having the largest market share gives a business: Good publicity, as they can call themselves the most popular and not be wrong. Increased influence over suppliers, as suppliers would be keen to sell to a business that is bigger than the others. Increased influence over customers (you would buy a Coke over a slightly cheaper Pepsi)Community Service

Social Enterprises are businesses in the private sector that DO NOT have profit as a main objective. Normally these businesses are NGOs to help the poor or the environment.

Business Objectives do not always stay the same. They may change over time.

Stakeholder Groups

Stakeholders are people who are affected by, or are involved with, a business. Stakeholders consist of:

Owners

Consumers

Workers

Government

Managers

Banks

The entire communityOwnersThey put in the main capital to set up and expand the business, and take a share of the profits if the business succeeds. They rise and fall with the business.

WorkersThey are employed by the business, and depend on the business for income. Because of this, they often are willing to work to secure the future of the business.

ManagersThey manage the workers and make important decisions. If they make a good decision, the business could be successful and end up expanding. But if they make the wrong decision, the business could fail.

CustomersCustomers are the pulse of every business. They buy the products the business makes. Without them, the business would fail. Successful businesses are made by finding out what customers want before making a product. This is called market research.GovernmentThey are responsible for the economy of the country, and may give monetary grants and loans to businesses they support. They also pass laws to protect workers and consumers.

The Whole CommunityCommunity is always affected by businesses. Communities need businesses for convenience, and also for employment.

BanksProvide finance for a business operations. They can give loans to businesses.

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