businesses can have several objectives, e.g. survival, growth, profit, market share

1.5.1 Business Objectives – Cambridge IGCSE Business Studies (0450)

Syllabus Map – What Is Covered Here?

Why Set Objectives?

• Direction & purpose – give the organisation a clear target.
• Motivation – staff know what they are working towards.
• Planning & control – objectives become the basis for plans and for checking progress.
• Performance measurement – results can be compared with agreed standards.

Common Types of Business Objectives

1. Survival – staying in operation, especially during downturns.
2. Growth – increasing size (sales, output, market presence).
3. Profit – earning a satisfactory return for owners/shareholders.
4. Market‑share – gaining a larger proportion of total sales in a market.
5. Social‑enterprise – delivering measurable social or environmental benefits alongside financial goals.

Stakeholder Objectives

Each stakeholder group has its own aims. Managers must balance them.

Conflicting Objectives (syllabus term)

• Profit vs. Quality – cost‑cutting can lower product quality.
• Growth vs. Survival – rapid expansion may overstretch cash flow, threatening survival.
• Social‑enterprise vs. Profit – community projects can reduce short‑term profit margins.

Measuring Objectives – Key Performance Indicators (KPIs)

Linking Objectives to Strategy (concise)

• Cost‑leadership – emphasises profit and market‑share through low prices and high volumes.
• Differentiation – focuses on quality, brand reputation (and sometimes social‑enterprise) to justify premium pricing.
• Social‑enterprise – places social‑enterprise objectives at the core; profit sustains the mission.

Setting SMART Objectives

SMART = Specific, Measurable, Achievable, Relevant, Time‑bound.

Example: “Increase the company’s market‑share in the UK snack market from 8 % to 12 % within the next 24 months by launching two new product lines and expanding distribution to 500 additional retail outlets.”

Differences Between Private‑Sector and Public‑Sector Objectives

• Private‑sector firms – primarily profit, growth, market‑share; increasingly also social‑enterprise goals.
• Public‑sector organisations – focus on service delivery, public welfare, and efficient use of taxpayers’ money; profit is not a primary aim.

Key Points to Remember

• Businesses usually pursue several objectives at once; they may complement or conflict.
• Objectives must be realistic, measurable and linked to the chosen strategy.
• Stakeholder groups each have their own objectives; effective managers balance them.
• Regular monitoring, review and adjustment keep objectives relevant.

Sidebar: Understanding Business Activity (Section 1)

• Purpose of business – satisfy human wants and needs, create value.
• Needs vs. wants – needs are essential for survival; wants are shaped by culture and income.
• Classification – primary, secondary, tertiary sectors; private vs. public sector; local, national, multinational.
• Forms of organisation – sole trader, partnership, limited company, co‑operative, social enterprise.
• Reasons for growth – economies of scale, market power, profit maximisation.
• Reasons for failure – poor cash‑flow, inadequate market research, over‑expansion, weak management.

Sidebar: People in Business (Section 2)

• Motivation theories (Maslow, Herzberg, McGregor).
• Management functions – planning, organising, leading, controlling.
• Leadership styles – autocratic, democratic, laissez‑faire.
• Trade unions – role, advantages and disadvantages.
• Recruitment & training – selection methods, induction, on‑the‑job training.
• Communication – formal vs. informal, barriers, effective techniques.
• Legal controls – health & safety, employment law, equality legislation.

Sidebar: Marketing Essentials (Section 3)

• Marketing’s role – identify and satisfy customer wants.
• Market changes – technology, fashion, demographics.
• Niche vs. mass market – focused vs. broad appeal.
• Segmentation – demographic, geographic, psychographic, behavioural.
• Market research – primary vs. secondary, qualitative vs. quantitative.
• 4 Ps – Product, Price, Place, Promotion (with brief examples).
• Legal/ethical issues – consumer protection, misleading advertising.
• Foreign markets – export, licensing, joint ventures.

Sidebar: Operations Snapshot (Section 4)

• Production methods – job, batch, flow, mass‑customisation.
• Cost classifications – fixed, variable, semi‑variable.
• Break‑even analysis – point where total revenue = total costs.
• Quality – total quality management, quality control vs. quality assurance.
• Location decisions – factors such as transport, labour, market proximity.

Sidebar: Financial Basics (Section 5)

• Sources of finance – internal (retained profit) and external (bank loan, equity, leasing).
• Cash‑flow – importance of positive cash‑flow for survival.
• Income statement – shows profit or loss over a period.
• Balance sheet – snapshot of assets, liabilities and equity.
• Key ratios – profit margin, current ratio, return on capital employed (ROCE).

Sidebar: External Influences (Section 6)

• Economic cycle – expansion, peak, recession, trough; impact on demand.
• Government policy – taxation, subsidies, regulation, public‑sector objectives.
• Environmental & ethical issues – sustainability, carbon footprint, corporate social responsibility.
• Globalisation – opportunities (new markets) and threats (competition).
• Multinational corporations – advantages of scale, challenges of cultural differences.
• Exchange rates – effect on imports, exports and profitability.