Buiness Objectives

Buiness Objectives

Business Objectives

Profit Maximisation

  • Profit maximisation is the most commonly assumed business objective in economic theories.
  • Can be determined graphically where marginal cost (MC) equals marginal revenue (MR).
  • In real life, some businesses face difficulties accurately calculating MC and MR.

Sales Revenue Maximisation

  • Aiming to maximise sales revenue can be an alternative to profit maximisation.
  • It’s often targeted by sales-driven businesses or dominant firms seeking to prevent potential competitors.
  • This can be graphically shown where total revenue (TR) is at its highest point.

Business Growth

  • Many firms aspire to achieve business growth as their primary objective.
  • Often driven by managerial motives like increasing market share, economies of scale, or business power.
  • Growth can increase business security, but offers risks such as overexpansion.

Corporate Social Responsibility

  • Businesses may also set objectives based on their commitment to corporate social responsibility (CSR).
  • CSR can improve public image, customer loyalty, and employee morale.
  • Additionally, responsible behaviour can avoid regulatory penalties. However, the costs of CSR could impact short-term profits.

Survival

  • For some firms, the primary objective may be simply survival, particularly relevant for new startups or businesses in declining markets.
  • Survival can be problematic when the firm faces intense competition or adverse economic conditions.
  • Measures like cost-cutting and efficiency improvements could enhance survival potential.

Market Share

  • Some businesses may aim to maximise market share. This can increase brand recognition and bargaining power.
  • However, a large market share can attract regulatory scrutiny due to concerns about monopolistic behaviour.

Return On Investment

  • Return On Investment (ROI) is a key objective for businesses funded by investors.
  • Essentially, it denotes the profit made from the invested capital.
  • A higher ROI can attract further investment, but may also put pressure on the firm to deliver consistent returns.

Remember to consider the potential conflicts between these business objectives when revising. For example, maximising profits may conflict with social responsibilities, or pursuing growth may clash with ROI expectations.