ZIMSEC O Level Business Studies Notes: Objectives of the business
- All businesses are formed to fulfill a particular main purpose and accomplish certain objectives.
- Different businesses have different objectives.
- Objectives are aims or targets to work towards.
- While the importance and types of objectives vary from business to business there are objectives that are common to most businesses.
- These objectives can be summarized as:
Addition of Value/ Added value
- this is the difference between the selling price and the cost of inputs used in the production process.
- For example a product sells for $8 when the inputs (land, labour, capital and enterprise) cost $5 the added value is $3.
- Business exist mainly to add value.
- For example a mining company extracts iron ore from within the earth and passes it on to a processing factory which increases the value of the ore which is turned into pig iron.
- The iron is then processed into steel which further enhances the value of the product.
- Many businesses want to add more value to their products.
Maximize profit (Profit Maximization)
- Common for business owned by private individuals. It involves improving profit margins, improving the rate of return on investment
Grow or expand (Growth and Expansion)
- It involves increasing the operations of the business, expanding to other regions or countries, gaining the market share.
- especially relevant for new businesses
Provide a service
- especially for public sector businesses whose main objective is to provide services, create employment and welfare of the general public
Importance/Conflict/ Change in objectives
- A business’s objectives are not always as clear cut as outlined above.
- They tend to change from time to time depending on the operating environment.
- For example during a recession (period of low economic activity such as 2008) the business might be interested more in surviving than in making profit.
- Objectives also vary according to the type business involved for example a public corporation is mostly interested in providing a service rather than making profit.
- Different stakeholders have different objectives within the business.
To access more topics go to the O Level Business Studies Notes Page.