Objectives of the business

Objectives of the business

Businesses have objectives. Image credit essaywow.com

Businesses have objectives. Image credit essaywow.com

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.

Survival

  •  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.

By | 2017-01-17T11:16:21+00:00 December 8th, 2015|Notes, O Level Business Studies Notes, Ordinary Level Notes|0 Comments

About the Author:

He holds an Honours in Accountancy degree from the University of Zimbabwe. He is passionate about technology and its practical application in today's world.

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