Everything you need to know about the objectives of business. The business is an economic institution operating in a socio-economic system.
Therefore, objectives of business should be defined keeping in view its prevailing environment and its needs for survival and growth. Like any other institution business has several rather than a single objective.
Objectives of business are multi-dimensional in nature. Business is established and it exists to achieve multiple objectives.
People enter into business and stay in business because they want to earn money, social power and prestige, joy of achievement and other goals.
ADVERTISEMENTS:
Generally, profit motive is considered to be the primary objective of business. But profit-making is not the sole or only objectives of a business. Every business enterprise has to lay down its multiple objectives to justify its existence.
The objectives of business can be studied under the following heads:-
1. Economic Objectives 2. Social Objectives 3. Human or Individual Objectives 4. Multiple Objectives 5. Organic Objectives 6. Micro Level Objectives 7. National Level Objectives 8. Global Objectives.
Classification of Business Objectives
Objectives of Business – Profitability, Growth, Stability, Efficiency and Survival
Business means busy in some activities. Business means conducting activities such as – sale, purchase and manufacturing etc for profit and growth. Business is also referred to a particular company, enterprise or corporation.
ADVERTISEMENTS:
A business always has some purpose and no doubt the most important purpose of business is achieving profitability and growth.
Followings are the some important objectives of business:
1. Profitability – This is one of the most important objectives of business. We normally setup business to achieve profits for its owner or shareholders. But, does it mean that business should somehow, by hook or crook, earn the profit? Our answer is no; it should earn profit by working under rules and regulations or by following ethical practices.
2. Growth – Another important objective of business is to achieve growth. The growth should be in terms of increase in profit, revenue, capacity, number of employees and employee prosperity, etc.
ADVERTISEMENTS:
3. Stability – Stability means continuity of business. An enterprise or business should achieve stability in terms of customer satisfaction, creditworthiness, employee satisfaction etc. A stable organization can easily handle changing dynamics of markets.
4. Efficiency – An efficient or aggressive working environment. A business should always try to achieve the best in its field. Efficiency is considered in terms of labor productivity, energy consumption, quality control etc.
5. Survival – A business should have the capability to survive markets jolts or shocks. A business should be there with a vision of long-term existence.
Objectives of Business – Economic, Social, Human or Individual and Multiple Objectives
Every business is directed to the achievement of certain objectives.
Objectives refer to the end points towards which all business activities are directed:
Objectives lay down the guidelines for various activities and decide the direction and amount of efforts needed for these activities. Objectives should be feasible and must be expressed in specific terms with a time limit for achievement. For example, the objective of a mobile company can be to increase the mobile users by 10% in 2 years.
Business Objectives may be broadly classified into three categories:
1. Economic Objectives
2. Social Objectives
ADVERTISEMENTS:
3. Human or Individual Objectives
1. Economic Objectives:
Business is an economic activity and its objectives are mainly economic in nature.
The main economic objectives are:
(i) Profit Earning – Every entrepreneur undertakes business activities primarily to earn profits. No business can survive for long without earning sufficient profits. A business needs profits not only for its existence but also for expansion and diversification.
ADVERTISEMENTS:
Profits provide a means of livelihood for the entrepreneur and a reward for bearing the risk.
(ii) Survival – Every business aims to ensure that it continues to survive and exist in the future. Survival is possible only when organisation is able to earn enough revenue to cover its costs.
(iii) Growth – A business needs to add to its prospects in the long run. For this, the business must grow and expand to survive in the long rim.
Growth of a business indicates how well it is able to exploit its potential opportunities. Growth is measured in terms of sales volume, increase in number of employees, market share, number of products, etc.
ADVERTISEMENTS:
Other Economic Objectives of Business:
(i) Creation of Customers – Creation of customers or demand is essential in order to earn profits. Customers are the focus of all business activities. A business enterprise can exist and grow only when it is able to capture a big market share, i.e. there are enough people to buy the products and services offered by an enterprise.
(ii) Innovation – Innovation refers to introduction of new ideas or new methods of production. Innovation plays a crucial role in increasing the competitive strength and improving the image of business enterprise in the mind of customers.
(iii) Optimum Utilisation of Resources – Resources available with the business are generally limited. So, every business enterprise aims to make best possible use of physical, financial and human resources. This objective can be achieved through – (a) Employing efficient and competent work force; (b) Making full use of installed machinery; (c) Minimizing wastage of materials.
2. Social Objectives:
Social objectives refer to the objectives, which are desired to be achieved for the benefit of the society. Business makes use of scarce resources of the society. So, society expects something in return for its welfare. Social objective deals with fulfilling obligations towards the society.
Some of the major social objectives are:
ADVERTISEMENTS:
(i) Supply of Quality products at Fair Prices – The business should ensure that there is a regular supply of useful products with fair quality and at reasonable prices. Supply of adulterated goods, inferior quality goods, unusable or harmful products are detrimental to the survival of business. It must be noted that customer is now more educated and quality conscious and expects value for his money spent.
(ii) Avoidance of Unfair Trade Practices – Business enterprise should not indulge in anti-social and unfair trade practices like black marketing, hoarding, adulteration, etc. Such practices are not only illegal but also hamper the image of business community. So, every business organisation should aim to avoid such undesirable activities.
(iii) Generation of Employment Opportunities – Every business enterprise should create sufficient employment opportunities without any discrimination as to caste, religion, sex, etc.
In India, unemployment is a serious problem and the business community can play a dominant role in solving this problem.
(iv) Protection of Environment – Business enterprise should take all reasonable steps to check and protect environment. It must make proper arrangement for disposal of effluents, smoke, wastes, etc. in order to avoid various types of pollution.
(v) Community Service – Many business organisations engage in various community services, like setting up schools, charitable dispensaries, donating money for social and religious activities, etc. Fulfillment of this objective helps to improve the reputation and public image of business.
ADVERTISEMENTS:
(vi) Welfare of Employees – No business can succeed without the contribution of its employees. Thus, business should aim to provide fair wages and reasonable working and living conditions to workers.
3. Human or Individual Objectives:
Human or individual objectives refer to the objectives related to the individual needs of the employees of an organisation. As employees are one of the most valuable resources for an organisation, satisfaction of their objectives is very important.
Individual objectives include the following objectives:
(i) To provide healthy and safe working conditions.
(ii) To pay fair and competitive salaries and perks.
(iii) To provide opportunities for personal growth and development of employees.
ADVERTISEMENTS:
(iv) To provide reasonable security of service.
(v) To provide various financial and non-financial incentives in order to motivate the workers.
(vi) To encourage employees to take initiative and participation in management.
Multiple Objectives of Business:
In this competitive world, management of a business must set’ Multiple Objectives’ for its long-term survival and growth. Peter F Drucker has suggested eight key areas, where objectives of a business enterprise must be set.
They are as follows:
(i) Market Standing:
ADVERTISEMENTS:
Market standing refers to the position of an enterprise in relation to its competitors. For example, position of ‘Airtel’ in relation to ‘Vodafone’. A business enterprise must aim to increase its market standing by offering good quality products at reasonable prices and serving them better than competitors.
(ii) Innovation:
In this competitive world, innovations are very important for a business enterprise to flourish. For example, Videocon introduced LED TV with inbuilt DTH facility. There are two kinds of innovation in every business – (a) Innovation in product or service; and (b) Innovation in various skills and activities needed to supply them.
(iii) Productivity:
Productivity is calculated by comparing the value of outputs with the value of inputs. It is used as a measure of efficiency. Every business enterprise must aim to achieve greater productivity through best possible use of available resources.
(iv) Physical and Financial Resources:
All business enterprises require physical resources (like plant, machinery, etc.) and financial resources (i.e. funds) in order to produce and supply goods and services to its customers. Every business enterprise must aim to acquire these resources according to its requirements and must use them efficiently.
(v) Earning Profits:
Earning profits on the capital employed is the main objective of every business enterprise. Every business aims to earn a reasonable profit in order to survive and grow in this competing world.
(vi) Manager Performance and Development:
All business enterprises need managers to conduct and coordinate business activity. So, every business enterprise must actively work for development of manager’s performance. Therefore, manager performance and development is an important objective.
(vii) Worker Performance and Attitude:
Worker’s performance and attitudes directly influence the productivity and profitability of every enterprise. So, every business enterprise must aim to improve performance of the workers and to develop positive attitude among them.
(viii) Social Responsibility:
Every business is a part of society as it makes use of scarce resources of the society. So, it must meet the expectations of the society. Social responsibility refers to the obligation of business firms to contribute resources for solving social problems and work in a socially desirable manner.
Objectives of Business
Every human activity has some objective or objectives, and business, as one of the important human activities, must have objectives.
There is a common belief that money making is the objective of business. Maximisation of profits is the prevailing norm among businessmen themselves. Money-chasing to them seems to be the primary economic objective of business. So a company must earn profit if it is to continue to exist. It is necessary to make earnings if additional capital is to be attracted and reserves are to be built up for meeting risk inherent in business activity.
But to say that the sole purpose of any business is to make profit is like saying that eating is the sole purpose of living, or that blood circulation is of supreme importance for human survival and breathing, digestion, or proper functioning of the nervous system count for nothing.
Obviously, a company must make profit for survival, but for survival it is also necessary that it produces goods or renders services that customers want. Its conditions of employment must be so good as to attract competent employees, and it should be an acceptable firm to the community in which it operates. Remove any of these essentials and the enterprise collapses. It is therefore important to recognise the fact that profit is the legitimate reward for honest endeavor, something the entrepreneur gets for rending service to the community.
Viewed in this light, profit plays a vital role as a measure of efficiency, and must be watched constantly. After all, profits provide not only the most accurate test of business efficiency, but also a sure check against failure. Over a course of time, profits are the measures of how well a company has met the needs of labour, consumers, shareholders, and the general public.
Besides economic objectives, a business has social objectives. In fact, the two objectives are intimately related. The primary objective of business therefore should be satisfaction of human wants through supply of quality goods at reasonable prices. Another objective is to provide a fair return to the investor and to have sufficient amount to cover future risks and to ensure future expansion. The third objective is to ‘create customers’ and meet their needs and wants, and also provide fair wages to the workers.
Suffice it to state here that business lies economic as well as social objectives. Its economic objectives relate to earning a satisfactory profit, creating customers and making innovation. Its social objectives comprise supply of quality goods in sufficient quantity at reasonable prices, fair deal to workers, fair returns to investors, and fair dealings with suppliers of materials.
To sum up, “business” may be said to be any enterprise which makes, distributes, or provides any article or service which other members of the community need. And business transactions are essentially measured in terms of money. These measurements must show profit to the enterprise, if it is to remain in business. But money and profit are measuring devices; yet a measuring device is not a purpose.
To realize a profit may be, and usually, is the motive or purpose of some of the individuals who engage in business. But “the only valid definition of business purpose is to create a customer”, that is, to provide goods or services which someone needs.
Objectives of Business – Economic, Social and Other Objectives of Business
As business seeks to create a balance between different needs and goals of different interest groups, like consumers, employees, society at large etc. it needs multiple objectives.
1. Economic Objectives:
The various economic objectives of business are described below:
i. Market Standing:
Market standing refers to the position of a business in context of its competitors. Every business enterprise must aim at securing a stronger standing in terms of offering competitive products to its customers and serving them to their satisfaction.
ii. Innovation:
Innovation is important as no business enterprise can flourish in a competitive world without innovation.
The innovation in business can be incorporated in many ways like:
a. Product innovation – The usability of a product may be enhanced by adding new features to it or modifying its packaging.
b. Production innovation – The technique of production may be improved with the help of better technology.
c. Distribution innovation – A business may explore new channels of distribution to enhance the marketability of its products.
iii. Productivity:
The productivity of a business is measured in terms of ratio between the inputs and outputs. Higher productivity indicates higher efficiency of the business. The productivity of a business should be high in order to ensure continuous survival and growth.
iv. Physical and Financial Resources:
Every business needs varied kinds of resources be it human physical or financial in order to carry out its activities. A business must obtain and utilised these resources efficiently.
v. Earning Profit:
Earning profit is one of the prime objectives of business. In the absence of profit a business may cease to exist over period of time. Thus, profit is must for every business in order to ensure its survival and growth.
2. Social Objectives:
The various social objectives of business are described below:
i. Supply of desired quality of goods and services – A businessman must offer the product and services in accordance with the needs and wants of the prospective buyers and at fair prices.
ii. Generating employment opportunities – It is essential for a business to generate employment opportunities so as to raise standard of living of people and foster economic development of the country.
iii. Community service activities – A business must be involved in different types of community services for the good of the society at large.
iv. Employee welfare – It is the prime responsibility of every business to take care of its employees. It must provide fair wages/salary, good working conditions, and prospects for growth etc. for them.
v. Protection of environment – A business should carry out its activities by adopting environmental friendly techniques in order to ensure conservation of natural resources and protection of environment.
3. Other Objectives:
The various other important objectives of business are described below:
i. Manager performance and development – The success of a business primarily depends upon the competence of its human resource. Therefore, the enterprises must actively work for this purpose by conducting motivational programmes for managers.
ii. Worker performance and attitude – The enterprises must ensure a positive attitude on the part of workers in order to enhance their contribution towards productivity and profitability of the enterprise.
Objectives of Business – Economic, Human, Organic, Micro Level and National Level Objectives
The objectives decide, “Where we want to go?” “What we want to achieve?” “What is our goal or destination?” To a layman an objective is an aim or goal. Objectives of any business enterprise have a great impact on the organisation and its working. All the time they guide the business concern on the path to destination. Entire business activities are directed, aimed and motivated towards the objectives or common ends.
Of course these objectives must be preplanned, predetermined, must be in written form and must be actual and feasible, and can be measurable in performance. The business objectives are multiple. These objectives can be classified in different categories like Primary and Secondary objectives. General and Specific objectives, long terms and short term objectives. Whatever, may be the classification of objectives, all these must be related to or oriented for the survival and growth of the business enterprise.
Objectives are needed in every area, where performance and results directly and vitally affect the survival and prosperity of business. It is the moral responsibility of top management to identify and specify the aims and objectives for their business enterprise. Management by objectives is an integral part of planning also.
Although, the profit motive constitutes the primary motive for business activities, but it is not the sole objective of it. Business enterprises have a number of objectives like economic, human, organic and social. A business enterprise is now considered not only as an economic institution but also as a social institution and a living member of the society. Therefore it has both the objectives, economic as well as social. Because of this, a business enterprise can fulfill its twin mission in the environment in order to enjoy stable and continuous life.
Classification of Business Objectives:
i. Yielding an adequate return on investment in the form of profits.
ii. Creating customers and capturing more markets for the products of the business.
iii. Introducing innovative ideas in technology, methods and procedure of work, in products or services etc.
iv. Ensuring adequate income or returns to the factors of production and its prompt payment.
v. Generating new employment opportunities through growth and expansion.
vi. Providing ample scope for growth, expansion, diversification etc.
i. Treating employees as human beings and partners in the business.
ii. Developing and improving new skills and abilities among the employees.
iii. Creating, developing and preserving a sense of commitment among the employees by their participation in management (in decision making process).
iv. Ensuring job satisfaction by making it more interesting and challenging.
v. Ensuring adequate, satisfactory wages, salaries and other non-economic amenities and benefits.
vi. Ensuring consumers satisfaction in terms of fair treatment like courtesy, understanding, honesty, no adulteration and no black marketing etc. Not resorting to malpractices.
vii. Maintaining satisfied work force with high morals.
viii. Motivating the employees continuously for higher efficiency.
i. Adopting the policy of ploughing back of profit for strengthening the business and self-reliance in capital raising.
ii. Implementing the schemes of growth and expansion so that the business can prosper day-by-day.
iii. Carrying the activities of research and development for innovation in business. Innovative ideas must be implemented.
iv. Attaining the ample size (Optimum size) of business operations for its prosperity.
v. Enhancing the goodwill, reputation and image of the business organisation.
4. Micro Level Objects:
i. Providing facilities for the spread of literacy, education, training etc.
ii. Improving standard of living by providing quality goods and services.
iii. Taking precaution to avoid environment pollution.
iv. Providing economic or non-economic help to religious, cultural, charitable, institutions for betterment of community at large.
v. Providing all types of help to backward and remote regions by establishing industrial units in these areas.
vi. Helping in maintaining a regional balance in industrial development.
i. Performing the business activities within the frame work of national priorities.
ii. Strengthening the national economy by giving their adequate contribution.
iii. Entering into new areas of production and distribution according to national priorities.
iv. Improving import substitution.
v. Promoting export in variety of products.
vi. Achieving self-sufficiency and self-reliance.
vii. Encouraging small scale business units and providing all facilities for their development.
viii. Ensuring the community at large for productive investment.
Objectives of Business – 4 Important Objectives: Economic, Human, Organic and Social Objectives
A business is an organisation of human, material and other intangible resources. It is established to offer satisfaction to its customers, owners, creditors, suppliers, employees, managers, shareholders. The main activity of business is to create, retain and satisfy profitable customers as a means of successfully achieving the desired aims of the enterprise. Business success is synonymous to marketing success. All business objectives need to be properly balanced, coordinated and integrated.
The objectives of business must be laid down keeping in view prevailing environment. These objectives of a business are multidimensional in nature. Every business enterprise has to prepare a list of economic, human, organic and social objectives, which must be clear-cut and specific.
Essentially a business is an economic activity.
These objectives focus on three important constituents of the business system:
i. The owner.
ii. The employees.
iii. The customers.
The owner i.e. the shareholders must get safety for their investments in business enterprise as well as adequate, regular and assured return on investment must be given to them.
In case of employees, job security, adequate and fair wages/salaries, allowances, incentives, bonus, welfare facilities etc. must be given to them. Employees are live asset of an organisation. On their, hard, devoted contribution only, business organisation can survive. Business enterprises must try to maintain their high morale. Continuous motivation is necessary for better and greater productivity or for efficiency.
Customer is the king of market. The entire business activities are customer oriented. They produce goods and services which are needed by customers. Satisfaction of the needs of customers in one of the important objectives of the business. Providing quality goods and services at reasonable prices is the aim of business.
Creating a large number of customers by capturing more and more markets is another objective of business along with stopping all types of adulteration, black marketing, artificial scarcity of goods, malpractices, fraudulent activities, cheating the customer etc. another objective of business which is the basic one, is earning reasonable profits from business activities. All these are covered under economic objectives of business.
2. Human Objectives:
Human objectives are connected with employees and customers. Employees must be treated as human beings and not merely as a factor of production. They must be treated not as employees but as business partners. Business profit must be shared with them. They must be made to participate in decision making process, called as worker’s participation in management.
Business enterprise has to arrange training programmes for the development of their knowledge, skill, capabilities i.e. abilities etc. for the better performance and efficiency. Their jobs must be secure, full job satisfaction should be given, and continuous motivation must be provided to keep their morale high. Making them committed and responsible employees of the organisation is another human objective of business enterprise. Customer is the center point of business enterprise.
Business has to take care of well-being of customers by providing needed goods and services, qualitative but at reasonable prices. Prompt redressal of their complaints is the primary expectation of customers. Proper care of the customer, at least for their complaints is a must for any business.
3. Organic Objectives:
Organic objectives are framed from business point of view. Its growth, development, expansion, stability, progress all these objectives are taken into consideration Ploughing back of profit is the renowned source for raising the capital needed by business where business enterprise does not want to depend on outsiders. It is also called as self-financing or financing from internal sources.
Under this concept capital is generated from profits of the business enterprises. Achieving the optimum size of business is another objective. Facing the competition and surviving for longer time etc. are covered under this category of objectives.
4. Social Objectives:
These objectives are classified into two categories; namely Micro Level and Macro Level. Under micro level business is expected to help in the spread of literacy, education, training, medical, and care, and public health, control of air and water pollution.
Under macro level, business has objectives like improving the import substitution, promoting more export developing small scale business units, industries as well as entering into area of production. Distribution of goods and services which have been given national importance and priorities.
Objectives of Business – Organic Objectives: Prestige and Recognition, Growth and Survival
The business is an economic institution operating in a socio-economic system. Therefore, objectives of business should be defined keeping in view its prevailing environment and its needs for survival and growth. Like any other institution business has several rather than a single objective. Objectives of business are multi-dimensional in nature. Business is established and it exists to achieve multiple objectives.
People enter into business and stay in business because they want to earn money, social power and prestige, joy of achievement and other goals. Generally, profit motive is considered to be the primary objective of business. But profit-making is not the sole or only objectives of a business. Every business enterprise has to lay down its multiple objectives to justify its existence.
Organic Objectives:
As an organic entity, a business enterprise has its own stages of infancy, childhood, adolescence, adulthood and maturity. Like a human being, the first concern of a business enterprise is to ensure its survival. When the enterprise is assured of its survival, it will aim at growth and expansion.
To accomplish this objective, it will attempt to win prestige, recognition and goodwill from the society in which it operates. In order to pass through these stages in time and with strength, a business unit uses several methods, e.g., ploughing back a part of its profits, attaining optimum size to avail of the economics of scale, etc.
Organic objectives are the foundation for achieving all other objectives of business:
(a) Prestige and Recognition:
Prestige and recognition help to ensure the survival and growth of a firm. A business enterprise with good image or goodwill can easily attract customers, investors and competent employees.
(b) Growth:
Growth and diversification is one of the major objectives of business. Growth may be measured in terms of size, investment, market share, etc. Market share which a business enterprise commands reflects its standing in the market. A business enterprise may identify new customers, new products or new markets or increase its market share in the present market.
(c) Survival:
First of all a business enterprise tries to maintain its existence. Survival of stability objectives implies the maintenance of a firm’s competitive position or earning capacity or market standing. Unless an enterprise survives no other objectives can be accomplished.
Objectives of Business – Economic and Social Objectives
Business objectives are something, which a business organisation wants to achieve or accomplish over a specified period of time.
Thus, the objectives of business may be classified as:
(i) Economic Objectives:
Economic objectives of a business refer to the objective of earning profit and those which have a direct impact on the profit earning objective of business.
The objectives can be summarised as under:
(a) Earning of adequate profits.
(b) Exporting new markets and creation of more customers.
(c) Growth and expansion of business operation.
(d) Making use of available resources in the best possible manner.
(ii) Social Objectives:
These objectives are those, which are desired to be achieved for the benefit of society.
Some of these are:
(a)Production and supply of quality goods and services to the society.
(b)Taking steps in the direction of consumer education.
(c) Conserving natural resources and wild life and protecting the environment.
(d) Contributing towards the general welfare and upliftment of the society.
(e) Avoidance of unfair practices like hoardings, black-marketing, over-charging etc.
Objectives of Business
1. Economic objectives of business:
The objectives are as follows:
(i) Earning of adequate profits.
(ii) Creating new customers and entered the area of the market.
2. Social objectives of business:
The objectives are as follows:
(i) Making goods available at reasonable prices.
(ii) Ensuring fair return to the investors.
3. Human objectives of business:
The objectives are as follows:
(i) Providing fair remuneration and incentives to employees.
(ii) Providing the employees with more and more promotional opportunities.
4. Global objectives of business:
The objectives are as follows:
(i) Making available globally competitive goods and services.
(ii) Reducing disparities among rich and poor nations by expanding its operations.