1.5. Business objectives and stakeholder objectives
- Syllabus
- 0264–2027–2028
- Topic
- 1.5
- Level
- —
Learning objectives
1.5.1Business objectives• businesses can have several objectives, e.g. survival, growth, profit, market share• the importance of business objectives1.5.2The role of stakeholder groups• internal stakeholder groups: owners (sole traders, partnerships, shareholders), managers, employees• external stakeholder groups: customers, suppliers, lenders/banks, government, local community• objectives of different stakeholder groups• how these objectives may conflict with each other
Use business objectives to guide decisions
A business objective is a target the business aims to achieve. It gives direction, helps managers choose between alternatives, coordinates employees and provides a standard for measuring performance.
| Objective | What it prioritises | Example indicator |
|---|---|---|
| survival | continuing to trade, especially during start-up or difficulty | positive cash flow and bills paid |
| profit | increasing the financial return from operations | profit value or margin |
| growth | expanding sales, capacity, employees or locations | sales or output growth |
| market share | increasing the business's sales relative to the total market | percentage market share |
Objectives can change with ownership, business age, competition and economic conditions. A start-up may prioritise survival, then later pursue profit or growth.
An objective is not merely a slogan. It must influence decisions and be measurable enough to review; objectives may also conflict, such as rapid growth versus short-run profit.
Balance stakeholder objectives
| Stakeholder | Typical objective |
|---|---|
| owners / shareholders | profit, dividends, growth and business value |
| managers | pay, status, job security, resources and meeting performance targets |
| employees | pay, security, conditions and development |
| customers | quality, value, choice and reliable service |
| suppliers | regular orders and prompt payment |
| lenders / banks | interest paid on time, loan repayment and acceptable risk |
| government | tax revenue, jobs and legal compliance |
| local community | jobs with limited noise, congestion or pollution |
Objectives conflict when satisfying one group imposes a cost on another. Higher wages may reduce short-run owner profit; lower prices help customers but squeeze margins; expansion may create jobs while increasing local congestion. Managers must judge stakeholder power, urgency, long-run relationships and the business objective.
Managers are internal stakeholders even when they do not own the business. Lenders are external stakeholders: they supply finance but normally seek repayment and interest rather than ownership returns.