Business objectives and stakeholders

Last time

Before we start: last time, in Business activity, added value and the economic sectors, you learned these points. Here they are again on one card. Keep them in mind, because today builds on them.

What is the business trying to do?

A new restaurant may just want to survive its first year. A large company may want to be the biggest in the country. These aims are its objectives. And many groups, from workers to the local community, care what the business does. They are its stakeholders.

Why objectives matter

Objectives are the aims or targets a business works towards. They give a direction, help managers make decisions, and motivate workers with a clear target. They also let the business measure its success, by comparing results with the target.

Private sector objectives

Survival: most important for a new business, or in a recession. Profit: needed to reward owners, and to pay for growth. Growth: a bigger business gains economies of scale and market share. Market share: a larger share of the market's sales. And service to society: some aim to help the community or protect the environment.

Objectives change

A new business usually aims to survive first. Once it is established, it may aim for profit, then growth. In a recession, many businesses switch back to survival. Social enterprises aim for social or environmental goals as well as profit.

Public sector objectives

Public sector organisations aim to provide a service to the public, such as health care or electricity, often at an affordable price. They may aim to protect jobs and keep services running in areas private firms would not serve. And to keep costs within the budget set by the government.

Stakeholders

A stakeholder is any person or group with an interest in the activities of a business. Internal stakeholders are inside the business: owners, managers and employees. External stakeholders are outside: customers, suppliers, banks, the government and the local community.

What each stakeholder wants

Each stakeholder group has its own objectives. Here they are.

Conflicting objectives

Owners want higher profit, but employees want higher wages, which raise costs and cut profit. Customers want low prices, but owners want high prices for profit. A business expanding a factory creates jobs for the community, but also more traffic and pollution.

Resolving conflict

Businesses must balance stakeholders' objectives. Ignoring one group can hurt the business later. For example, paying fair wages may cut profit now, but it raises motivation and lowers labour turnover. Reducing pollution costs money, but avoids fines and protects the brand.

Identify and outline

Identify four stakeholder groups is a four-mark knowledge question: just name four, one mark each. Outline needs a little more: name it and give one short detail, ideally from the case. Explain needs the full chain: point, how it affects the business, and a link to the case.

Which objective matters most?

Many questions ask which objective is most important. The answer depends on the business's situation. For a new business, survival matters most, because without it, no other objective is possible. For an established business in a growing market, growth or market share may matter most.

Mistakes that lose marks

Mistake one: saying every business aims only for profit. Mistake two: calling customers internal stakeholders. Mistake three: describing a stakeholder without giving its objective. The fix: match each group with its objective, and judge by the situation.

The full-marks tip

The full-marks tip: pair every stakeholder with what it wants from the business. When judging the most important objective, use the business's situation: new, growing, or struggling.

On one card

So, on one card: objectives and stakeholders. Keep it for revision.