Business objectives

Business AS · Business and its environment. The idea in plain words, the rules to remember, the mistake to avoid and a worked example, written and checked by Mega Lecture.

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The idea

Objectives tell everyone in a business what it is trying to achieve. They give direction, help managers decide between options and provide a standard for judging success.

There is a hierarchy. The mission statement gives the broad purpose. Aims are long-term goals. Objectives make the aims precise. Strategy is the long-term plan to reach them, and tactics are the short-term actions.

Private sector firms usually aim for survival, profit, growth or market share. Public sector organisations aim to provide a service. Many firms also accept corporate social responsibility and measure the triple bottom line: economic, social and environmental results. Objectives change over time, for example from survival to growth.

Rules to remember

Order from broad to specific: mission statement → aims → objectives → strategy → tactics.
SMART = specific, measurable, achievable, realistic, time-limited.
Triple bottom line = economic (profit), social (people) and environmental (planet).
CSR: a business considers the interests of society and the environment, going beyond what the law requires.
Decision-making stages: set objectives → gather and analyse information → choose an option → implement → review against the objective.
Objectives are broken down into targets and budgets for departments and individuals.
Ethical decisions follow what is morally right, even when this raises costs or cuts short-term profit.

Common mistake

A statement such as 'to be the best in the market' is not a SMART objective, because it has no number and no deadline. Look for a figure and a time limit.

Worked example

A retailer with four branches had sales revenue of $400,000 last year. Its objective is to raise revenue by 15% this year, shared equally between the branches. What is the target for each branch?

Increase = 15% × $400,000 = $60,000.
Company target = $400,000 + $60,000 = $460,000.
Target per branch = $460,000 ÷ 4 = $115,000.

Answer: $115,000 per branch.

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