Business objectives and stakeholder objectives

Business objectives are the specific, measurable goals that a business aims to achieve. Think of them as a destination on a map; without them, the business is directionless. Objectives are vital because they guide every decision made, from marketing campaigns to hiring new staff. They also help to motivate employees by giving them a clear target to work towards. Furthermore, objectives allow a business to measure its performance. By comparing its actual results against its set targets, a business can see if it is succeeding or if it needs to change its strategy. The best objectives are SMART: Specific, Measurable, Achievable, Relevant, and Time-bound.

While 'making a profit' is a common goal, businesses pursue several different objectives, and their importance can change over time. For a new start-up, the main objective might be survival – simply staying in business for the first year. Once established, it might shift to profit maximisation, which means making the largest possible profit (Profit = Total Revenue - Total Costs). Another key objective is growth, which involves increasing the size of the business. This can be measured by higher sales revenue, more employees, or opening new branches. Businesses also compete for market share, which is the percentage of total sales in a market that one business controls. A higher market share often leads to more power and recognition in the industry. For some organisations, like charities or public sector bodies, the main objective might be providing a service to the community rather than making a profit.

No business operates in a vacuum. It is surrounded by people and groups who have an interest in its activities and success. These are called stakeholders. It's helpful to split them into two categories: Internal Stakeholders are groups inside the business, such as owners (including shareholders), managers, and employees. External Stakeholders are groups outside the business, such as customers, suppliers, the government, the local community, and financiers like banks. Each of these groups is affected by the business's decisions, and in turn, they can also influence how the business operates.

Each stakeholder group has its own set of objectives related to the business. Understanding these is key to understanding business behaviour.

Owners/Shareholders: Their primary goal is a good return on their investment. This comes from high profits, which can be paid out as dividends, and an increase in the value of their shares.

Managers: They aim for high salaries, job security, and the status that comes with running a successful, growing business. Their personal objectives (like managing a larger company) might sometimes prioritise growth over immediate profit.

Employees: They want fair wages, safe working conditions, job security, and opportunities for training and promotion.

Customers: They seek value for money, which means good quality products and services at a reasonable price. Good customer service and after-sales support are also important.

Suppliers: They want to receive regular orders from the business and to be paid promptly and fairly for the goods or services they provide.

Government: It wants the business to succeed so it can create jobs and pay taxes (like corporation tax and sales tax). The government also expects the business to comply with all laws and regulations.

Local Community: They are interested in the business providing local employment. However, they also want the business to be socially responsible by minimising pollution, noise, and traffic.

A business cannot keep every stakeholder happy all the time because their objectives often conflict. Management's job is to find a balance or make a compromise. For example, a decision that pleases one group may anger another. Common conflicts include:

• Owners vs. Employees: A classic conflict. Owners want to maximise profits by keeping costs, such as wages, low. Employees want the opposite: higher wages and better benefits, which increases costs and reduces profit.
• Owners vs. Customers: Owners might want to increase profit by using cheaper, lower-quality materials. This directly conflicts with customers' desire for high-quality products that offer good value for money.
• Managers vs. Shareholders: Managers may want to reinvest all profits back into the business to fund rapid growth (which increases their status and salary). However, shareholders may prefer to receive those profits now as higher dividends.
• Business vs. Local Community: A factory may want to operate 24 hours a day to maximise production and profit. This conflicts with the local community's objective of living in a quiet area without constant noise and traffic from lorries.