What is a Business Objective?
Business objectives can be simply defined as corporate-level goals set by the top management team for attaining them within a specific period of time. These are clear and measurable results that companies intend to achieve and help them in growing their scale of business activities. Business objectives work as a compass for a company, demonstrating how the organization should assign their strength and weakness to opportunities available to them from time to time. This objective shows the direction for carrying out operations by a business organization in pursuit of the mission.
They are generally laid down at beginning of the fiscal year by the senior committee during the performance year. Once objectives are decided, the management team gets direction and independence for reaching the desired state within a given framework.
The main focus of Business objectives is on the needed performance and results of a business enterprise. Corporate objectives cover a wide range of key areas instead of single objectives that the organization is deemed to reach.
There are mainly 8 areas that should be covered under Business objectives: productivity, profitability, management, employees, innovation, public responsibility, physical and financial resources, and market standing. Many times, there is even confusion and overlapping found in companies with regard to terms objective and goals. Both of these are distinct from one another as objectives are statements of intent whereas goals are quantifiable targets.
Types of Business Objectives
The Business objectives are classified on the following basis: Economic objectives, Social objectives, Human objectives, National objectives, and Global objectives. Each of these types is well-explained in the points given below.
The economic objectives of the business are concerned mainly with the creation of profit. It also included other objectives that are required to be pursued for attaining the objective of profit earning such as customer creation, innovation on a regular basis, and efficient utilization of available resources.
Profit is termed as the livelihood of every business enterprise in whose absence no business can survive in today’s highly competitive environment. Earning profit is in fact key objective due to which a business is set up and its operations are carried out. It is much required for interrupted operations and survival of the business, its growth, and expansion over a period of time.
Profit not only enable the owner of companies to earn their livelihood but also helps them in expanding the business size via reinvesting the part of the profit earned. However, for attaining the prime objective of profit earning, there are several other objectives that need to be pursued by business: –
- Creation of customers: The presence of customers to buy goods and services is essential for the continuation of business enterprise in the market. Also, businessmen can earn profits only if he sells their product and services at a reasonable price. Businessmen should always focus on attracting more and more customers for both their new and existing range of products. A large number of marketing strategies are generally utilized by companies in order to influence customers toward it.
- Regular innovation: Innovation means bringing in changes from time to time that brings improvement in products and services. The changes are made with the aim of enhancing the performance of products, boosting the production process and distribution of goods. Innovation enables business units in bringing down their per-unit cost of production by adopting better methods. Customers are also more attracted to newly innovated products thereby ultimately raising the sales of business enterprises. Companies are able to generate more profits with a reduction in cost and an increase in sales volume. Some good examples of innovation are using tractors instead of hand implements on farms, utilizing power looms instead of handlooms, etc.
- Maximum utilization of resources: Availability of a sufficient amount of capital is a must for running any business in an uninterrupted manner. Capital is required in almost every activity of business such as the purchase of raw materials and machinery, employing workers, and meeting other numerous day-to-day cash expenses. Men, materials, money, and machines are various key resources needed for carrying out business activities. All of these resources are available in limited quantity and therefore should be utilized in the most efficient manner possible. Avoiding wastage of resources, making fuller utilization of machinery, and employing efficient workers can assist a lot in achieving the profit objective.
Social objectives are objectives concerned with the upliftment and benefits of society. As business enterprise operates in a society utilizing their scarce resources, therefore society also expects something in return from them for its own welfare. No business unit should carry out any activity that could bring any harmful effect or trouble to society. If a business organization brings any harm to society, then sooner or later, it will face a negative public reaction. The social objectives of business encompass the production and supply of better-quality products, adopting fair trade practices, contributing toward society’s welfare, and provision of welfare amenities.
- Production and supply of high-quality products/services: Every business organization uses resources from society and therefore society also expects better quality products from them. It is a must for companies to pay more attention to producing the right quality products and supply them at right time at the right price. Providing inferior and adulterated goods may cause injuries to customers that will ultimately bring ill effects on the functioning of a business enterprise. Price should also be charged in accordance with the quality of goods and services delivered to society. In addition to this, timely supply of all customer requirements is much required. Therefore, it is of utmost importance for every organization to maintain a regular supply of its goods and services.
- Adoption of fair-trade practices: Unfair trade practices such as black-marketing, overcharging and hoarding is considered unfavorable for every society. Also, misleading advertisements bring false impressions to the eyes of customers regarding products quality. These types of advertisements deceive customers and are used by businessmen for the sake of generating a high-profit level. All of these are covered under unfair trade practices. The business enterprise should never indulge in creating artificial scarcity of essential goods or raising prices just for generating higher profits. Such practices bring a bad image to companies and sometimes even make them liable for penalties or imprisonment under the law. Therefore, it must be a key objective of every business enterprise to follow fair trade practices for the welfare of its clients and society.
- Contribution towards the general welfare of society: Business organizations should always work towards the upliftment and welfare of society. It can be achieved by carrying out numerous social activities such as running schools and colleges for providing better education, setting vocational centers for training people so that they can earn their livelihood, building health centers for medical facilities, and offering recreational facilities for the general public such as sports complexes, parks, etc.
These objectives are concerned with the well-being and fulfillment of employees’ expectations. Human objectives also include considering the needs of people who are handicapped, disabled, and deprived of proper training and education. Such corporate objectives, therefore, involve the economic well-being of employees, psychological and social satisfaction of employees, and development of human resources.
- The economic well-being of employees: A business organization must ensure that its employees are provided with fair remuneration and proper incentives like performance-based benefits, pension, and various other amenities in the form of housing facilities, medical facilities, etc. Employees feel more satisfied at work and contribute more to their organization if their economic well-being is properly considered.
- Social and psychological satisfaction of employees: Providing social and psychological satisfaction to employees is the prime duty of every business enterprise. It can be done by making work more interesting and challenging, decreasing the monotony of work, placing the right man in the right job, and providing opportunities for promotion and career advancement to working personnel. In addition to this, employee grievances should be given attention and their suggestion should be considered while making decisions. When employees are happy and satisfied with their work then they put in maximum effort at their work.
- Development of human resources: Employees as human resources are always looking for opportunities providing them with growth and development. In order to attain growth, all employees need proper training for improving their knowledge and skills, developing their abilities and competencies in course of time. Therefore, it is of utmost importance for business organizations to arrange training and development programs for their employees.
- The well-being of economically and socially backward people: All business units are inseparable from society, therefore, they should assist the backward class and also, mentally and physically challenged people. There are numerous ways of doing that thing. For instance, the setting up of vocational training programs for improving the earning capability of backward people in the community. Giving more preference to mentally and physically challenged people during staff recruitment. Also, businesses by awarding scholarships for higher studies can assist and encourage meritorious students.
Fulfilling national goals and aspirations must be the objective of each business unit as they are an important part of the country. The goals of the country are offering employment opportunities to the country’s people, becoming self-sufficient from the perspective of goods production, promoting social justice, earning revenue for its exchequer, etc. While carrying out business activities, the goals of the country which are also called national objectives of the business should be necessarily kept in mind.
Mentioned below are the national objectives of business: –
- Generation of employment opportunities: Employment generation is one of the key national objectives of a business enterprise. Every business unit employs a large number of people across its distinct class of activities. They generate more employment opportunities for people via establishing more business units, expanding operations, widening distribution channels, and many more.
- Promotion of Social justice: Every business owner is a responsible citizen of his country, and is assumed to provide equal opportunities to all people who interact with him. He should not practice any discrimination while offering opportunities to employees for work and progress. More attention should be paid to the backward and weaker sections of society in order to achieve this business objective.
- Production as per national priority: The government plan and policies should be treated as a basis for deciding the production and supply of goods by business units. It should be the aim of organizations operating in our country to increase the production of essential goods and supply them at reasonable rates.
- Contributing to the country’s revenue: All legal taxes and dues should be paid in an honest and transparent manner by every business owner. It serves as the main source of revenue for the government that is ultimately utilized for carrying out the development activities across the nation.
Earlier, Many countries were having restricted business relationships with other countries. A very rigid policy was followed in the past with regard to the import-export of products and services. But in today’s time, all restrictions related to foreign investment are largely removed and import duties on goods have decreased substantially. Such changes have brought a huge rise in the overall competition rate of the market. The entire globe has now become a big market due to globalization. The goods produced in one country are easily available in other countries across the world.
Every business unit needs to consider some objectives in mind for actively facing stiff competition present in the global market. These objectives are termed global objectives that are well-discussed in the points given below:
- Raise general living standards: Setting up of business units across national borders of countries, helps in the availability of quality goods at reasonable prices all over the globe. The people living in one country get access to some type of goods that are available to people living in other countries. When people are able to use high-quality products then ultimately their standard of living gets enhanced.
- Bringing down disparities among nations: Business enterprises should work towards avoiding disparities among rich and poor countries of world via expanding their operations. They can help a lot in fostering the industrial and economic growth of both developing as well as under developing countries via doing capital investment.
- Producing globally competitive products and services: Good and services having a competitive position and huge demand in the global market should be produced by business enterprises. It will help to export country in improving their image and also brings more amount of foreign exchange for the country.
Importance of Business Objectives
The importance of corporate objectives can be well-understood from the points given below: –
Gives direction to business enterprise
Setting up objectives provides a vision for a business that is very important in order to attain success. Without any vision, a business will ultimately end up wasting its resources and incur huge losses. The objectives give direction to the business towards which it need to carry out its activities in order to attain desired results.
Bring down the risk of failure
Corporate objectives play an effective role in saving businesses from chances of getting failure. When objectives are decided, business know what to do, when to do and how to do. Business units are easily able to find right direct direction for them with the help of objectives. Once they choose correct path and follow the same in their daily course of business activities, then ultimately overall risk of failure gets minimized.
Set time frame
The objectives set by the business involve a proper time frame for carrying out each and every activity. Reaching the desired state in a timely manner requires all business activities are accomplished in a logical manner within the proper timing. There is a milestone and time frame set for each plan by management while deciding the corporate level objectives. It helps in easy documentation and understanding of the overall journey of the business, that it wishes to cover within the stipulated period of time.
Enhance goodwill of the business
Business enterprises are easily able to build goodwill in the market by setting customer satisfaction as their key objective. Customers are called the king of business and if business organization treats them well, then ultimately, they will earn good fame in the market. The business organizations that give priority to customer satisfaction are able to continue in long run. On another hand, if the business only gives attention to its need and does not consider customer requirements then they are going to suffer losses.
Helps in motivating employees
Business objectives help businesses in the proper delegation of responsibilities among their people. Once the ultimate goals are decided by top management, then every employee within the organization are delegated particular tasks along with specific goal. When employees get responsible of reaching a particular goal then it gives them motivation. They do their best to carry out their assigned tasks efficiently toward reaching goals within the specified time.