By now you are aware of the unique characteristics of business vis-a-vis other economic operations. In this article, we will look into the concept of the plurality of the objectives of a business to understand the business strategy in detail.
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In the last few years, sustainable development has been the buzzword for businesses around the globe. However, have you ever wondered why is sustainable development important? Also, why should a business focus on social and environmental issues along with profits? Finally, can a business just focus on, let’s say, profits and social issues and leave the environment out of the equation? To find an answer to these questions, let’s look at some considerations governing the business strategy.
Considerations for Objectives of a Business
- Interdependence: Businesses, usually, draw their factors of production from society. Further, they also depend on society for the sale of their goods and/or services. Also, people depend on businesses to provide goods/services.
- Many stakeholders: The owners of a firm are the stakeholders of the firm. However, they are not the only ones. Other investors or lenders, employees, customers, suppliers, competitors, community, and the larger society and ecology, all have a stake in the business.
- Profit: Profit for a business is like eating for survival. Don’t you eat to live or some may say they live to eat? Similarly in we need profit to carry on with the business and also the fundamental motive behind doing business is making the profit. In simple words, profit is the minimum concept. Also, you can say that it is the cost of staying in business.
- Importance of a customer: If we were to define a single purpose of all businesses, it is creating and maintaining customers. Further, businesses make this possible by offering quality products and/or services and delivering value for money.
- Performance: If a firm wants to earn profits, then it must display overall excellence in performance. Hence, the firm must excel in all functions including procurement, production, marketing, sales, accounting, etc. Therefore, even if the firm has an objective of profits, it has to break it down to individual goals for each of these functions.
Business Objectives Governing the Business Strategy
Objectives of a business are divided into four major types:
1] Economic Objectives
- Return on Investment
- Addition in economic value
- Also, market share, etc
2] Organic Objectives:
- The overall health of assets, human resources, and capital
- Growth and also diversifying capabilities
3] Social Responsibilities:
- Community Service
- Conserving the heritage
- Also, calamity and disaster support to the community
- Responsibilities towards:
- Competitors, etc
4] Legal, Ethical, and Environmental Objectives:
- Respect for law, both in letter and spirit
- Fair practices
- Honesty and integrity
- Green technologies
- Usage and disposal
- Lower emissions
- Effective waste-handling
- Also, air, water, and soil preservation
The Plurality of the Objectives of a Business
Consider the economic, social, and ecological returns while assessing a business. This allows you to have a holistic and more balanced view of the performance of the business. However, there are always greed-driven people who don’t care about anything except profits. Therefore, you must be able to discriminate between them and those who care for the community, society, and ecology in which they do their business.
Solved Question for You
Q1. Which of the following is not an economic objective of the business?
- Sales growth
- Improvement in market share
- Profits and return on investment
- Conservation of natural resources
Answer: Growth in sales, improvement in market share, and profits and return on investment are directly linked to the economic benefits of a business. Hence, they are economic objectives. However, the conservation of natural resource is not linked to any direct economic benefit. Therefore, option d is not an economic objective of the firm.