Objectives Of Business 37603g

Objectives of Business Unit-I

• Objectives explain why people enter into business and stay in it. • Objectives serve as the ends towards which all business activities are to be directed. • It is the objectives which guide and govern the actions and behaviour of businessmen • In the words of Drucker, “ Objectives in the key areas are the instruments necessary to pilot the business enterprise.

Classification of Business Objectives • As stated earlier , business is an economic institution operating in a socio-economic system. • Therefore, objectives of business should be defined keeping in view its prevailing environment and its needs for survival and growth. • Like any other institution , business has several rather than a single objective. • Objectives of business are multi – dimensional in nature. • Business is established and it exists to achieve multiple objectives. • People enter into business and stay in business because they want to earn money, social power and prestige , joy of achievement and other goals.

• Generally , profit motive is considered to be the primary objective of business. • But profit-making is not the sole or only objective of a business. • Every business has to lay down its multiple objectives to justify its existence. The various objectives of business may be broadly be classified as follows. 1.Organic objectives 2.Economic objectives 3.Social objectives 4.Human objectives 5.National objectives.

The realisation of economic and organic objectives helps the business directly and immediately whereas the social , human and national objectives help the business indirectly and in the long run. 1.Organic Objectives • As an organic entity a business enterprise has its own stages of infancy , childhood , adolescence , adulthood and maturity. • Like a human being, the first concern of business enterprise is to ensure its survival. When the enterprise is assured of the survival, it will aim at growth and expansion. • To accomplish this objective, it will attempt to win prestige , recognition and goodwill from the society in which it operates.

Organic objectives are the foundation for achieving all other objectives of business. (i)Survival – First of all, a business enterprise tries to maintain its existence. Survival objective implies the maintenance of a firms competitive position or earning capacity or market standing. Unless an enterprise survives, no other objective can be accomplished. (ii) Growth – Growth and diversification is one of the major objectives of business. • Growth may be measured in of size , investment , market share, etc. • Market share which a business enterprise commands reflects its standing in the market . • A business enterprise may identify new customers , new products or new markets or increase its market share in the present market . • Growth brings higher profits, economic and social power etc.

(iii)Prestige and Recognition – Prestige and recognition help to ensure the survival and growth of a firm. • A business enterprise with good image or goodwill can easily attract customers, investors and competent employees. 2.Economic Objectives Business is an economic activity and therefore, its major objectives are economic. Economic objectives refer to those goals which determine a persons conduct in the business part of life. Economic objectives of business are as follows:

(i)Profit – Making – Risk is inherent in business and profit is the reward for undertaking risk. • A business must earn profits in order to stay in business and to maintain intact the wealth-producing capacity of its resources. • Often the common man believes that profit-making is the sole objectives of business. This is far from truth. • A business enterprise uses various factors of production and it can succeed only when every factor is given its due reward. • Profit is the reward for entrepreneurship and therefore, profit cannot be the only goal of business.

(ii)Creation of Customer • Business can earn profits only when it provides goods or services which people are able and willing to buy. • Every business enterprise is conceived in of a product or service that meets the needs of public. • A business enterprise cannot survive unless there are enough people to buy the products and services offered by it. • Customer is the generator of revenue for business by paying for goods and services. • Business earns profits by satisfying the needs of the customers.

(iii)Innovation • Modern business is highly dynamic and an enterprise can continue to be successful only by adapting itself to changes in its to changes in its environment, it must on its own create conditions favourable to survival and growth. • The highly competitive nature of modern business puts a on innovation and creativity which implies the introduction of new and better products , improved means of production and distribution, new technology, new methods and procedures of management. • Innovation results in better and cheaper products and more employment for the society.

3.Social Objectives • The economic objectives of business can be realized only by serving the society. • Business is an organ of society and it draws its resources from the society. Therefore it must satisfy the wants and aspirations of society. • A business enterprise can survive and grow only when it caters to the needs of the society. • A really successful business can be built on the foundation of social service. • Social objectives of business refer to the obligations of business towards customers , employees , investors , suppliers in which all stake holders must share in proportion to their contributions. The social objectives of business are as follows:

(i)Quality Goods at Fair Prices The first and foremost social objective of business is to provide regularly the goods and services of proper quality and quantity to consumers at reasonable prices. Today consumers are conscious of the quality of goods they buy . When the goods are of sub-standard quality or adulterated, they stop patronising the enterprise and the enterprise faces eventual closure. Therefore,the business units must always maintain a continuous and adequate supply of articles of standard quality. Businessmen who keep their customers satisfied are likely to earn profits.

(ii) Providing Employment Another social objective of business is to create opportunities for gainful employment of the people. Sometimes this objective may conflict with the economic objective of cutting down costs and improving profits by introducing mechanisation or automation.

(iii)Avoidance of Profiteering and Anti-social Practices It is legitimate for a business enterprise to work for legitimate profit. But it must not over-charge the customers or indulge in hoarding , black-marketing, adulteration and other anti-social practices. In times of scarcity, it should ensure fair and euitable distribution.

4.Human Objectives • A business enterprise is an institution carried in by people ( entrepreneurs and managers), through people (employees) and for people (consumers and public). • Therefore ,human factor pervades all business activities. Business is not an end in itself but a means towards human welfare. • People are the success of a business depends upon the quality of people working in it. • In order to win the cooperation of employees business must fulfill their expectations. • The human objectives of business arise from these expectations.

The important human objectives of business are given below. (i) Fair Deal to Employees – The first human objectives of business is to pay fair wages , salaries and incentives to the employees at different levels. • Fair working and living conditions and security of service are necessary for securing the whole hearted efforts of the employees. Employee welfare is no less important than customers satisfaction. (ii) Job Satisfaction – It is the obligation of a business enterprise to make the jobs interesting and challenging so that employee may get job satisfaction while performing their jobs. Selection of right man for the right job and reducing unpleasantness of jobs help to offer job satisfaction which in turn ensures retention of an employee on the job for a long period. A business enterprise fulfills its human objective when it recognises the dignity of labour.

(iii)Participation • Workers will put forth their best efforts only when they are given an opportunity to participate in making decisions which affect them. • Workers participation in management facilitates redressal of employee grievances quickly and at the lowest possible level. • Recognition of worker representatives and their legitimate activities helps to maintain healthy trade union practices and sound industrial relations.

(iv) Development of Human Resources • Business can accomplish its economic objectives of innovation and productivity only when the employees are given adequate opportunities for developing new skills and capabilities. • Business should create proper climate wherein the talents of workers are allowed to grow and mature. 5. National Objectives Present day business is expected to serve as an instrument for the fulfillment of national needs and aspirations and implementation of national plans and policies in accordance with the accepted priorities.

Keeping in view the overall national objective of establishing a democratic , secular and socialist society and fostering growth stability and social justice , business in India has to serve the following national objectives: (i)Ensuring Social Justice As a responsible citizen , a business enterprise is expected to remove inequalities of opportunities and to provide a fair opportunity to all to work and progress. For this purpose , special attention must be given to the neglected , weaker and backward sections of the society.

(ii) Development of Small Enterprises In tune with the national policy of decentralised development , large business houses are responsible for encouraging the growth and development of small scale and cottage industries. Such industries can be used as ancillary units and their products should be patronised. Large business concerns are expected to desist from assuming monopolistic position. (iii)Production According to National Priorities In keeping with national plan objectives ,business enterprises should manufacture and supply goods necessary for the country’s development. It is also the national objective of business to manufacture and distribute cheaper varieties of essential commodities like soap ,cloth , edible oils etc. so as to help the weaker sections of the society.

(iv)National Self –sufficiency and Export Promotion • In order to enable the country to become self reliant it is the responsibility of business to produce such articles as have hither to been imported. • Business should aim at import substitution, specially in the case of machinery , equipment and technology. • Every business should take adequate steps to boost exports and thereby augment the foreign exchange reserves of the country. (v)Development of skilled Personnel Every country needs trained and skilled personnel for the development of its industry. Business houses can provide technical knowledge and training to their employees. This helps in skill formation for the country’s growth and development.

In addition to the above objectives , business is also expected to promote national integration balanced regional development , family planning , public health , education , sports and culture in the country. The above description reveals that the operation of business requires reconciliation of several micro and macro level objectives.

Essentials of A Successful Business • A business has to coordinate various factors of production for achieving a given objective. • All factors are equally important for making the business a success. • Various departments should work in coordination with each other and organizational and financial planning should be properly determined. • Modern business has become complex and complicated. • The improvements in technology and changing consumer preferences are creating more challenges for the businessman. • All aspects of an enterprise, i.e, production , financing , organization and marketing should be properly arranged and coordinated to make a business successful.

Some pre-requisites of the success of business are as under: 1.Setting Objectives • The setting up of business objectives is the first thing to be done by the management. One must know as to what is to be done. • Only after deciding the objective, the ways and the means will be determined to achieve the objectives. • If it is a producing business , the nature of product to be produced , whether to produce the whole product or part of it , should be decided. • In case of service business the nature and type of service to be provided should be decided. • It is not only the management which should be conversant with the business objectives but every person in the concern should know the aims and goals of the business.

2.Proper Planning After determining the objectives, the work should be planned in all its perspectives . Planning involves forecasting and laying down the course of action. It involves planning for both present and future. What is to be achieved and how it is to be achieved is of primary significance for the present. Future is always uncertain and the estimation of future happenings is very difficult. In planning for the future, an effort is made to estimate the future uncertainties and determine the possible course of action for the coming period. Thus , planning also helps the management to prepare itself for facing the uncertanties of tomorrow.

3.Sound Organization • Organization is an arrangement by which tasks are assigned to employees so that their individual efforts contribute effectively to the achievement of clearly defined purposes. • The duties and responsibilities of all persons are defined and they are to do. • An effective organization system is essential for the success of a business. Firstly, a decision should be taken about the form of ownership, i.e, sole trader , partnership, t stock company. Then a suitable internal organization should be developed. • No work should be left unassigned. The supervisors and subordinates should know their roles in the business.

4.Proper Financial Planning • The requirements of finance and its possible sources should be decided at the time of starting the enterprise. • The purpose of financial planning is to make sure that adequate funds are raised at the minimum of cost. • The required capital should be made available at all times , otherwise it will hamper the work. The scarcity of capital and too much of it both will be bad for the concern. • The availability of excess capital may tempt the management to spend more money on inventory and on fixed assets. • A proper plan is necessary for providing funds for the present needs and future development plans.

A financial plan will determine: (a) The needs of capital (b) Sources for collecting funds and (c) istration of capital structure. 5.Location and Layout of Plant One of the important decisions to be made by the management at the time of starting a concern is regarding the location of the plant. The plant should be located at a place where all factors of production are available at lowest costs. The aim of reaching an optimum point will be achieved only if the place of location of the business is suitable. Raw materials , labour , power and markets for the finished products should be available near the place of location

After deciding about location, a decision is made about layout of the plant. The setting up of the machinery and equipment should be systematic So that the flow of production should be smooth and uninterrupted. The office building and warehouse etc should be located near the factory. Proper layout will enable the economical use of available space . Proper location and layout of the business are necessary for the success of a business.

6. Marketing System • The marketing aspect of a business is more important than even production. • There is no use of producing a thing if it cannot be sold. Marketing management is essential for earning Profits. • Management should decide about the channels of distribution. • Whether to sell directly to consumers or to sell through wholesalers? • It should be decided after taking into consideration various aspects of goods.

7.Research • In the changing technological world, it is essential to use latest devices for production and marketing of goods. Change is the essence of business. • Everyday, new production methods are found. • Consumers needs and preferences should be taken into consideration in devising production and marketing policies. • Research and development should be given due place in the business. One can compete with changing business world only through research programmes. • If attention is not given to research work then it will become difficult to stay in business for a large period. So research activities are necessary for the success of an enterprise.

8. Dynamic Leadership • The success of an enterprise will depend upon the efficiency of its management. • The task of management is to plan, organize, co-ordinate and direct various activities for achieving business objectives. • This will be possible only if the leadership is dynamic. • The operation managing the concern should have foresight, initiative , courage and aptitude for a change. • These qualities are necessary in the leadership to take the concern on the road of progress.