1.5.3 - Business Objectives

Survival and profit maximisation

A business objective is a target the firm is trying to achieve. At one stage of a business's life the priority may simply be staying open; at another, owners may want the highest possible profit. The important exam skill is to explain why the same business would not always choose the same objective.

Survival is most likely to be the main objective when a business is new, hit by a downturn, under intense competition, or carrying too much financial pressure. In that situation managers usually avoid risky decisions. They may keep prices competitive, delay expansion, or focus on steady sales because staying open today gives the business a chance to improve tomorrow.

Profit maximisation becomes more attractive when owners or shareholders want stronger returns. A business may raise prices, cut unnecessary costs, or concentrate on high-margin products. Because profit is revenue minus total cost, a higher margin can increase profit if sales volume does not fall enough to offset it. The business may retain profit for future needs or distribute some to owners; an increased margin does not by itself guarantee higher total profit.

But profit maximisation is not automatically the best objective. If managers chase short-term profit too aggressively, they may reduce staffing, weaken quality, or push customers too hard. That can damage reputation and repeat sales, so a decision that lifts profit now may weaken the business later.

Growth objectives

Some businesses focus less on immediate profit and more on growing their position in the market. Two common objectives here are sales maximisation and market share, and they are related but not identical.

Sales maximisation means trying to sell as much as possible in a period of time. A business may accept lower profit per unit if higher sales volume helps fill capacity, build brand recognition, or attract customers away from rivals. This is especially likely in competitive markets where scale matters.

Market share focuses on the business's position relative to rivals. A large market share can give a business stronger brand visibility, better bargaining power with retailers or suppliers, and more security against new entrants. Because the firm already sells a big share of the market, any successful product launch can spread quickly through existing channels, therefore strengthening the business even further.

The difference matters in exams. A business can increase sales without gaining market share if the whole market is growing quickly. Equally, it can gain market share even if total sales are flat, provided rivals are losing customers faster.

The key judgement is whether growth today is likely to create stronger profits later. If yes, sales maximisation or market share may be sensible. If not, a business may simply be growing without becoming financially stronger.

Efficiency and stakeholder objectives

Not every objective is about growing bigger. Some are about running the business better or building stronger relationships with key stakeholders.

Cost efficiency is especially important in difficult trading conditions or in markets where products are quite similar. If a business lowers its costs, it can keep prices competitive or protect profit margins. This is why cost efficiency is often central in industries facing intense global competition. However, cutting costs too hard can reduce quality, slow delivery, or damage service, which then weakens sales.

Employee welfare means looking after staff through areas such as pay, working conditions, support, and development. This can be a sensible objective when a business depends on skilled or motivated workers. Better welfare can improve morale and retention; this leads to a more experienced workforce; therefore service quality or productivity can rise. The drawback is that better welfare usually costs money in the short run.