OBJECTIVES OF BUSINESS
OBJECTIVES OF BUSINESS
Business is an economic activity and therefore intents to make money or income in the form of profit. At the same time, business exists in society and makes use of the assets and resources in the society; and there are some responsibilities to the society. Based on these aspects, business objectives can be classified under two heads:
• Economic objectives
• Social objectives
Economic objectives of business are concerned with earning monetary income. This income is technically termed as profit. Profit is the excess of income over expenditures.
Following are economic objectives of business.
Profit is the basic objective of any business. It is the return to the businessman for bearing risks inherited with the business. It may also be considered as the reward for capital investment. Rate of profit is directly linked to success or failure of business. Profit is essential to create goodwill for the firm. Profit is also required for expansion and modernisation purposes.
Existence of business depends on how its products are demanded by the society. Again, it depends on how the business extracts its market potential and also how it competes in the market. Under economic objective, the business puts some targets on sales and expects to attain a predetermined market share.
Innovation is the act of bringing new ideas into business. It may be the development of new products or services, creation of new markets, developing new strategies in marketing etc. Innovation is essential to survive in the modern competitive world of business. Innovation is also the basis of economic development of business and therefore it is an economic objective. Modern business enterprises spend huge amounts in Research and Development (R&D) with a view to bring innovations. A Business which brings in new products or ideas can easily attract more customers leaving the competitors far behind. Business which succeeds in innovation can succeed in business also.
Optimum utilisation of resources
It is said that a manager deals with six M’s while managing a business. They are men, materials, machines, money, markets and methods. These are the resources of business and therefore careful utilisation of these, brings profits to the business. Profitability of a business is at the highest when these resources are utilised at optimum level, because it ensures the cost to be the minimum and the return to be the maximum.
Generation of income for the nation
Another economic objective of business is to generate income for the nation. It is a fact that, the business makes profit by making use of resources in the most effective manner. It is the process of value addition and the basis of wealth creation. When the money invested in the business grows, it increases the wealth of the nation also. Business always engages in production and distribution of goods and services and thus helps in the growth of national income. Moreover, it provides employment opportunities to a large number of people in the society and this also helps in generating income for the nation.
Business exists in and interacts with society. Society supports business by supplying all the necessary inputs for the business and also by demanding it outputs. In this context business must have certain objectives for the benefit of society. These objectives are called social objectives. They are:
Supply quality products at reasonable price
It is a fact that business cannot survive without the support of consumers and general public. Public support and goodwill to a great extent depend on how well business treats society. Moreover, business makes use of resources available in society and creates wealth. Because of all these, business has an obligation to supply quality goods at reasonable price.
Avoidance of anti- social and unfair trade practices
Business has a responsibility to promote values and to control anti- social practices in society. Business should realise that it can grow and develop only if there is disciplined and peaceful social atmosphere. Still some business people resort to some anti-social activities such as hoarding, black marketing, adulteration etc. with a view to make higher profits. Such practices are harmful and also punishable under law. If the business wants to exist and grow it should avoid all anti social and unfair trade practices.
Welfare of employees
Human element is the most sensitive and active resource in business. It has the ability to lead business towards great success or to utter failure. If the human factor is active and energetic, all other resources can be used most effectively. Therefore, business should provide everything possible to the growth, development and welfare of people in the business. It may be in forms of creating better working conditions, providing basic amenities, refreshment facilities, fair remuneration package, equitable consideration, better relationships with management etc.
Generate employment opportunities
Business has high potential in creating and improving employment opportunities. Business can help people to find a livelihood. It also contributes to the GDP of the country by producing and distributing more and goods and services. In short, business is the major contributor to the GDP, by creating wealth on one side, and by providing employment opportunities on the other.
Business units are now undertaking community services as part of their social obligation. It includes running charity hospitals and schools, undertaking and sponsoring public utility services such as drinking water supply, funding and sponsoring blood donation camps etc. In addition to this a number of firms have undertaken afforestation and manufacturing of eco-friendly products as part of their environment protection activities. Community services creates and develops goodwill for the business.