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Nature of business objectives

management, business, business objectives, administration, planning, leading, controlling, staffing

Authorities differ as to the exact nature of objectives for business enterprises. Perhaps the better approach is to consider first what the objective of our economic system is. This is, broadly, to provide goods and services to customers. Industrial and commercial concerns, which comprise the greater part of the economic system, must therefore have the same objective. The objective of a limited company clearly states that the objective is to manufacture a commodity or provide a service. Nationalized industries have the predominant objective of providing an efficient and economical service to customers.

General and specific objectives
Objectives can be general or specific and may range in time from months to years; they may apply to the whole company or to units or persons. General objectives are determined by the board of directors who approve other objectives.

It is preferable for objectives to be specific and expressed in quantitative terms. The first question to be answered is: what is the nature of the present business? This may change, but it must be understood in order for adaptation to changing customer needs to be possible. For example, a firm selling typewriters and accounting machines can expand with technology and move on to computers. If it decides it is in the ‘information processing’ business, rather than the ‘office machine’ business, then expansion will be easier.
Specific objectives usually have time limits, e.g. to open a new spare-parts section in six months’ time; or it could be to diversify in certain fields in order to avoid relying on the fortunes of a single market or industry. It can be mentioned here that the big problem in such a venture is whether staff on the right caliber are available effectively to operate these newer types of business.

The ideal is for a company to formulate specific objectives and develop policies, within the framework of general objectives, which together result in coordinated and controlled decision making. Careful planning of objectives helps management to give members a sense of direction and purpose. This is essential to achieve effective results.
To be able to survive, a firm must earn sufficient profits to sell services or products, of a certain quality, at a competitive price. Peter Drucker stresses that survival depends upon the ability to cover the costs of staying in business. These costs include providing for replacement and obsolescence as well as market risk and uncertainly. But it is rare to see survival stated as an objective. Drucker considers objectives are important in every area where performance and results directly affect the survival and prosperity of a business. These key areas must be carefully selected and he distinguishes them by considering.

He then goes on to mention eight specific areas in which objectives have to be set, in terms of performance and results. These are: market share; innovation; productivity; physical and financial resources; profitability; manager performance and development; worker performance and attitude, and public responsibility. It should be noted that the eight key results areas are relevant for public sector and non-profit ventures, even though they were directed at profit orientated enterprise. Whatever areas are deemed important, it is preferable that any standards desired should be capable of being expressed in quantitative terms (e.g. number of items to be produced monthly). It is also important to note that if the organization structure is not well designed, managers will find it difficult to achieve high performance.

Advantages of business objectives
•They embody basic ideas and theories concerning what the enterprise is trying to accomplish;
•They provide a basis for directing and guiding the enterprise and provide targets which enable efforts to be observed and aided;
•They help to motive people and they provide a sense of unity to the various groups in the organization, as an individuals unit’s contribution can be seen to be integrated with total enterprise goals.
Published: 2007-04-14
Author: Martin Hahn

About the author or the publisher
Martin Hahn PhD has received his education and degrees in Europe in organizational/industrial sociology. He grew up in South-East Asia and moved to Europe to get his tertiary education and gain experience in the fields of scientific research, radio journalism, and management consulting.

After living in Europe for 12 years, he moved to South-East again and has worked for the last 12 years as a management consultant, university lecturer, corporate trainer, and international school administrator

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