Steps in Setting Business Objectives
There are 8 steps in setting business objectives and there are different classifications of Objectives of business discussed.
1. Analyze the Internal Environment
The analysis of the internal environment helps identify an organization’s strengths and weaknesses. It is necessary for the organization to make every possible effort to correct its weaknesses and to further improve its strengths.
2. Analyze the External Environment
The company needs to analyze its external environment to identify the factors that affect its working. The external environment includes the following factors:
- Government policies
- Competitors’ strategies
- Consumer tastes and preferences
- Events in the international environment
- Technological developments in the industry
3. Value and Beliefs of Top Management
The value and beliefs of senior management influence the setting of objectives to a great extent.
At this stage, the management may formulate the mission statement or analyse it, if it already exists. The mission statement serves as the basis on which professional business firms set their objectives.
4. Involvement of Employees
It is imperative to involve employees while setting objectives to gain their cooperation and commitment in implementing the activities to achieve the objectives. The company may adopt the technique of Management by objectives (MBO) to improve its performance.
5. Past Performance of the Firm
Managers must be aware of the past objectives and performance of the firm to set objectives in the right direction.
6. Setting of Objectives
The management needs to set the objectives for all the functional areas of the organization—production, marketing, finance and HRM. The firm should set long-term as well as short-term objectives.
After setting the objectives, the management must plan and implement the targets. The process of implementation involves the following steps
- Organizing resources
- Directing subordinates
- Motivating subordinates
A periodic review of activities must be conducted to enable the firm to identify whether the listed objectives have been met. If deviations between targeted and actual performance are identified, corrective action must be taken. This may include resetting the objectives.
Classification of Business Objectives
The Organic Objectives are
The Economic Objectives are
- Wealth, etc.
The Social objectives are
- Customers, etc.
The Human Objectives are
- Working conditions
- Wages, etc.
The National objectives are
- Social welfare
|Economic Objectives||Social Objectives
|Meaning||Economic objectives are related to the economic or financial aspects of the firm||Social objectives are related to the responsibilities of the business towards its various stakeholders.
|Main Purpose||The main purpose is to bring greater returns to the firms such as a larger market share and higher profits.||The main purpose is to fulfil the social responsibility of the firm, thereby earning goodwill.
|Examples||Profit maximization and product innovation are examples of economic objectives.||Supply of quality goods and payment of a reasonable wages are examples of social objectives.
|Expansion of Business||Merely achieving economic objectives may not lead to the expansion of business.||Achievement of social objectives builds the business’s corporate image and resulting in its expansion.
|Primary/Secondary||They are primary objectives of a business unit because economic objectives ensure survival and growth.||They are secondary objectives of a business unit. Some firms can survive without achieving social objectives.
|Pervasiveness||They are universally accepted and followed by all business firms.||They are typically adopted by large professional business firms.
|Scope||The scope is narrow because these objectives can be achieved only by business firms.||The scope is wide because these objectives can be achieved by both, business and non-business organizations.
|Support from Public||The public may not support those firms which concentrate only on economic objectives.||The public strongly supports those firms that focus on social objectives.
|Origin||Economic objectives have a very long history since the early days of business.||This concept gained importance in the 20th century but is followed by only a few firms.
|Quantitative/ Qualitative||Economic objectives can be expressed in quantitative terms such as an increase in profits.||Social objectives are primarily expressed in qualitative terms such as the supply of quality goods.
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