Lecturer Introductory

Dr. Nay Min Aye

B.A (Business Science), Master of Accounting (M.Act)
PhD (Commerce), Dip IFRs, ADCSM

Former Associate Professor and Head

Department of Commerce, Co-operative and Management University, Thanlyin

Freelance Lecturer in Business and Management

My Contact: Mobile: 09980801010, Viber: 095069254,

email: nayminaye.23@gmail.com
Facebook: https://www.facebook.com/dr.nayminaye
Youtube: https://www.youtube.com/channel/UCxWXWiq2E7jK_EombRDNnNA
 Business Activity and Influences
on Businesses

Chapter 1 What is Business Activity

Chapter 44 Factors of production
What is business?
 What is business activity?
• Business activity produces goods and services which are consumed by
individual consumers/other businesses.
• Business is any organization that creates goods and services to satisfy
human needs and wants.
• Resources are used in the businesses to create goods and services. (four
factors of production; land, labour, capital and enterprise)
• Business functions: production/operation, marketing, human resources,
finance are examples.
• Businesses are affected by changes in external factors such as government
law, changes in consumer tastes, the actions of competitors.
• Mostly, businesses aim to make profit (make money for themselves).
Goods and Services
• Goods >> physical product such as smartphone, packet of crisps, etc.
• Services >> non-physical products such as banking, car washing, repairs, etc.
• Consumer goods >>> the goods finally used by the consumers to satisfy their wants. Some
goods are durable such as televisions, cars, etc. and some are not durable such as food
and drink.
• Producer goods (capital goods) >>> the goods that are used to produce more goods and
services or continue the process of production.
Test your understanding
Which of the following business activities is a service?
A. House construction C. Coconut farming
B. Dental treatment D. Gold mining

An example of a producer goods

A. Tractor C. Package holiday
B. Newspaper D. Meal at a restaurant
 Satisfying Needs and Wants
• Business have to satisfy people’s needs and wants by producing goods and
services.
• Needs >>> essential goods and services required for human survival, examples are
food, water, shelter, etc.
• Wants >>> goods and services which people would like to have but which is not
essential for living, examples include luxury house, new PC, car and watching movie
etc.
• People’s wants are never satisfied, they are infinite/unlimited.
• The resources available to businesses are finite/limited (such resources are called
scarce resources);
• Economic problem of scarcity: not enough factors of production to make all of the
goods and services that satisfy people needs and unlimited wants.
• unlimited wants + limited resources >>> Scarcity Problem (economic problem)
Test your understanding
Which of these products is designed to satisfy a need?
A. Potato crisps C. Bread
B. Cricket bat D. Smartphones
The purpose of business activity (why they exist)
• Business activity involves acquiring raw materials, converting raw materials
into finished goods and services that consumers need and want, and
selling and distribution of goods and services.
• Businesses exist to provide goods and services for different
purposes/reasons.
• Private enterprises are owned privately by individuals or group of individuals. Their
main purpose is to make money/profit for owners.
• Social enterprises are existed to meet social and environmental needs and make a
positive impact in their communities.
• Public enterprises are owned by central or local government and provide health
care, education, postal services, fire services, etc. The main purpose is to provide
public service; they provide goods and services that private enterprises fail to
provide adequately; goods and services provided in this sector are free at the point
of use; they are paid for through tax revenue.
Business Stakeholders
• Stakeholders are people who have an interest in the decision-making and
activities of a business. Examples of stakeholders are owners, consumers,
workers, government, managers, suppliers, banks, and the whole
community.
• Some stakeholders are internal (who own and work for the business) and
external (outsiders of the business)
• Stakeholders are important for businesses since they can either affect or be
affected by the business. Stakeholders and businesses are mutual
dependent on each other.
Stakeholder Main features Most likely objectives
Group

Owners/ ➢ They put capital in to set up and ➢ share of the profits so that they gain a rate of
Shareholde expand the business. return on the money put into the business.
rs ➢ If the business is not successful, they ➢ growth of the business so that the value of their
(Internal) may lose the money they invested. So, investment increases. (increase in share value)
they are risk takers.
Workers ➢ They are employed by the business ➢ regular payment for their work and fair wages
(Internal) and have to follow the instructions of that reflect their contribution to the business’s
managers. success
➢ The success of business depends on ➢ contract of employment, job security – workers
their skills and motivation do not want to look for new jobs frequently
➢ job that gives satisfaction and provides
motivation
➢ Training to do their work effectively
Stakeholder Main features Most likely objectives
Group
Managers ➢ Their main roles are planning, organizing, ➢ high salaries because of the important work they
(Internal) leading and controlling the resources to achieve do.
the business goals. ➢ job security – this depends on how successful they
➢ They take important decisions. Their successful are.
decisions could lead to the business expanding. ➢ growth of the business so that managers can
If they make poor decisions, the business could control a bigger and better known business. This
fail. gives them more status and power

Customers ➢ They buy the goods that the business produces ➢ safe and reliable products
(External) or the services that the business provides. They ➢ value for money (charge a fair price)
are important to every business. Without ➢ well-designed products of good quality
enough customers, a business will make losses ➢ reliability of service and maintenance
and will eventually fail.
➢ The most successful businesses often find out
what consumers want before making goods or
providing services.
Stakeholder Main features Most likely objectives
Group
Government ➢ they are responsible for the economy of ➢ wants businesses to succeed in its country.
(External) the country. Successful businesses will employ workers, pay
➢ they passes laws to protect workers and taxes and increase the country’s output
consumers. ➢ expects all firms to stay within the law – laws
affect business activity
The whole ➢ The community is greatly affected by ➢ jobs for the working population
community business activity. ➢ production that does not damage the
(External) environment
➢ socially responsible practices
Suppliers ➢ Business which provides raw material/ ➢ To receive prompt payment for goods supplied on
(External) components; they provide on credit. credit.
➢ To be treated fairly and not be forced to reduce their
prices by businesses with strong buying power.

Banks ➢ They provide finance for the business’s ➢ expect the business to be able to pay interest and
(External) operations. repay capital lent.
Test your understanding
Which of the following is a business stakeholders?
A. Lawyer C. Customer
B. Tax Collector D. Police Officers
Changing Business Environment (1 of 2)

• Business may be affected by external factors that are likely to change overtime;
PESTEL environment and Industry environment changes affect the business.
• PESTEL Environment
• Political changes (change in government policy and legislation, world affairs,
etc.)
• Economic changes (economic growth & recession, etc.)
• Social changes (population trends, education level)
• Technology changes (digitalization, internet, automation, etc.)
• Ecological changes (global warming, deforestation, etc.)
• Legal changes (new laws & regulations, etc.)
Changing Business Environment (2 of 2)

• Industry Environment changes

• fierce competition by strong competitors,
• entrants of new competitors,
• falling in industry growth
• Changing environment provides opportunities or impose threats for businesses
• The business must be aware that the changing environment can bring new
opportunities and impose new limitations.
• For example,
• Internet development brings opportunities for retailers (they can develop online
business model.
• Political instability impose threats for many businesses.
 Four Factors of Production
Resources are used in doing business activities are called Factor of
production.
• Land: natural resources such as minerals, fields and
forest, oil, gas, metals, trees, wind, water, etc., and
raw materials used in the production process. Some
resources are renewable like forests and some are
non-renewable like oil and gas.
• Labour: human resources; the number of people
available to make product; manager, employees, etc.
• Capital: Human-made resources that are to be used
in the production; Machinery, tools and equipment,
buildings, technology.
• Enterprise: It means people prepared to take the risk
of setting up businesses and their management skills
(Entrepreneurs).
Example of Factors of Production (Baking Firm)
• Land (Natural Resources) : Land to build the shop, water, wind to
produce electrical power for mixer and oven, flour, sugar, butters, etc.
• Labour (Human Resources) : Skilled bakers who bake and decorate the
bread, salesperson, cashier and accountant, etc.
• Capital (Man-made Resources) : Shop building, Oven, Mixer, etc.
• Enterprise: Person who develop and run the baking firm and his
management skills.
Example of Factors of Production (Automobile)
• Land (Natural Resources) : Land to build the factory, iron ore, aluminum,
copper, platinum, petroleum, and lead, etc.
• Labour (Human Resources) : factory workers, engineers, designers, paint
sprayers, office staff, distribution staff, etc.
• Capital (Man-made Resources) : Factory, conveyor belt, welding robot,
engine machining station, and a lot of hand tools, etc.
• Enterprise: Person who take the risk of entering the market and his
business ideas, management skills, hard-working character.
20
 Labour Intensive vs Capital Intensive production

• Labour intensive production- business uses

relatively more labour than capital; it is
common in Far Eastern countries where
labour is cheap and plentiful; businesses
providing services are often labour intensive;
• Capital Intensive production- production
relies more on the use of plant and
machinery; it is common in West countries;
mass produced fast-moving consumers goods
are often capital intensive;

21
 Capital Intensive Production
Advantages
• Machinery is often more precise and
consistent. This would lead to higher
efficiency and productivity.
• Quality can be standardized. This
would lead to improve brand image.
• Generally more cost effective if large
quantities are produced;
• Machinery can operate 24/7 so
businesses are easier to meet growing
demands.
• Machinery is easier to manage than
people;
Disadvantages
• Hugh set-up costs since it requires
significant investment in technology
and machinery.
• May be inflexible- a lot of machinery is
highly specialized; more difficult to
change production process to respond
to the market changes.
• Long delays may occur when there is a
breakdown;
• May leave the workforce facing
redundancy and effect morale. This
can be negative effects for societies
and businesses.
22
 Labour Intensive Production
Advantages
• Requires less capital investment. It only
needs to hire workers for its operation.
So it is cheaper for small-scale
production. It may be cheaper for large-
scale production when labour is cheap;
• Generally more flexible than capital-
labour can be retrained, for example;
Customized products are easier to make
according to customers demand.
• People are creative and can solve
problems and make improvements.
Disadvantages
• People are more difficult to manage-they have
feelings and reactions; this would lead to lower
efficiency and productivity than capital intensive.
• People sometimes need to be motivated to
improve performance. This would lead to higher
cost for the business.
• Quality of products can vary due to expertise of
the worker.
• People can be unreliable-they may be sick or
leave suddenly; People need breaks and holidays;
• It takes time and cost to train; in the long-run
production can be more expensive if labour costs
are increased.
• Skilled workers will be paid more than unskilled
workers.
23
The changing relationship between enterprise,
capital and labour

• Overtime, the types of resources used by a business, and the way

they are used is likely to change;
• Advances in technology have resulted in more capital-intensive
production world wide;
• More large-scale production resulted in more capital-intensive
methods and division of labour;

24
 How could a business increase added value?
• Added value is the difference between the selling price of the product
and the cost of materials bought in.
• (Added Value = Selling Price of Product – Cost of materials bought in)
• Increase selling price but keep the cost of materials the same would
increase the added value. However, to increase the selling price, the
business tries to create a higher quality image for its product through
branding, excellent service quality, adding product features, etc.
• Reduce the cost of materials but keep the price the same would also
increase the added value. It should be noted that lower price materials
might reduce the quality of the product and consumers will not pay the
same price as before.
25
 Specialization and division of labour
• One feature of modern business is specialization; this is the production of a
limited range of goods by an individual, business, region or nation; For
example: Coca-Cola specializes soft drinks, Toyota makes cars.
• Advantage: Resources can be focused on their most productive lines.
• Limitation: Specialization can lead over-reliance on a set product. When the product
is no longer required the business becomes failure.
• Specialization of workers in certain tasks and skills is called division of labour;
it allows workers to concentrate on a limited range of tasks.
• For example, in case of football production, some workers might specialize in
cutting, while some in stamping or stitching, or bladder inserting, or molding
into correct shape or inflating the correct pressure
26
 Specialization of workers/Division of labour
Advantages
• Workers need to specialize in only one
task in which they have the relevant
skill. So they are far more efficient, it
would reduce the cost of production;
thus they can provide the consumers
with goods and services at a lower
price.
• Workers are trained in only one tasks,
so it is quicker and cheaper to train
workers as fewer skills need to be
taught.
• Less time is wasted moving from one
task to another. So production is faster
by specializing.
Disadvantages
• Workers can become bored doing just
one task- efficiency might fall. Little
opportunity for variety.
• If one worker is absent and no one
else can do the job, production might
be stopped. (over dependency)
• Where tasks are closely linked, delays
or hold-ups in one area can slow down
the whole process.
• It is difficult to respond to change
because the workers lack flexibility.
27
28
Practices
• For each of the following businesses identify the factors of production
used in the production process, state whether the business is capital-
intensive or labour-intensive and explain your answer.
• A café serving coffee, tea and snacks
• An advertising company
• A shoe manufacturer
• Explain one benefits of job specialization to a clothing manufacturer.
Past Questions Extract (Edexcel)
• State two features of a private sector business.
• Define the term stakeholder. (1/19/paper1/Edexcel)
Lecturer Introductory
Dr. Nay Min Aye
B.A (Business Science), Master of Accounting (M.Act)
PhD (Commerce), Dip IFRs, ADCSM

Former Associate Professor and Head

Department of Commerce, Co-operative and Management University, Thanlyin

Freelance Lecturer in Business and Management

My Contact: Mobile: 09980801010, Viber: 095069254,

email: nayminaye.23@gmail.com
Facebook: https://www.facebook.com/dr.nayminaye
Youtube: https://www.youtube.com/channel/UCxWXWiq2E7jK_EombRDNnNA
 Business Activity and Influences
on Businesses

Chapter 1
What is Business Activity
What is business?
 What is business activity?
• Business activity produces goods and services which are consumed by
individual consumers/other businesses.
• Business is any organization that creates goods and services to satisfy
human needs and wants.
• Business functions: production/operation, marketing, human resources,
finance are examples.
• Businesses are affected by changes in external factors such as government
law, changes in consumer tastes, the actions of competitors.
• Mostly, businesses aim to make profit (make money for themselves).
 Four Factors of Production
Resources are used in doing business activities are called Factor of
production.
• Land: natural resources such as minerals, fields and
forest, oil, gas, metals, trees, wind, water, etc., and
raw materials used in the production process. Some
resources are renewable like forests and some are
non-renewable like oil and gas.
• Labour: human resources; the number of people
available to make product; manager, employees, etc.
• Capital: Human-made resources that are to be used
in the production; Machinery, tools and equipment,
buildings, technology.
• Enterprise: It means people prepared to take the risk
of setting up businesses and their management skills
(Entrepreneurs).
Example of Factors of Production (Baking Firm)
• Land (Natural Resources) : Land to build the shop, water, wind to
produce electrical power for mixer and oven, flour, sugar, butters, etc.
• Labour (Human Resources) : Skilled bakers who bake and decorate the
bread, salesperson, cashier and accountant, etc.
• Capital (Man-made Resources) : Shop building, Oven, Mixer, etc.
• Enterprise: Person who develop and run the baking firm and his
management skills.
Example of Factors of Production (Automobile)
• Land (Natural Resources) : Land to build the factory, iron ore, aluminum,
copper, platinum, petroleum, and lead, etc.
• Labour (Human Resources) : factory workers, engineers, designers, paint
sprayers, office staff, distribution staff, etc.
• Capital (Man-made Resources) : Factory, conveyor belt, welding robot,
engine machining station, and a lot of hand tools, etc.
• Enterprise: Person who take the risk of entering the market and his
business ideas, management skills, hard-working character.
Goods and Services
• Goods >> physical product such as smartphone, packet of crisps, etc.
• Services >> non-physical products such as banking, car washing, repairs, etc.
• Consumer goods >>> the goods finally used by the consumers to satisfy their wants. Some
goods are durable such as televisions, cars, etc. and some are not durable such as food
and drink.
• Producer goods (capital goods) >>> the goods that are used to produce more goods and
services or continue the process of production.
Test your understanding
Which of the following business activities is a service?
A. House construction C. Coconut farming
B. Dental treatment D. Gold mining

An example of a producer goods

A. Tractor C. Package holiday
B. Newspaper D. Meal at a restaurant
 Satisfying Needs and Wants
• Business have to satisfy people’s needs and wants by producing goods and
services.
• Needs >>> essential goods and services required for human survival, examples are
food, water, shelter, etc.
• Wants >>> goods and services which people would like to have but which is not
essential for living, examples include luxury house, new PC, car and watching movie
etc.
• People’s wants are never satisfied, they are infinite/unlimited.
• The resources available to businesses are finite/limited (such resources are called
scarce resources);
• Economic problem of scarcity: not enough factors of production to make all of the
goods and services that satisfy people needs and unlimited wants.
• unlimited wants + limited resources >>> Scarcity Problem (economic problem)
Test your understanding
Which of these products is designed to satisfy a need?
A. Potato crisps C. Bread
B. Cricket bat D. Smartphones
The purpose of business activity (why they exist)
• Business activity involves acquiring raw materials, converting raw materials
into finished goods and services that consumers need and want, and
selling and distribution of goods and services.
• Businesses exist to provide goods and services for different
purposes/reasons.
• Private enterprises are owned privately by individuals or group of individuals. Their
main purpose is to make money/profit for owners.
• Social enterprises are existed to meet social and environmental needs and make a
positive impact in their communities.
• Public enterprises are owned by central or local government and provide health
care, education, postal services, fire services, etc. The main purpose is to provide
public service; they provide goods and services that private enterprises fail to
provide adequately; goods and services provided in this sector are free at the point
of use; they are paid for through tax revenue.
Business Stakeholders
• Stakeholders are people who have an interest in the decision-making and
activities of a business. Examples of stakeholders are owners, consumers,
workers, government, managers, suppliers, banks, and the whole
community.
• Some stakeholders are internal (who own and work for the business) and
external (outsiders of the business)
• Stakeholders are important for businesses since they can either affect or be
affected by the business. Stakeholders and businesses are mutual
dependent on each other.
Stakeholder Main features Most likely objectives
Group

Owners/  They put capital in to set up and  share of the profits so that they gain a rate of
Shareholde expand the business. return on the money put into the business.
rs  If the business is not successful, they  growth of the business so that the value of their
(Internal) may lose the money they invested. So, investment increases. (increase in share value)
they are risk takers.
Workers  They are employed by the business  regular payment for their work and fair wages
(Internal) and have to follow the instructions of that reflect their contribution to the business’s
managers. success
 The success of business depends on  contract of employment, job security – workers
their skills and motivation do not want to look for new jobs frequently
 job that gives satisfaction and provides
motivation
 Training to do their work effectively
Stakeholder Main features Most likely objectives
Group
Managers  Their main roles are planning, organizing,  high salaries because of the important work they
(Internal) leading and controlling the resources to achieve do.
the business goals.  job security – this depends on how successful they
 They take important decisions. Their successful are.
decisions could lead to the business expanding.  growth of the business so that managers can
If they make poor decisions, the business could control a bigger and better known business. This
fail. gives them more status and power

Customers  They buy the goods that the business produces  safe and reliable products
(External) or the services that the business provides. They  value for money (charge a fair price)
are important to every business. Without  well-designed products of good quality
enough customers, a business will make losses  reliability of service and maintenance
and will eventually fail.
 The most successful businesses often find out
what consumers want before making goods or
providing services.
Stakeholder Main features Most likely objectives
Group
Government  they are responsible for the economy of  wants businesses to succeed in its country.
(External) the country. Successful businesses will employ workers, pay
 they passes laws to protect workers and taxes and increase the country’s output
consumers.  expects all firms to stay within the law – laws
affect business activity
The whole  The community is greatly affected by  jobs for the working population
community business activity.  production that does not damage the
(External) environment
 socially responsible practices
Suppliers  Business which provides raw material/  To receive prompt payment for goods supplied on
(External) components; they provide on credit. credit.
 To be treated fairly and not be forced to reduce their
prices by businesses with strong buying power.

Banks  They provide finance for the business’s  expect the business to be able to pay interest and
(External) operations. repay capital lent.
Test your understanding
Which of the following is a business stakeholders?
A. Lawyer C. Customer
B. Tax Collector D. Police Officers
Changing Business Environment (1 of 2)

• Business may be affected by external factors that are likely to change overtime;
PESTEL environment and Industry environment changes affect the business.
• PESTEL Environment
• Political changes (change in government policy and legislation, world affairs,
etc.)
• Economic changes (economic growth & recession, etc.)
• Social changes (population trends, education level)
• Technology changes (digitalization, internet, automation, etc.)
• Ecological changes (global warming, deforestation, etc.)
• Legal changes (new laws & regulations, etc.)
Changing Business Environment (2 of 2)

• Industry Environment changes

• fierce competition by strong competitors,
• entrants of new competitors,
• falling in industry growth
• Changing environment provides opportunities or impose threats for businesses
• The business must be aware that the changing environment can bring new
opportunities and impose new limitations.
• For example,
• Internet development brings opportunities for retailers (they can develop online
business model.
• Political instability impose threats for many businesses.
Past Questions Extract (Edexcel)
• State two features of a private sector business.
• Define the term stakeholder. (1/19/paper1/Edexcel)
 Business Activity and Influences
on Businesses

Chapter 2
Business Objectives
What is business objective?
• Objectives : The goals or target set by a business to be attained in the future.
• Objectives can vary depending on the type/size of business
• Objectives can change depending on the situations
• Objectives can be grouped into financial objectives and non-financial
objectives
Financial Objectives Non-financial Objectives
Business Survival Independence and control
Profit maximization Challenge
Sales Personal satisfaction
Market share Social objectives
Financial security
Importance of clear objectives
• Businesses are more likely to be successful if they set clear objectives
• Businesses need to have objectives for the following reasons;
• Objectives can give employees and manager a target to work towards and thus this
help to motivate them.
• Without objectives, the business may fail since the owner have no motivation to keep
the business going.
• Objectives help to decide where to take a business and what steps/measures are
necessary to get there.
• It is easier to assess the performance of a business if objectives are set. Business
managers can compare how the business has performed with their objectives.
• It can direct how the organization should allocate its resources.
• It can show the direction of the business to relevant stakeholders.
Financial objectives (Private Sector objectives)
• Survival
• This objective will be priority for businesses which is newly start-up because the new
businesses have no enough resources and experience.
• When the economy is falling (recession), trading condition becomes difficult because of
entering new competitors/strong competitors, the business’s short-term objective should be
survival.
• Measures to survive; lower the price of the product, reducing the cost, entering new market
and developing new products.
• Profit maximization
• Most private sector businesses aim to make profit because the owners want financial return
on their investment.
• Without any profit at all, the business are likely to be closed.
• Profits are needed to pay a returns (dividend) to the owners and provide finance for further
investment.
• There are a danger in profit maximization by putting up the price of the product; customers
would stop buying their products.
• Measures: cost control and economies of scale (cost reduction through large scale
production)
Financial objectives (Private Sector objectives)
• Sales (Revenue)
• Some businesses want to grow their sales because they may enjoy a number of
benefits with large volumes of sales;
• May enjoy lower costs
• Have a larger market share
• Enjoy a higher public profile
• Generate more wealth for the owners
• Might benefit a wide range of stakeholders; job security for employees, increasing
salaries and status for managers, etc.
• Measures: sales promotions, trade discounts, lowering selling prices, market
penetration, priority of customer satisfaction, etc.
Financial objectives (Private Sector objectives)
• Increase market share
• Market share is a proportion of total market which is gained by a business.
• Businesses want to build large market share because
• They can be popular among the public “good publicity”.
• They can dominate the market; increased influences over suppliers and customers.
• They may be able to charge higher price on customers and lower price on suppliers.
• They may enjoy higher the profile in the market which make easier to launch new
products.
• Financial security (Profit Satisficing)
• Some small businesses do not aim for profit maximization because
• they are satisfied with modest amount of profits which give financial security for them.
• they do not want extra responsibility of expanding their businesses.
• they prefers life-style businesses which generate enough profit and financial security to
provide the flexibility needed to allow a particular life style.
• they spend more time on their other interest or on family.
Non-financial objectives
• Social objectives: (the objective to achieve societal benefit)
• These are important for public sector organizations
• In case of public sector organization, Generally the main aim is to provide services. The
objectives are designed to improve human well-being and linked with quality of services
provided to public. Examples of public sector objectives are
• To increase special needs provision in schools
• To increase response time by the emergency services
• To reduce specific crime rates
• To reduce waste sent to landfill
• To increase the numbers of students entering higher education
• To create employment in poor regions with few other business employers
• In case of social enterprises such as charities and cooperatives, the objective is to
improve human and environmental well-being; clear social or environmental mission.
• To provide the job opportunity for disabled persons
• To contribute to the general welfare of society
• To reduce environmental pollution
Non-financial objectives
• Personal satisfaction
• Happier and feel more satisfied in their work environment
• Enjoy taking risk and seeing their idea succeed
• Developed their hobby into business
• Challenge
• Starting a business can be very challenging since the owners need high commitment, hard-
working, and multi-skills (organization, financial management, communication, decision making,
IT, HR Management, etc.)
• For established businesses, they might need new challenges such as international expansion, new
product development)
• Independence and Control
• To be their own-boss, taking full control over their business.
• To be independent and to take control of their own futures
• Freedom to make all the decisions
• In practice, this independence may be limited
Why social objectives are also important for
today private sector businesses?
• Social objectives are designed to achieve societal benefits.
• As business operates in a society and utilize the scarce resources in its
functions, it should contribute something to society and environment.
• If business activities lead to socially harmful affects, public would against
the business sooner or later, thus social objective should be set to
compensate for the same.
• Social objectives can boost their image and reputation, this would in turn
increase the competitiveness, good relationship with stakeholders and
long-term profitability for the business.
• Most businesses emphasize corporate social responsibility program which
can boost employee morality and greater productivity.
 Test your understanding
Which of the following is a non-financial business objective?
A. Increase market share C. Profit maximization
B. Independence and control D. Survival

Which of the following is a financial business objective?

A. Improve customer service C. Sales growth
B. Independence and control D. Improve social responsibility
 Test your understanding
Which of the following is likely to be an objective of a public sector
organization
A. Increase profit by 5% in the next financial year
B. Survival
C. Increase revenue by 20% over a three year period
D. Improve the quality of customer services
SMART objective?
• Business objectives need to be SMART
➢To increase market share by 10% at the end of 2022

Specific: stating clearly what is trying to be achieved

Measurable: capable of numeric measurement
Achievable: attainable by the people involved
Realistic: able to be achieved given the resources available
Time specific: state a time by which they should be achieved
Why might objectives change as businesses evolve?
• Reasons for changing business objectives
• Market conditions (new entrant, introducing new product by rivals, decline in economy
might lead the business to set the objective of survival instead of profit-maximization)
• Technology (automation into production, introducing online selling technology might
encourage business to set the sales growth objective so that they can exploit the
economies of scale and enjoy lower cost)
• Performance achieved (Sales growth has been achieved by lowering price and
profitability can be affected in the long-run so that the business might change to profit
objective)
• Legislation (new environmental, employment or consumer legislation might change the
business objective; some business set the objective to reduce carbon emission due to
new environmental legislation)
• Internal reasons (Some businesses might set new objectives when change in
ownership/ change in senior management team occurs in the company; new owners
might want to maximize profits so that higher dividends can be paid to shareholders)
Test your understanding
Which of the following might cause business objectives to change
overtime?
A. Technological Development
B. A rise in the price of share
C. Following the introduction of a new accounting system
D. A change in weather pattern
Past Questions Extract (Edexcel)
(1) Outline one possible financial objective other than revenue that TADS might have.
(2/20/paper1/Edexcel)
(2) Azeem has set the objective of survival for Designer Cuts. Why would Azeem set
this objective?
(3) What two objectives, other than survival, could Azeem set for Designer Cuts?
(4) State one non-financial objective for Tata Company Ltd. (1/19/paper2/Edexcel)