BA404 – Philosophy and Business

Module 3:
The Corporate Objective

Reported by:
Kristine G. Contreras

University of Luzon
 The Objectives of Business
Business objectives are something which a
business organization wants to achieve or
accomplish over a specific period of time.
Business objective is the purpose or the
reason for which a business exists and
operates.

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Corporate Objectives of Business
Corporate objectives are those that relate to
the business as a whole. They are usually set
by the top management of the business and
they provide the focus for setting more
detailed objectives for the main functional
activities of the business.

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Corporate objectives tend to focus on the
desired performance and results of the
business. It is important that corporate
objectives cover a range of key areas
where the business wants to achieve
results rather than focusing on a single
objective.

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Peter Drucker suggested that corporate objectives
should cover eight key areas:

1. Market standing
2. Innovation
3. Productivity
4. Physical & Financial Resources
5. Profitability
6. Management
7. Employees
8. Public responsibility

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 The Profit Orientation

A company objective that can be

implemented by focusing on (1) target
profit pricing, (2) maximizing
profits, or (3) target return
pricing.

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(1) Target profit pricing: a pricing strategy
implemented by firms when they have a
particular profit goal as their overriding concern;
uses price to stimulate a certain level of sales at a
certain profit per unit.

Formula (Contribution Margin Method):

Total Sales Volume (units) = Target Profit + FC

CM per unit

Whereas, FC – Fixed Cost

CM – Contribution Margin (Selling Price less Variable
Cost)
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Example computation for Target Profit Pricing:
Target Profit: P3,000
Fixed Cost: P1,000
Selling Price/unit: P50
Variable Cost/unit: P10

Total Sales Volume (units) = Target Profit + FC

CM per unit
= P3,000+P1,000/(50-10) =
P4,000/40
= 100 units

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To check:
Sales (100xP50) P5,000
Less: Variable Cost (100xP10) 1,000
Contribution Margin P4,000
Less: Fixed Cost 1,000
Net Income P3,000

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(2) Maximizing Profits: a profit strategy that
relies primarily on economic theory. If a firm can
accurately specify a mathematical model that
captures all the factors required to explain and
predict sales and profits, it should be able to
identify the price at which its profits are
maximized.
Example: Costs Incurred: P1,000
Units produced: 150pcs.
(P1000/150 = P6.66)
SRP to Maximize Profit: P10/pc.
(P150 x 10 = P1,500)
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(3) Target return pricing: a pricing
strategy implemented by firms less
concerned with an absolute level of profits
and more interested in the rate at which
their profits are generated relative to their
investments; designed to produce a specific
return on investment, usually expressed as a
percentage of sales.

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Example:
Target return: 15% on 10,000,000
investment
Mnufacturing cost/unit: P12
Units to be sold: 70,000

Sales : 2,340,000
Less: Cost of Sales : 840,000
Profit : 1,500,000

2,340,000 / 70,000 = P33.43 SRP/unit

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 The Service Concept
The service concept has been defined in many
different ways.
Heskett (1986) defines it as the way in which the
“organization would like to have its services perceived by its
customers, employees, shareholders and lenders”.
It has also been defined as the elements of the service.
package, or what Collier (1994) calls the “customer benefit
package”.
Edvardsson and Olsson (1996) refer to the service concept as
the prototype for service and define it as the “detailed
description of what is to be done for the customer (what
needs and wishes are to be satisfied) and how this is to be
achieved”.
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The service concept consists of
the holistic combination of four
dimensions:
• Service operation: the way in
which the service is delivered;
• User experience: the user’s
direct experience of the service;
• Service outcome: the benefits and results of the
service for the user;
• Value: the benefits the user perceives as inherent in
the service, weighed against the cost of the service.

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Profitable Service: The
Corporate Objective

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 References
• https://www.tutor2u.net/business/reference/corporate-objectives
• https://smallbusiness.chron.com/10-important-business-objectives-23686.html
• https://www.sciencedirect.com/science/article/abs/pii/S0272696301000900
• https://goats.extension.org/what-are-profit-oriented-goals/
• https://www.coursehero.com/file/74258712/Ch14pdf
• https://www.serviceautomation.org/what-is-a-service-concept/

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Thank you once again for listening!

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