1.5 Objectives of Business

1.5.1 Economic Objectives of Business

Economic objectives are the most important objectives of business.

They are

i) Earning profit

ii) Market Standing

iii) Innovation and

iv) Best use of resources.



i) Earning profit

Profit is the aim of every business. It keeps the business engine running. Without profit a business cannot survive for long. Profit is the income of the owner for taking business risk. It expands the capital base, improves the working conditions and generates more capital. If the business does not make enough profit the owners will lose interest in business which will ultimately lead to its closing down. Loss-making businesses drain out capital investment. Profit is the yardstick of managerial efficiency. A profitable business gains reputation and goodwill, promote sense of security among workers and generate more profit.



ii) Market standing

Customer is the king of business in a free economy. Every business activity is fine tuned to satisfy the requirement of customers. Efficient marketing is essential to continuously spin the cycle of goods to market and money in to business. A business should establish its name in market through systematic efforts. It is important to achieve a position in market and to maintain it. Intense competition is a reality in almost every field of business. To survive in business, there should be constant monitoring of trends and changes in customer’s tastes and preferences and the efforts of the competitors to grab more market share. Careful strategies are essential to safeguard the position in market.



iii) Innovation

To innovate means to implement better techniques. Business is constantly on the look out for better ways of production, marketing and management. Innovation is essential in products, process and distribution. Innovation helps to improve the quality of the product and reduce price of product. It increases efficiency in distribution. Fresh thinking is essential on every area of business. A business which does not improve actually goes down. A business cannot remain steady. If the quality of product does not change, the competitors will introduce better products at lower price and gradually push a stagnant business out of market. Therefore innovation is an essential economic objective for the very survival of a business.



iv) Best use of resources

The resources available to a business are men, materials and money. These resources should be put to the best use. Idle resources indicate inefficiency of management. Profit can be maximized only when the resources work hard to generate income. Natural resources which are not renewable should be carefully utilized to minimize wastage.

1.5.2 Social Objectives of Business

Social objectives of business are based on the commitment of the business towards the society in which it exists. A business cannot survive without any consideration of the requirement of the society. There are a lot of adjustments and sacrifices made by the society to help the business function. Pursuing social objectives is in a way giving back part of what is taken out. Therefore social objectives are considered part of business objectives in the long term interest of the business. Following are the important social objectives:

i) Supply of desired quality of goods

ii) Avoidance of unfair trade practices

iii) Generation of employment

iv) Welfare of employees

v) Community service

i) Supply of desired quality of goods


People expect good quality of goods for the money they pay. Customers are increasingly getting quality conscious. Durability, safety and performance at a competitive price are the basic concerns of a customer. Therefore, production and supply of goods according to the expectations of the customer is an important social objective.



ii) Avoidance of unfair trade practices

Businesses are often caught making quick money by mal practice. Hoarding of goods, black marketing and over charging buyers are some o the objectionable trade practices. False claims made in advertisements are also considered mal-practice in business. Cosmetic products are known to make exaggerated claims in television commercials, such as 27 ingredients in soap and magic oil that can change black skin to white in 14 days. Such practices cause bad name for the business and they are punishable under law. It must be part of the social commitment of the business to avoid unfair means of earning profit.



iii) Generation of employment

Money in the hands of a common man remains stagnant money or unproductive wealth. But money in the hands of a businessman becomes capital. This is the money that builds up prosperity in the country. It generates further wealth, employment both direct and indirect. The policies of business should be tailored to provide livelihood to people who are less privileged. Special provision should be made to employ people who are handicapped or people who deserve special consideration of the society. This helps such people to be useful part of the society. Business units which pursue these objectives improve their public image.



iv) Welfare of employees

Employees are considered valuable human resources of a business. It should be carefully developed and retained in the business for the long term benefit of the business. Providing good salaries and service conditions is considered part of the social obligations of a business. A company should provide adequate salary and benefits such as housing, medical facilities etc. to the employees. Large companies provide various facilities to their employees and family members. This will help them improve the efficiency of worker and raise the profitability of the business.



v) Community service

Community service is increasingly recognized as part of social obligations of a business. In India there are reputed management institutes, colleges, hospitals and other institutions financed by large business houses. They also sponsor sports and cultural events. Community services help the business to build up reputation and respect.