Objectives of Business Characteristics
Characteristics of Business
Production or Trading of Good or Services for Sale
If a business plans on selling a product, it has to either manufacture that product or purchase it and add a profit margin to it and sell it further. Business is interested in every activity that is concerned with the production or purchase of goods for selling, this makes it one of the most important characteristics of a business. Services for sale include transportation, housekeeping, and security. Whereas, goods are mostly consumable items.
Sale or Exchange of Goods and Services
The third and crucial one of the characteristics of business after production or procurement is to sell that product for the money. The way to sell a product or service is by launching it in the market or to offer it for sale. A sale or exchange must take place between the seller and the buyer.
Economic Activity
Business necessarily has to be an economic activity. But what exactly is an economic activity? Any activity that gives a monetary return is an economic activity. For example, if your friend’s father picks you up and drops you at college every day, he is doing this act out of kindness. But if he starts a transportation service of picking up and dropping by charging money then it’s an economic activity.
Profit Earning
The sole purpose of business is the maximization of profit. It steps into the market with the main objective of earning a profit. For the survival of business in a market, generating profit is extremely necessary. If a business can’t produce profit, it is expected of it to go downhill financially. Therefore the businessman does all the possible tricks to maximize its profits by increasing the volume of sales or decreasing the costs.
Regularity in Dealings
Business is a repeatable economic activity that generates money. For example, if you sell your old bike and it generates money. Also, it’s an economic activity but is you doing this on a regular basis? No. As it has no regularity in it, it cannot be accepted as a business activity. Similarly, there is a dealer who deals in the purchase and sells of second-hand bikes. For him, it’s a business activity as there is a regularity in his dealing. A single transaction of purchase or sale cannot be classified as a business.
Uncertainty of Returns
Businessmen invest huge capital in their activities to sustain and extract profit from the business. As we discussed the risk above, it is very uncertain as to what amount the profit will be earned. Often there are situations where is no return of profit. There are always chances of losses in the business activities.
Risk Factor
It is well known “Higher the risks, higher the return”. Business attracts risk. While initiating business it is not guaranteed 100% that the business will be successful. There is an anticipation that there might be demand for its product or service in the market. But the market is always dwindling the subject to risk. The business may even earn profit but the amount of profit earned may vary.
Legal Activity
The business has to be legal and lawful. Business is an extremely important activity for a country but it is not above the law. Every economic activity has to be within the limits of the law. The country’s legislation puts clauses on the functioning of the business to control its activities.
Setting of objectives is an essential part of the business. In fact management process begins with setting organisational objectives. Strategic planning is applied to every aspect of the business in order to meet its objectives.
The following are the features of business objectives:
- Quantitative and Qualitative:
Objectives can be expressed in quantitative and qualitative terms i.e. volume, number or value terms, increase in sales, market share, rate of production etc. are the examples of quantitative objectives. Some objectives are qualitative in nature such as goodwill, worker’s job satisfaction etc.
- Flexible:
Flexibility means, ‘that keeps on changing’. Business objectives should be flexible. It must not be rigid. Business environment keeps on changing. Therefore the objectives should be changed or modified according to the changing situation. The objectives must be able to reframe in the light of changes in the environment.
- Objectives should be understandable:
In order for a company to establish a business objective, it must first understand where it stands and where it has been. It then determines what its goals are and how it will attain them.
Once the objectives are set, it must be properly understood by the team members because it helps in proper implementation for achievement of the objectives.
The business objectives should be made in an understandable way. This helps in communicating your objectives to your investors, employees, partners etc. Without this communication of business objectives, it becomes very difficult to reach them.
- Objectives should be measurable:
Objectives of an organisation must be measurable. Unless the objectives are set the organisation will not be able to compare the actual performance with the planned target. Objectives give the business a clearly defined target.
It also enables the business to measure the progress towards to its stated aims. To avoid this, organisation must state the objectives that are capable of being measured in terms of performance.
- Hierarchy of objectives:
Hierarchy means level. Business objectives are structured according to its hierarchy. All the objectives are not equally important. It should be achieved according to its priority and importance. The most important objective should be achieved first.
For example:
In a hierarchy survival of a business firm comes first following growth and then the prestige and goodwill.
- Multiplicity of objectives:
Business does not have a single objective. They are multiple in natures. The primary objective of every business is profit followed with customer satisfaction. Business also has objectives towards society that comprises of employees, shareholders, creditors, government etc. Business objectives are classified as organic objectives, economic objectives, social objectives, human objectives and national objectives.
- Objectives should be understandable:
In order for a company to establish a business objective, it must first understand where it stands and where it has been. It then determines what its goals are and how it will attain them.
Once the objectives are set, it must be properly understood by the team members because it helps in proper implementation for achievement of the objectives.
The business objectives should be made in an understandable way. This helps in communicating your objectives to your investors, employees, partners etc. Without this communication of business objectives, it becomes very difficult to reach them.
- Objectives should be measurable:
Objectives of an organisation must be measurable. Unless the objectives are set the organisation will not be able to compare the actual performance with the planned target. Objectives give the business a clearly defined target.
It also enables the business to measure the progress towards to its stated aims. To avoid this, organisation must state the objectives that are capable of being measured in terms of performance.
- Quantitative and Qualitative:
Objectives can be expressed in quantitative and qualitative terms i.e. volume, number or value terms, increase in sales, market share, rate of production etc. are the examples of quantitative objectives. Some objectives are qualitative in nature such as goodwill, worker’s job satisfaction etc.
- Flexible:
Flexibility means, ‘that keeps on changing’. Business objectives should be flexible. It must not be rigid. Business environment keeps on changing. Therefore the objectives should be changed or modified according to the changing situation. The objectives must be able to reframe in the light of changes in the environment.
- Achievable:
Business goals must be achievable. The organisation should frame those goals, which can be achieved taking into consideration its capabilities and resources. The objective must be feasible enough to keep team members motivated to strive towards its achievement. While setting the objectives, the organisation must concentrate on the limitations also.
- Objectives should be specific:
Objectives must be specific in terms of time, quality and quantity. Specific objectives help in the accomplishment of those objectives in the specified time frame and resource availability. If the objectives are specific it gives precise results.
Specific objectives help in understanding the objectives in the correct manner. Specific objectives help the firm to understand where they stand with respect to the completion of the objective.
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