Question

Long answer Type questions

Describe various objectives of a business unit

Answer 1

Although business is run solely to earn profit, nowadays, with growing diversity, the objectives of business have expanded. It is no more limited to earning profits and has multiple objectives. The objectives of business is broadly divided into, economics and social objectives.

Economic Objectives:

i. Earning and maximising profits: Profit has always been the sole motive of every business. It is quite rational for anyone who invests a certain amount of money in business to expect a higher amount in return. The profit-earning capacity of a business decides its growth prospects. The higher the profits, the higher is the amount reinvested in the business, and consequently, the higher are the growth prospects and vice versa.

ii. New prospects: Finding new prospects or new customers is another objective of a business. Customers are important for any business. Thus, in competitive businesses, the marketer aims to increase its profits by increasing its customer base.

iii. Innovation: Innovation implies developing new techniques by incorporating new ideas to meet new demands. With the help of new techniques, a business can reduce its cost of production and provide new and superior products at a low price compared to those offered by competitors. Thus, innovation is of immense need if a business wants to attract new consumers and grow.

iv. Resource Utilisation: Using resources efficiently or with minimum wastage also results in increase in profits. Thus, optimum use of resources is another objective of a business. Here, efforts are made to reduce the wastages and make best use of scarce resources.

Social Objectives:

i. Social Welfare: It has been realised that every business should contribute towards social welfare. By social welfare, we mean helping poor section of the society or handicapped people, encouraging research and development, etc.

ii. Producing quality product: Producing superior quality product is another social objective of the business. It should not sell inferior quality products that are hazardous to health of the consumers. It must also engage in fair dealings.

iii. Creating Jobs: A business is a socio-economic institution and hence has some responsibility towards the society. Creating jobs for employees with different skill set is one of the social objective of the business.

iv. Promoting ethical trade: A business should not indulge into any unfair or unethical trade practices, for example, it should pay taxes on time, it should keep transparency with the investors, it should not make false claim about the business activities, etc. Thus, promoting the ethical trade practices.