Objectives of business

April 20, 2020

Good morning boys!

Let us first see Saturday's answers:
1) Vaisyas, Marwaris.
2) It is inherited business which provides services to specific caste and communities.
3) If an activity involves monetary benefit, it is known as economic activity.
4) Business is an economic activity as it involves regular exchange of goods and services with the aim to earn profit.
5)No, because it is not done to earn livelihood.

Today's Topic is OBJECTIVES OF BUSINESS

Learning outcomes- At the end of the topic, students will be able to-
1) State the social and economic objectives of business.
2) Explain the role of profit in business.

Q.7 Explain the economic and social objectives of business.(6)
Ans-  objective is the purpose for which an activity is performed. It provide directions  to all business decisions and actions. The objectives of business can be  classified as follows:
A. Economic Objectives- Business being an economic activity , its main objectives are based on financial gains. Some are as follows-
a)Profit Earnings- 1) For successful survival and continuous growth, business must earn profits.
2) Profit also provide opportunities for future expansion and diversification. It provides a yardstick to evaluate business performance and create confidence among creditors and lenders.
b) Market Standing- 1) It refers to the position of an enterprise in relation to its competitors in the market. 
2) For example- Position of Samsung in relation to LG Electronics.A business market standing is measured by its market share .It is a must for business to  provide good quality products in order to have strong footing in the market.
c) Innovation - 1)For a business to have a continued strong footing in the market, it is important that it becomes the first mover .
2) To be able to survive competition , a business should try to be the first one to bring in new products or adopt changes in technology or introduce new ideas while producing and distributing goods and services.
B. Social Objectives- A business enterprise uses society's resources and earns profits from the society by selling its goods and services to customers who are part of society .It is imperative for every business to fulfill  social responsibilities for its survival and prosperity in the long run .Some of the social objectives are as follows -
1)Supply of desired goods and services as desired by the customers .Goods must be of proper quality with all required certifications.
2) Social and fair trade practices- A business obsessed with profit may exploit various sections of society and indulge in malpractices like black marketing, hoarding, etc which will affect its working in the long run. 
3) Good employment opportunities- Business should generate employment opportunities for all sections of society especially for less advantaged people.

Q.8 Explain the role of profit in business. (5)
Ans -Profit is the essential objective for following reasons :
1) Survival- a) Profit is the leading source for business existence and survival in future.
b) A business can run in the long run only if it earns adequate profits. Profit is the only means of earning livelihood for a businessman.
2) Efficiency Measuring tool -
a) Profit is the yardstick to measure business performance and success.
b) The success of any business depends on its ability to earn profits. Higher the profits indicate greater managerial efficiency .
3) Facilitates future growth and expansion-
a) Profits not only provide funds for growth and expansion but also motivate businessmen to think of diversifications and expansion plans to achieve greater heights.
4) Reward for bearing risk- 
a) Profit is the reward for efforts and investments put in by the owner.
b) Profits motivate businessman to take risks as higher the risk, higher is the possibility of earning more profits.
5) Builds credit- worthiness- 
a) Higher profits builds reputation if business.
b) It improves business credit- worthiness amongst creditors and lenders  Higher profits enable business to meet its expenses comfortably.

Watch the video given below for better understanding of the topic-