Business objectives - to make a profit, to increase market share, to fulfil a market need, to fulfil a social need, to meet shareholder expectations - and the relationship between businesses and their objectives

What this dot point is asking

VCAA wants you to know the five business objectives named in the study design, how they vary across business types, how a business and its objectives relate (objectives give direction and the benchmark for every decision), and how objectives can reinforce or conflict with each other. Section A short responses commonly test one or two objectives and their relationship; Section B case studies often require you to identify the scenario business's objectives and reason from them.

The answer

The five objectives in the study design

VCAA names five objectives a business may pursue.

1. To make a profit

Profit is total revenue minus total expenses over a period. It is the primary objective of most commercial businesses because it funds reinvestment, rewards owners through dividends, services debt and signals long-term viability. A business that cannot make a profit over time cannot survive without external subsidy.

2. To increase market share

Market share is the business's portion of total sales in the market it competes in. Growing market share usually means winning customers from competitors or growing faster than the market. A larger share can bring pricing power, economies of scale and bargaining strength with suppliers.

3. To fulfil a market need

A business exists to meet a customer need or want - the product or service it provides. Fulfilling that need well is the foundation of every other objective; a business that stops meeting its customers' needs loses sales, share and profit in turn.

4. To fulfil a social need

Some businesses exist primarily to address a social or environmental problem. For social enterprises this is the dominant objective, with commercial revenue serving the mission. For commercial businesses, fulfilling a social need shows up through corporate social responsibility commitments.

5. To meet shareholder expectations

Businesses with shareholders (private and public companies) must deliver the returns owners expect - dividends, share-price growth, and confidence in the business's strategy. Listed companies face this objective most sharply because the share price reacts continuously to performance.

How objectives vary across business types

Different business types weight these objectives differently (see the related dot point on business types).

The relationship between a business and its objectives

Objectives are not a wish list. They do real work.

• They give direction. Objectives state what the business is trying to achieve.
• They are the benchmark for decisions. Every strategy and operational decision can be tested against whether it advances an objective.
• They cascade. A high-level objective becomes a strategy, then operational decisions, then measurable KPIs that track progress (see the Unit 4 KPI dot point).
• They are balanced and sequenced. Real businesses pursue several objectives at once. Managers weigh them against each other over the short and long term.

When objectives conflict

Objectives often pull against each other, especially over different time horizons.

• Profit versus market share. Discounting to win share (a price war) sacrifices margin now in the hope of higher profit later. Aldi's Australian expansion used low prices to take share before scale made the model profitable.
• Shareholder returns versus a social need. Spending on environmental or community programs can reduce short-term profit and dividends, even where it builds long-term licence to operate.
• Profit versus fulfilling a market need well. Cutting service quality lifts margin briefly but erodes the customer need-fulfilment the business depends on.

Skilful management resolves these tensions over time rather than maximising one objective at the expense of the rest.