Organisational objectives 3 On completing this chapter you should be able to: Know and understand

Profit satisficing
This means aiming to achieve enough pro
fi
t to keep the owners happy but not aiming 
to work 
fl
at out to make as much pro
fi
t as possible. This is often the objective of owners 
of small businesses who wish to live comfortably but do not want to work very long 
hours in order to earn more pro
fi
t.
Growth
The growth of a business – in terms of sales or value of output – has many potential 
bene
fi
ts for the managers and owners. Larger 
fi
rms will be less likely to be taken over 
and should be able to bene
fi
t from economies of scale. Managers may gain higher 
salaries
and fringe bene
fi
ts. Businesses that do not attempt to grow may cease to be 
competitive and, eventually, will lose their appeal to new investors. Business objectives 
based on growth have limitations:
• Over-rapid expansion can lead to cash 
fl
ow problems.
• Sales growth might be achieved at the expense of lower pro
fi
t margins.
Total costs and revenue
Profit-maximising point
Revenue
Costs
Output
Figure 1.3.4 
Profit maximisation – the greatest possible difference between total revenue 
and
total
cost

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Organisational objectives
43
• Larger businesses can experience diseconomies of scale.
• Using pro
fi
ts to 
fi
nance growth – retained pro
fi
ts – can lead to lower short-term 
returns to shareholders.
• Growth into new business areas and activities can result in a loss of focus and direction 
for the whole organisation.
Increasing market share
Closely linked to overall growth of a business is the market share it enjoys within its 
main market. It is possible for an expanding business to su
ff
er a loss of market share if 
the market is growing at a faster rate than the business itself. Increasing market share 
indicates that the marketing mix of the business is proving to be more successful than 
that of its competitors. Bene
fi
ts resulting from being the brand leader with the highest 
market share include:
• Retailers will be keen to stock and promote the best-selling brand.
• Pro
fi
t margins o
ff
ered to retailers may be lower than for competing brands as the shops 
are so keen to stock it – this leaves more pro
fi
t for the producer.
• E
ff
ective promotional campaigns are often based on ‘buy our product with con
fi
dence – 
it is the brand leader’.
Survival
This is likely to be the key objective of most new business start-ups. The high failure rate 
of new businesses means that to survive for the 
fi
rst two years of trading is an important 
aim for entrepreneurs. Once the business has become 
fi
rmly established, then other 
longer-term objectives can be established.