Economic objectives of Business
- Survival: The first priority of a business firm is to stay in business. In a highly competitive environment, survival requires regular monitoring of the environment and appropriate strategies to exploit the environmental opportunities. Otherwise a firm is likely to become sick like a large number of sick units. A Business enterprise can hope to accomplish its other objectives only after it is able to survive. As an organic entity, a business firm must first of all ensure its survival.
- Profitability. Business requires investment of capital and it must earn a reasonable return on this investment. Therefore, profit making is an essential economic objective of business. A business firm must earn profits in order to maintain intact its income generating capacity. Business makes use of several factors of production and it can succeed only when every factor is given its due reward which is possible only when profits are generated.
- Innovation: Business can earn profits only when it provides goods and services which can satisfy the needs and wants of people at a reasonable cost. In the words of Peter Drucker, “There is only one valid definition of business purpose: to create a customer. It is the customer who determines what a business is …. The customer is the foundation of business and keeps it in existence …. and it is to supply the customer that society entrusts wealth producing resources to a business enterprise.” Customers can be created through innovation and marketing. Innovation means introduction of new and better products improved means of production and distribution. New methods and techniques of management.
- Market Share: Market share means the share of a firm in the total sales of the industry. It is a good indicator of the relative position of the firm vis-à-vis other firms. Therefore, most companies seek to maintain and increase their market share. Continuous increase in market share provides market leadership to a company Market leadership brings power and prestige.
- Growth: Growth and diversification is one of the major objectives of most businesses. Growth can provide benefits not only to the owners but to the society as a whole. A business firm may grow either in the same/related industries or in entirely new/unrelated industries.
