Economic Objectives of Business

2. Economic Objectives of Business

Economic objectives are the objectives directly concerned with the business's own economic survival and growth as a commercial enterprise. The syllabus groups four economic objectives together:

1. Earning profit. Profit is the surplus that remains after a business meets all its expenses out of its revenue. Profit is a necessary objective, for several reasons: it is the reward the entrepreneur earns for bearing the risk and uncertainty of running the enterprise (a business could just as easily make a loss); it provides the internal funds a business needs to survive difficult periods, replace worn-out assets, and finance future expansion, without depending entirely on outside borrowing; and a reasonable, sustained level of profit is itself a signal that the business is being run efficiently. At the same time, profit is a means to the business's survival and growth, not its only legitimate purpose — a business that chases the highest possible profit while ignoring its customers, employees, or the law will not sustain that profit for long (this is exactly why the chapter goes on to cover social, human, national and global objectives as well).
2. Creation and maintenance of customers. A business exists only because customers are willing to buy what it offers — a business with no customers has no revenue and no reason to exist. "Creating" a customer means attracting a first-time buyer through the right product, price, and promotion; "maintaining" that customer means keeping them satisfied enough to buy again and recommend the business to others. Continually creating and retaining customers, not a one-time sale, is what allows a business to survive and grow over the long run.
3. Regular innovation. Innovation means constantly introducing something new or improved — a new product, an improved version of an existing product, a new production method, or a better way of reaching customers. A business that never innovates eventually loses customers to competitors who offer something better, cheaper, or more convenient. Innovation may relate to the product itself, to the process used to make it, or to the way it is marketed and delivered.
4. Optimum utilisation of resources. A business uses four broad categories of resources — men (human effort), money (capital), materials (raw materials and supplies), and machines (equipment/technology) — commonly remembered as the "4 Ms." "Optimum utilisation" means using these resources in the best possible combination to get the maximum output with the minimum waste, rather than merely using "more" of everything. Efficient use of resources keeps costs down, which in turn supports both the profit objective and the ability to offer goods at a fair price. …