The objectives organisations pursue (profit maximisation, growth, survival, market share, satisfying customers, managerial objectives, social responsibility) and how objectives differ across the private, public and third sectors.

What this key area is asking

Every organisation sets objectives, the goals it is trying to achieve, and the SQA wants you to know the main ones and, crucially, to explain why they differ between the three sectors and change over time. A new firm survives; an established firm grows; a charity serves a cause. Higher rewards you for linking the objective to the type and circumstances of the organisation.

The main objectives

• Profit maximisation. Making the greatest possible profit, the traditional aim of private-sector firms, used to reward owners, fund growth and reassure investors.
• Growth. Becoming larger through more products, outlets or markets. Growth spreads risk, brings economies of scale (lower cost per unit), raises status and can deter competition.
• Survival. Simply staying in business. This is the priority for a new start-up, or for any firm during a recession or intense competition, even if profit must be sacrificed in the short term.
• Increasing market share. Winning a bigger percentage of total sales in the market than rivals. A larger share brings higher revenue, prestige and more influence over prices.
• Satisfying customers. Meeting customer needs and expectations to build loyalty and repeat business, which protects long-term sales and reputation.
• Managerial objectives. Goals pursued by managers for their own benefit, such as larger budgets, bigger departments, status, perks or salary. These can conflict with owners' wishes.
• Corporate social responsibility (CSR). Acting ethically and sustainably towards employees, customers, the community and the environment, for example fair pay, reducing waste and supporting local causes.

How objectives differ between sectors

The sector shapes the objective:

• Private sector organisations are owned to earn a return, so profit, growth and market share dominate, balanced increasingly by CSR to protect reputation.
• Public sector organisations exist to provide essential services funded by taxation, so their objectives are the quality and reach of the service, value for money and staying within budget, and meeting government targets, not profit.
• Third sector organisations pursue a social, charitable or community aim: relieving poverty, protecting the environment, supporting a group. Any surplus is reinvested in the cause.

How objectives change over time

Objectives are not fixed. A typical path: a start-up prioritises survival and building a customer base; once established it shifts to growth and market share; a mature firm focuses on profit maximisation, customer satisfaction and CSR; and in a recession any firm may fall back to survival. The SQA likes you to recognise this life-cycle change.

Examples in context

Example 1. A discount retailer chasing market share. A budget supermarket may deliberately set very low prices that cut its profit margin, accepting lower profit per item in order to win market share from established rivals. Once it dominates a region, the higher volume restores profit. This shows how growth and market share can take priority over short-term profit maximisation.

Example 2. A charity and a plc in the same field. A health charity and a private pharmaceutical plc both work on disease, but their objectives diverge: the charity aims to relieve suffering and fund research (a social aim, third sector), reinvesting every surplus, while the plc aims to maximise profit and shareholder value (private sector), tempered by CSR. The contrast is a clear way to show how sector drives objectives.

Try this

Q1. Describe what is meant by "increasing market share" as a business objective. [2 marks]

• Cue. Winning a larger percentage of total sales in the market than rivals, which raises revenue, status and influence over price, often at the expense of short-term profit.

Q2. Explain two reasons a business might pursue corporate social responsibility. [4 marks]

• Cue. It protects and enhances reputation, attracting customers and investors who value ethics; it can improve staff motivation and retention; it reduces the risk of fines or boycotts; and it can cut costs through less waste and energy use (any two, developed).