Day 6: Why Does a Business Exist? (Multiple Objectives)
Re-knock: Last week, we clearly separated a businessman from a professional and an employee. We established that while all three earn a livelihood, their "rules of engagement" differ significantly. Today, we ask the million-dollar question: what is that businessman actually trying to achieve? If you said "just making money," you are only partially correct. In my 25 years of teaching, I've seen students treat "Profit" as the only goal, but a business is a multi-dimensional entity. It has to survive in a competitive market while fulfilling its duty to the society that allows it to exist. Let's explore the "Multiple Objectives" that keep a modern business afloat.
Daily Learning Goals:
- Understand why profit is not the *sole* objective of a modern business.
- Identify and analyze the Economic Objectives including Market Standing and Innovation.
- Examine the Social Objectives that connect a business to its community.
- Analyze a real-world Jharkhand-based scenario to differentiate between these objectives.
Objectives of Business
Economic Objectives
Economic objectives are those that enable a business to earn money, grow, and maintain its financial health. No business, whether it's a small retail outlet in Koderma or a massive industrial unit in Jamshedpur, can function without meeting these.1. Market Standing
Market standing refers to the position of an enterprise in relation to its competitors. A business must strive to capture a respectable share of the market by offering better products and services. In Jharkhand, consider a local dairy brand like Sudha. Their market standing is based on the trust consumers place in their milk quality compared to other unorganized sellers. High market standing ensures long-term customer loyalty.2. Innovation
Innovation is the introduction of new ideas or methods in the way business is conducted. There are two kinds of innovation:- Product Innovation: Developing a new product or improving an existing one.
- Process Innovation: Finding a more efficient way to produce or distribute goods.
3. Productivity
Productivity is a measure of efficiency. It is calculated by comparing the value of outputs (finished goods) with the value of inputs (raw materials, labor). Higher productivity means producing more with fewer resources, which directly reduces costs and increases profit.4. Physical and Financial Resources
Every business needs physical resources (like land, machinery, and office space) and financial resources (funds to buy materials and pay salaries). An important objective is to acquire these resources efficiently and utilize them in the most productive manner possible.5. Earning Profits
Profit is the excess of revenue over expenses. While we will deep-dive into the "Role of Profit" tomorrow, for today, understand that profit is the reward for risk-taking and a test of the business's efficiency.Social Objectives
A business is an organ of society. It uses social resources (land, labor, and capital) and sells to social members. Therefore, it has certain social objectives to fulfill.1. Supply of Desired Quality of Products at Fair Prices
The consumer today is "King." A business must provide goods that are safe, reliable, and reasonably priced. A manufacturer in Jharkhand producing mining safety helmets must ensure they meet ISI standards. Selling a cheap, non-standard helmet is not just bad business; it is a failure of social objectives.2. Avoidance of Unfair Trade Practices
Hoarding, black-marketing, and misleading advertisements are unfair trade practices. An ethical business avoids these to build long-term reputation and trust.3. Employment Generation
One of the biggest social contributions of a business, especially in regions like Jharkhand, is creating jobs for the local youth. By setting up a factory, a business helps in the economic upliftment of the local community.4. Welfare of Employees
A business must look after its workers by providing fair wages, safe working conditions, and growth opportunities. Happy employees lead to higher productivity.5. Community Service
Many large corporations in Ranchi and Jamshedpur engage in community service, such as building schools, hospitals, or providing clean drinking water to tribal villages. This is often part of their Corporate Social Responsibility (CSR).| Objective Type | Primary Focus | Examples |
|---|---|---|
| Economic | Financial health, survival, and competitive growth. | Capturing 20% market share, reducing waste in the Ranchi factory. |
| Social | Welfare of stakeholders and society at large. | Opening a school for employees' children in Koderma, avoiding false ads. |
Case Study: Jharkhand Mining Solutions (JMS)
Let's look at a fictional company based in Ranchi called Jharkhand Mining Solutions (JMS). They manufacture high-tech drills for the coal mines in Dhanbad. The Situation: JMS recently developed a new drill that is 30% faster than older models (Innovation). They have a 40% market share in the Chotanagpur region (Market Standing). However, last year, they discovered that their factory was releasing untreated waste into a local stream. The management decided to spend ₹50 lakhs on a waste treatment plant, even though it reduced their profit for that quarter. Analysis: 1. Economic Objective: By developing the new drill and maintaining a high market share, JMS is successfully meeting its economic objectives. Their innovation ensures they stay ahead of competitors. 2. Social Objective: By investing in the waste treatment plant, JMS is fulfilling its social objective of environmental protection. They realized that polluting the local Ranchi water table would eventually lead to legal trouble and a loss of public trust, proving that social objectives often protect long-term economic interests.Deep-Dive: The Interdependence of Objectives
Why do we say "Multiple Objectives"? Because they are interdependent. If a business in Koderma provides excellent quality mica at a fair price (Social Objective), its Market Standing (Economic Objective) will naturally improve. If it treats its employees well (Social Objective), its Productivity (Economic Objective) will increase. Conversely, if a business focuses only on profit and ignores employee safety, a single accident could lead to a strike, government fines, and a massive loss of reputation. Therefore, a successful manager must balance these objectives like a tightrope walker.Interactive Evaluation: Day 6
Test your ability to classify and analyze business objectives.
MCQ 1: Which of the following is an example of an Economic Objective of a business?a) Providing clean drinking water to a village in Jharkhand.
b) Capturing a higher market share in the Ranchi district.
c) Ensuring employees get a bonus during Diwali.
d) Stopping the use of plastic packaging to save the environment.
Click to reveal Answer
Answer: b) Capturing a higher market share in the Ranchi district. This relates to "Market Standing," which is a core economic objective.
MCQ 2: Developing a new, more efficient method of manufacturing steel in Jamshedpur is an example of which objective?
a) Productivity
b) Innovation
c) Community Service
d) Physical Resources
Click to reveal Answer
Answer: b) Innovation. Finding new ways to produce goods (process innovation) or new products (product innovation) is the definition of innovation.
Case Study: The Ranchi Garment Factory
Mrs. Verma runs a garment factory in Ranchi. She noticed that her workers were frequently falling ill due to poor ventilation in the sewing room. She decided to install a high-end air purification system and improved lighting. She also started a free lunch program for her staff. Within six months, the number of garments produced per day increased by 15%, and the defect rate dropped.
Question: Identify the social objective fulfilled by Mrs. Verma and explain how it helped her achieve an economic objective.
Click to reveal Analysis
1. Social Objective Identified: Welfare of Employees. By improving the working conditions (ventilation, lighting) and providing a lunch program, she looked after the health and well-being of her staff.
2. Economic Objective Achieved: Productivity. Because the workers were healthier and more motivated, they worked more efficiently. This resulted in a 15% increase in output (Productivity) and better quality (less defects), which eventually leads to higher profits. This proves that social objectives are often the fuel for economic success.
2. Economic Objective Achieved: Productivity. Because the workers were healthier and more motivated, they worked more efficiently. This resulted in a 15% increase in output (Productivity) and better quality (less defects), which eventually leads to higher profits. This proves that social objectives are often the fuel for economic success.
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