Business objectives, stakeholders and business growth
Domain 3: Business objectives, stakeholders and business growth
This domain tests why businesses set objectives, how stakeholders influence decisions, and how growth changes structure and control.
Core rules
- Objectives can include profit, survival, sales growth, market share, customer satisfaction, quality and social responsibility. Objectives should be specific and measurable.
- Stakeholders are groups affected by or interested in a business: owners/shareholders, employees, customers, suppliers, lenders, government, local community and pressure groups.
- Stakeholder aims often conflict: higher wages raise employee income but reduce profit; lower prices help customers but may squeeze margins.
- Internal growth comes from expanding existing operations. External growth comes through merger (agreed joining) or takeover/acquisition (buying control).
- Integration types: horizontal (same stage, same industry), vertical backward (towards suppliers), vertical forward (towards customers), conglomerate (unrelated industries).
- Growth can bring economies of scale but also diseconomies: communication problems, slower decisions and loss of personal service.
Worked example
A Namibian retailer buys the wholesaler that supplies its stores. This is backward vertical integration because the retailer moves towards its supply chain. It may gain reliable stock and lower buying costs. But the retailer now manages warehousing and transport, which are different activities, so management diseconomies and higher fixed costs are possible. If the same retailer bought an unrelated insurance firm, that would be conglomerate growth.
Traps
Do not list stakeholders without explaining their interest. Do not assume profit is the only objective for all organisations. Do not call a merger a takeover when both boards agree. Do not claim growth always lowers unit costs - diseconomies can appear.