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Cambridge IGCSE0450

Business objectives and stakeholder objectives

Business Studies 0450 Chapter Notes

What this chapter covers

Business objectives and stakeholder objectives - Businesses can have several objectives and the importance of them can changeBusiness objectives and stakeholder objectives - The role of stakeholder groups involved in business activityBusiness objectives and stakeholder objectives - Differences in objectives of private and public sector enterprises
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In this chapter

  1. 1What a business objective is
  2. 2Why a business needs objectives
  3. 3The range of business objectives
  4. 4Survival and profit
  5. 5Growth and market share
  6. 6Why objectives change
  7. 7Objectives of social enterprises
  8. 8Internal and external stakeholder groups
  9. 9Objectives of different stakeholder groups
  10. 10How stakeholder objectives conflict
  11. 11Judging which stakeholder matters most
  12. 12Who owns the business
  13. 13Objectives of private sector businesses
  14. 14Objectives of public sector enterprises
  15. 15Stating the difference

1. What a business objective is

A business objective is a specific target that a business works towards. It states something the business wants to achieve.

A bare ‘target’, ‘goal’ or ‘aim’ earns one mark. The full mark needs both ideas: it is specific, and the business works towards it.

Examiner insight

“A small, but significant, number of candidates wrongly defined an objective as an aim. Such candidates often gained one mark for awareness that these are goals to work towards.” “A common mistake was to repeat the word ‘objective’ without defining the term.”

Worked example 12 marks

Define ‘business objective’.

  1. 1

    Full definition: (a statement of) a specific target that a business works towards. Or: a specific target to be achieved. [2]

  2. 2

    Partial definition (1 mark only): target, goal or aim. Or: something the business works towards or wants to achieve.

2. Why a business needs objectives

Objectives give a business targets to work towards and a sense of direction. They link to the business's strategy and help with decision-making, because each choice can be checked against the target.

A question on this asks for reasons for having objectives. Giving examples of objectives, such as profit, does not answer it. Say how the objective helps.

Examiner insight

“Strong responses focused on discussion of goals and giving the business a sense of direction. There were several ways of developing the answer, for example, making links to strategy and decision-making.” “Weaker candidates tended to describe business objectives rather than explain the reason for them.”

Worked example 16 marks

Ines Duarte has opened Duarte Dental, a clinic with two dentists in a small town. She has written down the number of patients she wants by the end of the first year. Explain two reasons why Duarte Dental needs business objectives.

  1. 1

    Knowledge: objectives give the business a target to work towards. [1]

  2. 2

    Application: Ines has a number of patients she wants by the end of the first year. [1]

  3. 3

    Analysis: both dentists know what to aim for, so the clinic can judge its first year. [1]

  4. 4

    Knowledge: objectives give a sense of direction and help decision-making. [1]

  5. 5

    Application: Ines must decide whether to take on a third dentist. [1]

  6. 6

    Analysis: she can check the choice against the patient target, and hire only if it helps. [1]

3. The range of business objectives

A business can set several objectives. The ones a mark scheme credits are to make or increase profit, to survive, to increase market share, to increase sales or customers, and to improve the business's image.

Others are to sell in other countries or new markets, to raise returns to shareholders, and to be socially, ethically or environmentally responsible. Name the objective itself. How the business will reach it is a different thing.

Examiner insight

“Other responses lacked precision. For example, referring to making money rather than profit or increased sales. Some candidates wrongly discussed actions the business might take to achieve the objective, without specifying the objective itself.” “Some stated growth or ways of growth as an objective which can’t be considered as it was explicitly excluded in the question.”

Worked example 12 marks

Identify two examples (other than growth) of business objectives.

  1. 1

    Objective 1: any relevant objective, such as make or increase profit, or survival or breakeven. [1]

  2. 2

    Objective 2: a different relevant objective, such as increase market share, increase sales or customers, or be socially responsible. [1]

4. Survival and profit

A business with a survival objective aims to cover its costs so that it gets through an early or difficult stage. It matters most to a new business, and to a family business that wants to protect the family's investment. It does not suit the long run.

Profit is the surplus left after expenses have been met. It is a reward for the owners and investors, and a source of finance for expansion.

Apply the objective to the stage the business is at. An established business has probably passed the survival stage.

Examiner insight

“Survival was answered well by those who used the context of the case and recognised that this was not a new hotel and so had probably passed this stage. A larger number of candidates just took survival at face value and gave a generic answer.” “An error made by some candidates in the first section about ET’s objectives was to think that profit is acquired in order to pay expenses rather than being the surplus after those expenses have been met.”

Worked example 16 marks

Nadia Rahman opened Rahman's Roti, a street-food stall, six months ago. Her sales cover her costs in some weeks but not in others. Do you think survival or profit is the better objective for Rahman's Roti at this stage? Justify your answer.

  1. 1

    Knowledge: survival means being able to cover costs. [1]

  2. 2

    Analysis: Nadia's sales cover her costs only in some weeks, so the stall may run out of money and have to close. [1]

  3. 3

    Knowledge: profit is the surplus after expenses, a reward for the owner. [1]

  4. 4

    Analysis: in the weeks when sales do not cover costs there is no surplus, so Nadia cannot yet rely on meeting a profit target. [1]

  5. 5

    Evaluation: decision: survival is the better objective now. [1]

  6. 6

    Evaluation: justification: the stall is only six months old, so it must cover its costs steadily before profit can be a target. Profit becomes the better objective once weekly sales always exceed costs. [1]

5. Growth and market share

A business with a growth objective aims to get bigger. Market share is the share of the market's sales that the business wins. It is concerned with the value of sales or the number of customers.

State what it is a share of. Market share is not share ownership. A business wants more of it to gain sales, and in the long run more control over the market and its prices.

There are costs. Extra marketing may be needed, and cutting prices to win customers may lower profit in the short run.

Examiner insight

“Stronger candidates clearly explained the concept of having a higher market share as an objective but usually failed to bring out the costs of achieving this such as extra marketing or that price cutting may lower profits. Most candidates quickly concluded that ‘higher market share means high profits’.” “A common mistake was to refer to the idea that market share had something to do with percentage of the market but not specify what it was a share of or confused the term with share ownership.”

Worked example 16 marks

Brightside Mobile repairs phones in 12 shops across one city. Its owner wants Brightside to win a larger share of the city's phone repairs. Explain two benefits to Brightside of increasing its market share.

  1. 1

    Knowledge: increased market share means more sales or more customers. [1]

  2. 2

    Application: more of the city's phone repairs would be done in Brightside's 12 shops. [1]

  3. 3

    Analysis: each extra repair brings in revenue, so total revenue rises. [1]

  4. 4

    Knowledge: a larger market share gives the business more control over the market. [1]

  5. 5

    Application: Brightside would be the main repairer in the city. [1]

  6. 6

    Analysis: with fewer rivals it can hold its prices up, which can raise profit in the long run. [1]

6. Why objectives change

The importance of an objective can change. A new business may put survival first. Once it has passed that stage, profit or market share may matter more. If demand falls, an established business may put survival first again.

Examiners credit three reasons for a change: the business has achieved its current objectives, there has been a change in the level of demand, or there has been a change in competition.

The question asks why objectives change. Naming a new objective does not answer it.

Examiner insight

“Many candidates did not read the question carefully so identified possible objectives the business might have set rather than outlining reasons why the objectives might have changed. Better responses recognised the business might have achieved its current objectives or that there may have been changes in the level of demand or competition.” “Some candidates did not understand the question and stated two possible objectives rather than the reasons why they may change.”

Worked example 14 marks

Sam's Sourdough is a small bakery. Two years ago its objective was survival. It now covers its costs every month, and a supermarket has opened a bakery counter nearby. Outline two reasons why Sam's Sourdough might change its objectives.

  1. 1

    Knowledge: the business may have achieved its current objective. [1]

  2. 2

    Application: Sam's Sourdough now covers its costs every month, so survival is no longer the main target. [1]

  3. 3

    Knowledge: a change in competition. [1]

  4. 4

    Application: the supermarket's bakery counter may take customers, so protecting market share becomes more important. [1]

7. Objectives of social enterprises

A social enterprise has social objectives. Making a profit is not its main objective. It aims to be socially, ethically or environmentally responsible, or to provide a service to the community.

A social enterprise still earns money. Any profit made is reinvested in the business to pay for its social aims.

Do not confuse it with a public sector organisation, a not-for-profit organisation or an entrepreneur. Its objectives are not government objectives.

Examiner insight

“Many understood that it had social objectives or that profit was not its main objective. Common errors were to confuse a social enterprise with a public sector organisation, a not for profit organisation or an entrepreneur.” “Correct answers recognised that any profit made was reinvested in the business and recognised a social enterprise might want to provide social benefits. The most common mistake was to identify government objectives.”

Worked example 14 marks

Hope Kitchen is a social enterprise. It sells low-price meals to local residents and trains unemployed people as cooks. Outline two objectives of Hope Kitchen.

  1. 1

    Knowledge: to provide a service to the community, a social benefit. [1]

  2. 2

    Application: it sells low-price meals to local residents. [1]

  3. 3

    Knowledge: to make a profit that is reinvested in the business, not profit as its main objective. [1]

  4. 4

    Application: the profit from selling meals can pay to train more unemployed people as cooks. [1]

Recap

  • A business objective is a specific target that a business works towards. An aim alone earns one mark.
  • Businesses need objectives for targets, a sense of direction, strategy and decision-making. Say how the objective helps; do not list objectives.
  • Credited objectives include profit, survival, market share, sales or customers, image and social responsibility. Name the objective, not the way to reach it.
  • Survival means covering costs to get through an early or difficult stage. Profit is the surplus after expenses, a reward for owners and a source of finance.
  • Market share is a share of the market's sales, by value or customers. It is not share ownership. It brings control of prices in the long run but can cost profit at first.
  • Objectives change when they are achieved, or when demand or competition changes. Apply the reason to the business.
  • A social enterprise has social objectives, and profit is not its main aim. Any profit is reinvested. It is not a public sector organisation.

8. Internal and external stakeholder groups

A stakeholder group has an interest in a business, because the business's decisions affect it. Do not confuse stakeholders with shareholders. Shareholders are owners, so they are only one stakeholder group.

Internal stakeholders work in the business: the owners, the managers and the employees. External stakeholders sit outside it. They include customers, suppliers, banks/lenders, government, the local community, competitors and pressure groups.

Name the group, then say who it is in the business. Two owners are one stakeholder group, not two.

Examiner insight

“A common error was to confuse stakeholders with shareholders.” “Some responses included Danielle and Anthony as two stakeholder groups and could only be given credit for one stakeholder group.”

Worked example 12 marks

Identify two external stakeholder groups a business might have.

  1. 1

    Knowledge: one external group, for example customers [1]

  2. 2

    Knowledge: a second, different external group, for example suppliers or banks/lenders [1]

9. Objectives of different stakeholder groups

An objective of a stakeholder group is what that group wants from the business. Always state it from the stakeholder's point of view, not the business's.

Shareholders want dividends. Employees want higher pay. Suppliers want to be paid on time. Customers want good quality at an affordable price. Government wants tax. Owners want a good return on their investment. A bank wants its loan repaid with interest. The local community wants jobs and little pollution.

Then apply it to the business, with a different point of application for each group.

Examiner insight

“Some candidates identified general government objectives which is a different question.” “Weaker responses confused objectives with the role of the stakeholders, such as TSE supply products to customers or looked at the objective from TSE’s point of view and not that of the stakeholder group.”

Worked example 14 marks

Tilda's Bakery sells bread to 12 cafes in a city. Its 15 bakers start work at 4 am. Outline one objective of each of the following stakeholder groups of Tilda's Bakery: the bakers and the cafes.

  1. 1

    Knowledge: the bakers, as employees, want higher pay [1]

  2. 2

    Application: for starting work at 4 am [1]

  3. 3

    Knowledge: the cafes, as customers, want good quality at an affordable price [1]

  4. 4

    Application: for the bread that each of the 12 cafes buys to serve [1]

10. How stakeholder objectives conflict

Objectives conflict when meeting one makes it harder to meet another. A business cannot fully satisfy every group at once.

The common conflict is employees against owners. Employees want higher wages. Owners want to reduce costs and increase profit. Customers who want lower prices can also clash with owners who want more profit.

Explain the chain. Higher wages mean higher costs, and higher costs can mean lower profit. Stating the two objectives is not enough.

Examiner insight

“The most popular conflicting objectives were for employees to want higher wages, job security or work more sociable hours and these may conflict with the owners wanting to expand the business, reduce costs and increase profit.” “Many responses identified lower profit without explaining why this may happen. For example, higher wages could result in higher costs, and it is the higher costs which could lower profit.”

Worked example 16 marks

Marlow Fabrics makes cotton scarves in a factory with 40 employees. The owners want to raise profit this year. Explain how the objectives of two stakeholder groups, employees and customers, might conflict with the owners' objective.

  1. 1

    Knowledge: employees want higher wages [1]

  2. 2

    Application: a pay rise for all 40 factory employees [1]

  3. 3

    Analysis: this raises Marlow Fabrics' costs, and higher costs lower profit [1]

  4. 4

    Knowledge: customers want lower prices [1]

  5. 5

    Application: for the cotton scarves they buy [1]

  6. 6

    Analysis: a lower price brings in less revenue from each scarf, so profit falls [1]

11. Judging which stakeholder matters most

Longer questions ask for a justified decision. Weigh the groups against each other and choose.

Build each side with relevant development: the objective, its effect on the business, and the effect on the other group. Then decide which group matters most to the business, or which conflict is most likely, and give the reason.

Do not repeat earlier points as a conclusion. A conclusion needs a decision and a reason that is new.

Examiner insight

“A minority of candidates discussed the conflicts within a single stakeholder group such as conflicts between shareholders on the decisions the business could make but this was not what the question asked.” “Instead of evaluation, some candidates repeated earlier points made which had already been credited.”

Worked example 16 marks

Harbour Cafe is owned by two people and has 12 staff. The owners want to open until midnight to raise sales, and most evening customers come on Fridays and Saturdays. Neighbours in the local community fear noise late at night. Do you think Harbour Cafe should open until midnight? Justify your answer.

  1. 1

    Knowledge: the owners want higher profit [1]

  2. 2

    Analysis: opening later brings extra evening sales, so revenue rises [1]

  3. 3

    Knowledge: the local community wants quiet at night [1]

  4. 4

    Analysis: complaints from neighbours could harm the cafe's reputation, so it could lose customers [1]

  5. 5

    Evaluation: a decision, such as opening until midnight on Fridays and Saturdays only [1]

  6. 6

    Evaluation: a reason, such as gaining most of the extra sales while neighbours are disturbed on only two nights [1]

Recap

  • Stakeholder groups are internal (owners, managers, employees) or external (customers, suppliers, banks/lenders, government, local community, competitors, pressure groups).
  • Stakeholders are not the same as shareholders.
  • Two owners are one stakeholder group.
  • State an objective from the stakeholder's side, then apply it to the business, with a different application for each group.
  • Shareholders want dividends, employees higher pay, suppliers payment on time, government tax.
  • Objectives conflict when meeting one makes another harder, such as higher wages and higher profit.
  • Explain the chain between two conflicting objectives, never only name them.
  • Finish with a justified decision and a reason.

12. Who owns the business

The difference starts with ownership. A private sector business is owned by private individuals, not by the government. A public sector business is owned by the government (the state).

Name the owner. 'Run by the government' is not precise enough for full marks. A public limited company is not public sector: it is owned by shareholders, so it is an organisation in the private sector.

Examiner insight

“Weaker responses were imprecise so referred to control or running the business rather than focusing on ownership.” “Other responses confused the public sector with public limited company by referring to shareholders owning the businesses.”

Worked example 12 marks

Hollis Rail carries passengers between the main cities of country Y. Its trains and stations all belong to the state. Define 'public sector business'.

  1. 1

    Knowledge: full definition, with both elements, ownership and government. A business that is owned by the government (the state). [2]

  2. 2

    Not precise enough for full marks: a business run by the government.

13. Objectives of private sector businesses

A business objective is a specific target that a business works towards. A private sector business sets its objectives for the business and the private individuals who own it.

The objectives the mark scheme credits include make / increase profit, increase market share, increase sales, survival, increase shareholder returns, improve business image and sell in other countries.

Pick the objective, then develop it. Do not drift into how it will be achieved. Two answers that mean the same are credited once.

Examiner insight

“For example, maximising profit was the most common correct answer however instead of development, a common mistake was to explain how this objective would be achieved through higher prices or lower costs.”

Worked example 12 marks

ASW sets up and manages websites for other businesses. Identify two examples (other than growth) of business objectives.

  1. 1

    Knowledge: one relevant objective, for example make / increase profit. [1]

  2. 2

    Knowledge: a second, different objective, for example increase market share, survival, or increase shareholder returns. [1]

14. Objectives of public sector enterprises

A public sector enterprise is owned by the government, so it has no shareholders. Its objectives are still business objectives: targets the enterprise itself works towards. The mark scheme's list includes provide a service to the community and being socially responsible. Use these for an enterprise the state owns.

Profit is a general objective that could apply to any organisation. In a question about a public sector enterprise, give an objective that fits that enterprise.

Do not write the government's own aims, such as economic growth, job creation or restricting imports. Those do not answer the question.

Examiner insight

“Candidates frequently identified general objectives which could apply to any organisation, such as gaining profit or government objectives, such as economic growth.”

Worked example 14 marks

Riverside Buses is owned by the government of country Y. It runs bus routes between 30 villages and the capital. Swift Coaches is owned by shareholders and sells coach tours to tourists. Outline one objective each business might have.

  1. 1

    Knowledge: Riverside Buses may aim to provide a service to the community. [1]

  2. 2

    Application: keeping its bus routes running to the 30 villages. [1]

  3. 3

    Knowledge: Swift Coaches may aim to make a profit. [1]

  4. 4

    Application: from the coach tours it sells to tourists. [1]

15. Stating the difference

A difference question needs both sectors in every point. State the private sector objective and the public sector objective together, apply them to the two businesses, then develop the point.

Start from the difference in ownership: private individuals own the private sector business and the state owns the public sector one. Shareholders may expect dividends, so profit matters to a business they own. A state-owned enterprise has no shareholders to pay.

Examiner insight

“However, too often full marks were not earned because candidates failed to make the comparison of the two business structures, offering a simple statement about one feature of just one organisation.”

Worked example 16 marks

Swift Coaches is owned by shareholders. It sells coach tours to tourists and competes with three other coach firms. Riverside Buses is owned by the government and runs bus routes to 30 villages. Explain two differences between the objectives of these two businesses.

  1. 1

    Knowledge: Swift Coaches, in the private sector, may aim to make a profit, while Riverside Buses, in the public sector, may aim to provide a service to the community. [1]

  2. 2

    Application: Swift's profit comes from its coach tours. Riverside's service is its routes to the 30 villages. [1]

  3. 3

    Analysis: profit gives Swift funds to reinvest and dividends for its shareholders. Riverside has no shareholders to pay. [1]

  4. 4

    Knowledge: Swift Coaches may aim to increase its market share, while Riverside Buses may aim to be socially responsible. [1]

  5. 5

    Application: Swift would win tour bookings from the three other coach firms. [1]

  6. 6

    Analysis: a larger market share means more sales, so more revenue for Swift. [1]

Recap

  • Private sector: owned by private individuals, not by the government.
  • Public sector: owned by the government (the state).
  • A public limited company is in the private sector.
  • A business objective is a specific target that a business works towards.
  • Private sector objectives include profit, market share, sales, survival and shareholder returns.
  • For a public sector enterprise, use provide a service to the community or be socially responsible.
  • Give business objectives, never the government's own aims such as job creation.
  • Every difference names both sectors, is applied to both businesses and is developed.

End-of-chapter exercise

Test yourself on the whole chapter. Work through these before moving on.

  1. Tomás has opened a food truck called Taco Tomás. Define ‘business objective’.2 marks
  2. Leila runs a hair salon. State two objectives (other than growth) that Leila's salon might have.2 marks
  3. Brightside Mobile wants to increase its market share. Define ‘market share’.2 marks
  4. Ravi owns an electronics shop called Ravi Gadgets. He has never set a target for his sales. Outline two reasons why Ravi Gadgets should set business objectives.4 marks
  5. Zoe started Zoe's Zesty Juices three months ago and has few regular customers. Explain why survival is an important objective for Zoe's Zesty Juices.4 marks
  6. Mei's Bakery pays all its expenses each month and has money left over. Mei wants to open a second shop. Outline two reasons why profit is an important objective for Mei's Bakery.4 marks
  7. Greenfield Gyms has 3 gyms in a town with several rival gyms. Its owner has set an objective to increase market share. Explain one benefit and one cost to Greenfield Gyms of having this objective.6 marks
  8. Fatima's Fashion has sold clothes for 8 years. Its objective was survival, but it now makes a steady profit. A rival has just opened next door. Explain two reasons why Fatima's Fashion might change its objectives.6 marks
  9. Lakeside Ferries has carried passengers across a lake for 15 years. A road bridge opened two years ago, and since then its sales have not covered its costs. Its owners have also set up Lake Clean, a social enterprise that collects plastic from the lake and sells it to a recycling business. Explain two objectives Lakeside Ferries is likely to have now and two objectives Lake Clean is likely to have.8 marks
  10. Harbour Print has printed packaging for food businesses for 14 years. It makes a steady profit, which is the main income of the family that owns it. A new rival now offers lower prices, and Harbour Print's two largest customers have asked for a price cut. The owners are considering three objectives: survival, profit and market share. Which objective do you think is most important to Harbour Print in the long run? Justify your answer.12 marks
  11. Orla owns a hair salon and employs four stylists. Define 'stakeholder'.2 marks
  12. Tomas and Lena own a bicycle repair shop. They employ three mechanics. Identify two internal stakeholder groups of the shop.2 marks
  13. Kestrel Books is an online bookshop. Identify two external stakeholder groups of Kestrel Books, other than customers.2 marks
  14. Volta Tyres makes tyres in a factory where 90 employees work night shifts. It pays tax on its profit. Outline one objective of each of the following stakeholder groups of Volta Tyres: the government and the employees.4 marks
  15. Grayson's Garage borrowed $40 000 from a bank to buy new equipment. It buys car parts on credit from a local supplier. Outline one objective of each of the following stakeholder groups of Grayson's Garage: the bank and the supplier.4 marks
  16. Stonegate Quarry employs 120 local people. Its lorries pass through the nearest village. It sells stone to building firms. Outline one objective of each of the following stakeholder groups of Stonegate Quarry: the local community and the customers.4 marks
  17. Nila Shoes makes leather shoes in a factory with 60 shoe makers. It buys its leather from two suppliers. Nila Shoes' objective is to increase profit. Explain how the objectives of two stakeholder groups, suppliers and employees, might conflict with this objective.6 marks
  18. Brightside Gym has 20 employees and 900 members. Do you think employees are a more important stakeholder group than customers to the success of a business? Justify your answer.6 marks
  19. Reyes Ferries runs three passenger ferries between islands and is owned by Carla Reyes. Its 30 crew are part-time and work only in the tourist season, from May to September. Carla plans to buy a fourth ferry. The crew complain that they are told their shifts only one day ahead. Explain two objectives that Carla and the crew are likely to share and two objectives that are likely to conflict.8 marks
  20. Sundar Textiles is the main employer in its town, with 200 employees. The directors plan to move production to another country where wages are lower, which should cut costs by 20%. Shareholders have had no rise in dividends for three years. The employees fear losing their jobs. The town's shops rely on the factory's employees as customers. Consider the objectives of three stakeholder groups: the shareholders, the employees and the local community. Which two groups' objectives are most likely to conflict over this plan? Justify your answer.12 marks
  21. Coral Post delivers letters in country K. It is owned by the state. Define 'public sector business'.2 marks
  22. Anya owns a photography studio with her sister. Define 'private sector'.2 marks
  23. Kemi's Kitchen is a restaurant owned by Kemi and two investors. Identify two objectives the restaurant might have.2 marks
  24. Zenith plc is a public limited company. It sells shares to the public and is owned by 9 000 shareholders. A student calls Zenith a public sector business. Outline two reasons why the student is wrong.4 marks
  25. Dalton Dairy is owned by shareholders and sells milk to shops. Dalton Water is owned by the government and supplies homes in the region. Outline one objective for each business.4 marks
  26. Pia has just opened Pia's Pies, a bakery next to a supermarket that also sells pies. She pays rent on the shop every week. Pia says that profit is the only objective a private sector business can have. Outline two other objectives Pia's Pies might have.4 marks
  27. Lakeside Hospital is owned by the government and treats everyone in the town. Lakeside Clinic is owned by a group of four doctors and charges fees. A second private clinic has just opened nearby. Explain two differences between the objectives of the hospital and the clinic.6 marks
  28. Marlow's Mowers is a lawn-mower maker owned by two brothers. It sells 900 mowers a year to 12 garden shops. Explain two objectives Marlow's Mowers might have.6 marks
  29. Harbour Ferries plc is owned by shareholders and carries tourists to a resort island. Island Link is owned by the government and sails to 6 small islands that have no other transport. A trainee writes: 'Both are public sector businesses, so both aim to create jobs and restrict imports.' Explain two mistakes in the trainee's statement. Then outline one objective each business might have.8 marks
  30. Tarn Valley Energy is owned by the government of country R. It supplies electricity to 60 000 homes. Of these, 4 000 are in remote hill villages. A new managing director, who joined from a public limited company, wants the main objective to be to maximise profit. He proposes ending supply to the hill villages. The energy minister wants the main objective to be to provide a service to every home. Which of the two should be Tarn Valley Energy's main objective? Justify your answer using the data. | Tarn Valley Energy, last year | Amount (dollars) | | --- | --- | | Profit of the whole business | 2 000 000 | | Revenue from one hill home | 500 | | Cost of supplying one hill home | 900 |12 marks

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