UNIT 1.
BUSINESS ACTIVITY AND
INFLUENCES ON BUSINESSES
1.2 BUSINESS OBJECTIVES
Learning objectives
Aims and objectives
Business aims are general statements about what a business intends to
do. This is often set out in its mission statement - a short written
statement that sets out the overall vision of the company.
Eg McDonald’s mission statement is ‘... to be the world’s best quick
service restaurant experience.’
Business objectives set out what the business needs to do to achieve its
aims and focus on the medium to long term.
Aims and objectives
Think about what McDonald’s objectives may be to meet its overall
aim - the world’s best quick service restaurant experience.
The importance of clear objectives
- Employees need something to work towards → motivation
- Without objectives owners might not have the motivation to
keep going and might allow the business to ‘drift’
- Objectives help to decide where to take the business and how
to get there
- Easier to assess the performance of a business if objectives are
met
Businesses are more successful if they set SMART objectives
Why objectives are important?
Financial objectives
PROFIT -
MAXIMISATION
SURVIVAL
FINANCIAL OBJECTIVES
(PRIVATE SECTOR)
FINANCIAL
SECURITY - PROFIT SALES
SATISFICING
MARKET SHARE
Financial objectives
1. SURVIVAL - When is survival important?
- When a business first start trading
- When trading conditions become difficult
- If a strong competitor emerges
2. PROFIT
- Most businesses aim to make a profit because their owners want a financial
return
- Profit maximisation: making as much profit as possible in a given time period
Financial objectives
3. SALES
- Businesses with large volume of sales may enjoy lower costs, have a larger
market share, enjoy a higher public profile and generate more wealth for
owners
4. INCREASE MARKET SHARE
- How? Win customers from competitors
- Businesses with high market share may be able to dominate the market
- They might be able to charge higher prices
- Businesses with large market share have a higher profile in the market
Financial objectives
5. FINANCIAL SECURITY OR PROFIT SATISFICING
- Making enough profit to satisfy the needs of the business owner(s)
- Reasons:
- Owners do not want to take on the extra responsibility of expanding their business
- Owners might want to run a business that generates enough profit and financial
security to provide the flexibility needed to allow a particular lifestyle (work-life
balance)
Non-financial objectives
SOCIAL OBJECTIVES PERSONAL
SATISFACTION
NON FINANCIAL
OBJECTIVES
INDEPENDENCE
AND CONTROL
CHALLENGE
Non-financial objectives
1. SOCIAL OBJECTIVES
- Social objectives are designed to improve human well-being
- Specially important in public sector businesses. Eg. reducing response time
by emergency services or increasing rates of recycling
- Some private sector businesses operate as social enterprises (not-for-profit
organisations) such as charities and cooperatives. They might aim to improve
human and environmental well-being
- Lately some businesses have attempted to improve their social responsibility.
One way of doing this is to take into account the needs of a wider range of
stakeholders such as customers, local community and employees
ACTIVITY Do some background research
Non-financial objectives
2. PERSONAL SATISFACTION
- To be their own boss
- To develop their hobby into a business
3. CHALLENGE
- To be successful in business people need to be committed, hardworking and
multiskilled
SMARTOBJECTIVES
SMART objectives
• A business objective is a goal or aim that a business wants to achieve.
The best objectives are SMART and not vague, so that everyone in the
business knows what direction the business is going.
Non-financial objectives
4. INDEPENDENCE AND CONTROL
- Being their ‘own boss’
- Freedom to make decisions, not being told what to do
SMART objectives
- Specific - stating clearly what should be achieved
- Measurable - an outcome that can be measured in numbers
- Achievable - possible to complete by the people involved
- Realistic - able to be achieved with the resources available
- Time specific - stating a time period for it to be achieved
Eg. Increase market share by 5% in the next 2 years
Why might business objectives change over time?
- Market conditions (dynamic) - new competitors, new products,
changes in the economy
- Technology - automated production → sales growth, on-line
selling → increase market share
- Performance - not constant
- Legislation - becoming more socially responsible
- Internal reasons - change in ownership or management team
Objectives in large vs small businesses
Large (> 250 employees) vs small businesses (< 50 employees)
Small - many content to stay small → make enough money to
support family/lifestyle. Maybe more interested in non-financial
objectives - personal satisfaction and independence
Large - maybe more interested in financial objectives and may try
to maximise profits for owners
Multiple choice questions
ACTIVITY 1.2
