Business Aims & Objectives

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GCSE Business GCSE Business StudiesStudies

Business Aims

An aim or goal is a statement of purpose

Business aims or goals describe the overall rationale of the business; he reasons why the firm is in business



Mission Statement

A mission statement is a written statement making clear to all stakeholders a firm’s overall aims and values

It describes what the company wants to achieve and how it wants to act

It sets out the vision and values of a business

It enables the stakeholders of a business to understand to understand why the business is doing what it is doing!



Difference Between Aims & Objectives

Aims

General statement of purpose

E.g. we want to grow business in European markets

Objectives

Measurable target

E.g. we want to achieve sales of €10 million in European markets in 2004



Why Set Objectives

Objectives give business a clearly defined target

Plans can then be made to achieve these targets

Can help motivate employees

Enables business to measure progress towards to its stated aims



Criteria for Business Objectives

Specific

Measurable

Achievable

Realistic

Timed



Levels of Business Objectives

Objectives are set at various levels in a business

Corporate objectives

Targets the whole business is trying to achieve

Often related to what the owners of the business want to focus on (e.g. survival, growth, profits)

Departmental objectives

Objectives for specific functions in the business

E.g. objectives for the marketing department to achieve

Need to be consistent with corporate objectives



Typical Business Objectives

Growth say by increasing sales and/or market share e.g. from 10% to 20% in next 12 months. Growth often allows firms to enjoy the benefits of Economies of scale and the competitive advantage that comes from

the resultant lower unit costs

Market leadership and the enhanced ability to set a price that meets objectives

Higher profits which mean higher salaries for managers and a higher share price for owners.

Profit say increasing return on capital employed to 5% by 2004 or improving earnings per share to maximise shareholder value and generating funds to support investment further and growth. Can mean making cost reductions a target

Survival small and simply want to continue in business by reaching break even within 12 months

Newly established firms may want to establish themselves in the market and ‘get known’ – they expect initial losses



Reasons Why Business Objectives Change Over Time

A business may achieve an objective and will need to move onto another one

E.g. survival in first year may lead to an objective of increasing profit in second year

Competitive environment might change

E.g. launch of new products from competitors

Technology might change product designs



Main Conflicts in Business Objectives

Growth versus profit

E.g. achieving higher sales in short term (by cutting prices) will reduce short-term profit

Short-term versus long-term

E.g. business may decide to accept lower cash flows in short-term whilst it invests heavily in new products or plant and equipment



Objectives of Public Sector Organisations

Required to deliver more than just a profit for shareholders

Many provide a form of public service (e.g. Royal Mail, BBC) in addition to commercial activities

May be involved with monitoring or control of private sector activities

E.g. Inland Revenue controls payment of tax by individuals and businesses

Aims of such enterprises would include ensuring compliance with law rather than, say, achieving a profit

Business Aims & Objectives

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