1.3: Setting Business Aims and Objectives Flashcards
What is the Aim of a business?
A general GOAL for a business to achieve
Charity may support particular group in society e.g homeless or a profit company might have aim to double sales
What is an Objective for a business?
A specific target that is set for the business to achieve e.g. Sales, Customer Satisfaction, Customer Service etc
The are quantified and have a time period to measure over eg. Increase sales by 20% in 2 years
What is purpose of setting objectives?
To guide the people making decisions - what needs to be done to achieve the objective
Provide a measurable target to track success (or not) against
Assist in raising finance - Investor will want to know and believe in the objectives of a business and whether they can achieve
Co-ordination - all employees in the different parts of a business have the same objectives
What is the role of objectives in running a business?
Helps achieve the business aims
Objectives depend on:
- aim or general goals
- type of business e.g. not for profit no profit objectives
What are examples of different Business Aims?
Survival - new business need to survive as 60% die in first 5 years - cautious decisions i.e. not too risky
Growth - aim to increase sales to grow - more products in UK or even globally. Can make business more dominant and increase market share and profits
Profit maximisation - highest profit from trading activity - reward owners and shareholders with share of profits - provides funds to invest in improving the business
What are the main areas of Business Objectives?
Market Share - share of sales value as a % of total sales in a market.
Customer Satisfaction - through high quality products or customer service - customers become loyal
Shareholder Value - shareholders own company - need a return on investment via dividends and an increase in the value of shares
Social and Ethical - common for not for profit - other companies also - look after certain groups or the environment - sustainable product - can have customer and PR value
What are Dividends?
Financial reward paid out to a shareholder each year
Why would a business change its Objectives ?
New business might have objective to survive but as becomes bigger to drive a profit
Established businesses drive for growth - need to have satisfied customers by offering new products and great customer service
Large businesses might want to become dominant in their market and generate highest profit - objective to increase market share and / or expand globally - they might want to increase shareholder value also - also ethical to get better reputation
