1.4 Business aims and objectives Flashcards
What is the difference between an aim and an objective?
An aim is broader and more longer term, whereas an objective is more specific and short term. Objectives may be seen as stepping stones to achieve aims.
What are the common aims a business might have?
Profit. Growth. Market share. Survival. Providing a service.
What is profit maximisation?
When a business aims to make as much profit as is possible.
What is satisficing?
Making just enough profit to provide the business owner with a decent living. More common in smaller businesses.
What is survival?
When a business just manages to keep going?
Why is survival an important aim for a new business?
Many new businesses fail within the first year or two. Surviving is very difficult. There may be competitors who are established and customers don’t know/trust the new business yet.
What does the aim ‘providing a service’ mean?
To make sure the business meets the needs of the customer.
Define market share?
The share one business has of the total market for a product or service. It is shown as a percentage.
How is market share calculated?
(Sales of one business / Total sales in the market) x 100
How might aims change as a business grows?
More profit.
To change ownership to gain limited liability.
To provide good service (if new competitors come along).
What might be the aims of a business in difficulty?
Lower profit objectives.
Avoid losses.
To survive.
