3.1

Question 1

hierarchy of objectives

Answer 1

mission statement and corporate aims
corporate objectives
functional objectives

Question 2

business objectives

Answer 2

• set objectives to enable them to achieve their mission
• everyone is working towards a goal, coordination should improve
• useful in decision making
• compare performance with their objectives to measure the success

Question 3

corporate objectives

Answer 3

• the goals of the business as a whole
• the objective will depend on the size of the business
• new shop owner might focus on trying to survive, while big international company will want to grow bigger and diversify product range

Question 4

functional objectives

Answer 4

• objectives of each department
• more detailed than corporate objectives - specific to each department
• will help them achieve their corporate objective

Question 5

objectives should be smart
(specific)

Answer 5

more specific - businesses more likely to achieve them

Question 6

objectives should be smart
(measurable)

Answer 6

• if the objective isn’t measurable the business wont know what they’re supposed to be aiming for.

‘increase profit by 5%’ instead of ‘increase profit’

Question 7

objectives should be smart
(agreed)

Answer 7

• everyone involved in achieving the objective needs to know about it and agree to it

Question 8

objectives should be smart
(realistic)

Answer 8

• no point setting objectives that are too ambitious
• impossible objectives demotivate staff

Question 9

objectives should be smart
(timely)

Answer 9

• a specific time frame
• if the is no limit staff wont see the objective as urgent

Question 10

profit objectives

Answer 10

• businesses that are currently making a loss might aim to become profitable
• established businesses that are already profitable might want to increase their profits
• may set functional objectives to minimise costs

Question 11

growth objectives

Answer 11

• the larger the business grows the more it is able to use its position in the market to earn higher profits.
• growth objectives can be based on increasing revenue, market share or expansion

Question 12

survival objectives

Answer 12

• main objective for new businesses - becomes key objective during periods of strong competition from other companies or when the economy is declining

Question 13

cash flow objectives

Answer 13

• money that moves in and out of the business
• set cash flow objectives to improve cash flow
• increasing cash flow gives greater chance of survival

Question 14

social objectives

Answer 14

• relate to benefiting society or people in need

Question 15

ethical objectives

Answer 15

based on moral principles about how businesses treat people and the environment

Question 16

why are non-profit organisations set up

Answer 16

to achieve social or ethical objectives (housing associations)

Question 17

long term objectives

Answer 17

• set the direction of a business - affect the big decisions that senior managers make.
• things like long term growth

Question 18

short term objectives

Answer 18

• include things like short term survival and making short term profit.
• often require a business to cut back on its long-term objectives

Question 19

mission statements tell you about a business’s intentions - its overall purpose or main corporate aims

Answer 19

• tells you the purpose of the business, its values, standards and what makes it unique.
• give staff a sense of shared purpose, work towards a common goal
• having cooperation of all the staff makes it more likely that a business will achieve its aims

Question 20

fixed costs

Answer 20

• business costs that occur regardless of output level e.g. rent, salaries.
• will not change whether the business produces one or one thousand units.

Question 21

variable costs

Answer 21

• costs that fluctuate as output changes e.g. raw materials or shipping.
• a business that understands how each cost changes and interacts with its production can more effectively minimize costs to improve its business

Question 22

total variable costs formula

Answer 22

variable costs per unit x number of units sold

Question 23

total costs formula

Answer 23

fixed costs = variable costs

Question 24

profit formula

Answer 24

total revenue - total costs

Question 25

profit and loss

Answer 25

• if total revenue is greater than total costs the business will make profit
• if the total costs are greater than the total revenue the business will make a loss