Business Aims and Objectives Flashcards
What are different aims businesses can have?
Survival
Maximise Profit
Growth
Increase Shareholder Value
Increase Market share
Why is Survival important in Businesses?
You need to have enough cash to pay the debts of the business as they arise.
Why is Maximising Profit important for a business?
To keep your operating cash flow healthy.
Why is Growth important for a business?
It helps aquire assets, attract new talent and fund investments. It also drives business performance and profit.
Why is Increasing Shareholder Value important?
To create profits and returns for its investors, measures its financial health and affects what kind of investment risks it’s taking.
Why is Increasing Market Share important?
The higher the market share, the more sales a company has than its competitors.
What do Objectives do in a Business?
Helps Achieve their Aims
What are 2 Aims which aren’t Financial?
Social and Ethical issues
Customer Satisfaction
What are 3 different Factors that affect the objective of a business?
Size of the Business
Level of Competition
Type of Business
Explain why Size of the Business affects objectives?
Many small, local businesses depend on customer satisfaction to survive rather than increasing market share.
Explain why Level of Competition affects Objectives.
If business is in highly competitive market, it might focus on customer satisfaction so it can win customers from rivals. Market share may be more important than maximising profits.
Explain why the Type of Business affects objectives?
For example, Not-for-Profit businesses are more likely to follow on social or ethical objectives.
How does New Legislation (the law) change businesses objectives?
Companies may need to adjust their objectives when new laws are introduced. For example a new living wage. This would affect profit.
How does changes in the economy change businesses objectives?
During a recession, a firm may choose to focus on survival rather than growth. Whereas in a period of boom, you may focus on growth.
How does Changes in Technology change businesses objectives?
Companies need to keep up to date with new tech, especially if their competitors are using it. So they may spend more money on getting new equipment rather than investing in growth.