Theme 1 - 1.5.3 - Business Objectives CGP Version

Question 1

What is an aim for a business ?

Answer 1

An aim is a broad target or goal set by the business for the long term - for e.g. being the No.1 seller of books - the businesses main aims are known as its mission

Question 2

What is a Businesses mission ?

Answer 2

A businesses mission is the main aim of the business

Question 3

What is a business objective ?

Answer 3

A business objective is a SPECIFIC target or goal set by the business for the short / medium term to help them achieve an aim ( which is a broad target set by the business for the long term )

Businesses usually have more than one objective that they are working on at a time - although they might consider some more important than others

Question 4

Whats a very common aim for a business ?

Answer 4

A very common aim for a business is print maximisation - as the more profit a business makes then the more capital it has to grow and expand

Question 5

What are the benefits of profit maximisation ?

Answer 5

Profit maximisation not only helps the business to grow and expand because of the extra capital used for R&D etc but also because it helps a business to survive - as the more money that a business has - the better able the business is to deal with any unexpected expenses for e.g. old machinery breaking and the business needing to replace them

Question 6

What are the objectives that the business has to focus on in order to head for the profit maximisation aim ?

Answer 6

In order to maximise the profits, businesses need to try and reduce costs to a minimum and/or increase the sales revenue to its maximum

Question 7

Whats the most import ant short term business objective and why ?

Answer 7

Survival is the most important short term business objective and this is because a survey in 2014 shows that less than half of small UK businesses will still be trading five years after they start up - therefore before a business can concentrate on maximising profits - its main objective should simply be survival and trying to break even first before they move onto other objectives

Question 8

What is one of the main reasons that a business struggles to survive ?

Answer 8

Poor cash flow management is one off the main reasons why new businesses struggle to survive - this can happen if the business expands too quickly, resulting in higher costs before they have seen an increase in sales - for e.g. if the business expands and buys lots more equipment then they waste a lot of money before they have even made enough sales to pay for these expansions

Question 9

When should Survival not be the businesses main objective ?

Answer 9

When a business is able to break even - then the business can start concentrating on other objectives rather than survival

Question 10

Is it just start up businesses that need to worry about survival ?

Answer 10

No, even established businesses can also have a survival objective and this is because factors arise that make the future of the business uncertain - for e.g. if the market becomes very competitive or if the economic changes cause the businesses costs to increase - the business might need to start worrying about survival as during these times they might experience less sales and this might be a big concern as they would have to change up their business plan like the marketing strategies etc

Also unexpected things can happen such as a sudden economic crash therefore even big businesses need to have survival as their business objective

Question 11

Is profit maximisation only a long term aim ?

Answer 11

Profit maximisation can also be a short term objective for a business for e.g. a business may set small objectives like to achieve a certain amount off profit each month and this would be a short term goal

Profit objectives will also help the business to monitor how well its achieving its overall profit aim

Question 12

What is sales maximisation ?

Answer 12

Sales maximisation is were the business focuses on increasing sales - this may be measured by the value of the total sales and so may help increase profits - this may be also measured by the number of units sold with less concern for making a large profit

Question 13

What does increasing the total items sold help increase ?

Answer 13

It helps increase the market share which helps increase profits

Question 14

What does increasing market share do ?

Answer 14

It can increase revenue and profits as if you have a large market share - this means you control a lot of the market therefore you get most of the sales therefore you will make more profit as more people are buying your product

Increasing market share will also help a new business to gain a foothold and become more established in a market

It will also help the business become more well known - this may help to increase sales further as retailers will be encouraged to stock the businesses products firmly and more customers ill be tempted to buy the products

Question 15

How do you increase market share ?

Answer 15

To increase market share - you need to heavily promote your products - or put their prices really low ( penetration pricing ) - in order to tempt customers away from competitors

Question 16

What does it mean if an established business has market share as a business objective ?

Answer 16

It may mean that the business is trying to dominate the market and reduce the number of competitors in the market

Question 17

What can a business do with increased revenue ?

Answer 17

Increased revenue usually means an increase in profits and the business can use these profits to expand and grow the business - by expanding the product portfolio for e.g. and using Boston matrix they can put the money into stars and question marks and cash cows

Question 18

Whats another common business objective ?

Answer 18

Improving cost efficiency

Question 19

What does improving cost efficiency involve ?

Answer 19

Improving cost efficiency focuses on saving money for the business by reducing unit costs - this means more profits for the business - also if there are lower unit costs then the business can reduce the price of the product and this could mean an increase in sales which will increase profits

Question 20

How can cost efficiency be increased by using economies of scale ?

Answer 20

Cost efficiency can be increased by scaling up and taking advantage of economies of scale - this can occur when unit costs fall as a result of producing on a larger scale - they can happen for several reasons - because businesses that produce more, need more materials so they buy in bulk which means that they cut down on costs

Question 21

How can cost efficiency be improved ?

Answer 21

Cost efficiency can also be improved by looking for cheaper suppliers - using more efficient production methods and reducing waste

Question 22

What can improving employee welfare lead to ?

Answer 22

Improving employee welfare can lead to lower costs and more sales

Question 23

What does improving employee welfare mean ?

Answer 23

Improving employee welfare relates to anything that will improve the happiness or wellbeing of staff - improving employee welfare will help staff to stay motivated

Question 24

How does Employee welfare lead to motivated staff and what does motivated staff mean for the business