3.1.3 Setting Business Aims and Objectives
Welcome to one of the most important parts of your Business studies! Think of a business as a ship on the ocean. Without a map or a destination, it would just float around aimlessly. Aims and objectives are that map and destination. They tell the business where it is going and how it plans to get there.
Don't worry if these terms seem similar at first. By the end of these notes, you’ll be an expert at telling them apart and understanding why they matter so much in the real world!
What are Business Aims and Objectives?
While people often use these words to mean the same thing, in business, they have slightly different meanings:
• Aims: These are the broad, long-term goals of a business. They are often quite general, like "to be the most successful coffee shop in town."
• Objectives: These are the specific, measurable steps a business takes to achieve its aims. They are like mini-goals. For example, "to increase sales by 10% in the next six months."
Memory Aid: The "Mountain Analogy"
Imagine you want to climb a mountain.
• Your Aim is to reach the summit.
• Your Objectives are the specific checkpoints you need to reach by certain times (e.g., reaching the base camp by 2 PM).
The Main Aims and Objectives for Businesses
Depending on how long a business has been running and what it does, it will choose different goals. Here are the main ones you need to know:
1. Survival
This is the most basic goal. It simply means keeping the business running and avoiding closure. This is very common for new start-up businesses or during a difficult economic time (like a recession).
2. Profit Maximisation
Most private sector businesses want to make as much profit as possible. Profit is the money left over after all costs have been paid. Making a profit allows owners to take a reward and reinvest in the business.
3. Growth
This is about getting bigger. It could be domestic growth (opening more shops in the UK) or international growth (expanding into other countries). Growth often leads to more power in the market.
4. Market Share
This is the percentage of total sales in a market that one business has. For example, if you and your competitors sell 100 phones in total, and you sell 30 of them, your market share is 30%. Businesses often fight to have the biggest "slice of the pie."
5. Customer Satisfaction
Happy customers come back! Businesses might set objectives to improve their service or product quality to ensure customers are satisfied and loyal.
6. Social and Ethical Objectives
Some businesses care about more than just money. They might aim to be environmentally friendly, pay fair wages (ethical), or help the local community (social).
7. Shareholder Value
For large companies (PLCs), keeping the owners (shareholders) happy is vital. This usually means making sure the share price stays high and paying out dividends (a share of the profit).
Quick Review: Key Takeaway
Businesses don't just want one thing. They often balance several aims at once, but their main focus might change depending on their situation.
The Role of Objectives in Running a Business
Why bother writing these down? Objectives help a business in three main ways:
• Direction: They give everyone in the business a clear goal to work towards.
• Motivation: Having a target can inspire managers and employees to work harder.
• Judging Success: At the end of the year, a business can look back at its objectives to see if it actually achieved what it set out to do.
Why Objectives Differ Between Businesses
Not every business has the same goals. Here is why they differ:
The Size of the Business
A small corner shop might just be aiming for survival or a steady income for the owner. A giant like Amazon is more focused on growth and global dominance.
The Level of Competition
In a market with lots of competitors (like supermarkets), a business might focus heavily on market share or customer satisfaction to stop customers from switching to a rival.
Type of Business (Not-for-profit)
Charities or not-for-profit organisations don't have "profit" as their main aim. Instead, their objectives are usually social or ethical, such as "providing clean water to 10,000 people."
Common Mistake to Avoid!
Don't assume all businesses want to grow. Some small business owners are happy with a "lifestyle business" where they earn enough to live comfortably but don't want the stress of managing a huge company!
How and Why Objectives Change Over Time
As a business evolves, its "map" changes. Here is how that usually happens:
• Step 1: Start-up Phase. The main objective is survival. The owner just wants to get through the first year.
• Step 2: Established Phase. Once the business is safe, it might switch to profit maximisation or growth.
• Step 3: Large/Dominant Phase. A large, successful business might focus on international expansion or increasing shareholder value. They might also start focusing more on ethical and environmental considerations because the public expects big brands to be "good citizens."
Did you know?
Many huge companies, like Google or Facebook, started in garages with the simple aim of survival and building a cool product. They didn't focus on massive profits until they were much older!
Judging Success: It's Not All About Profit
Success looks different to different people. While profit is a major way to measure success, a business can also be judged on:
• Social Impact: How much did they help the community?
• Sustainability: Did they reduce their carbon footprint?
• Innovation: Did they invent something brand new?
• Employee Happiness: Do people enjoy working there?
Final Summary: Key Points to Remember
• Aims are long-term; Objectives are specific and measurable.
• New businesses focus on survival; established ones focus on profit and growth.
• Not-for-profit organisations focus on social/ethical goals.
• Objectives change as a business grows and as the world around it changes.