Welcome to Business Aims and Objectives!
Ever wondered why some shops are happy just to stay open, while others want to take over the world? Or why a local charity doesn't care about making a "profit" the same way a big bank does? That is what this chapter is all about! We are going to look at the "GPS" of a business—its aims and objectives. Understanding these helps us see why businesses make the choices they do.
Don't worry if this seems tricky at first! Think of a business like a person: everyone has different goals. Some want to win an Olympic medal (High Growth), while others just want to stay healthy (Survival). Businesses are exactly the same!
1. What are Aims and Objectives?
Before we dive into the specific types, let’s clear up the difference between these two words. They are often used together, but they mean slightly different things:
- Aims: These are the long-term goals of a business. They are broad statements about what the business wants to achieve in the future (e.g., "To become the most popular bakery in town").
- Objectives: These are the specific, measurable steps a business takes to reach its aim (e.g., "To sell 500 cupcakes every week for the next six months").
The Analogy: Imagine you want to become a professional footballer. That is your aim. Your objectives would be "Practice for 2 hours every day" and "Join a local team by September."
2. The Main Business Aims
The OCR syllabus says you need to know these five main aims. Let’s break them down:
A. Profit
Most private businesses exist to make profit. This is the money left over after all the bills have been paid.
The simple formula is: \( \text{Profit} = \text{Total Revenue} - \text{Total Costs} \)
B. Survival
This is often the main aim for start-up businesses or during a difficult time (like an economic recession). Survival means the business is making just enough money to keep trading and pay its bills without closing down.
C. Growth
Once a business is stable, it often wants to get bigger. Growth could mean opening new stores, hiring more staff, or selling products in different countries. Example: A local coffee shop opening a second branch in the next town.
D. Market Share
Market share is the percentage of total sales in a market that one business has. If a business wants to "increase market share," it wants to take customers away from its competitors.
Example: If there are 100 phones sold in a town and 30 are iPhones, Apple has a 30% market share in that town.
E. Providing a Service
Not every business is out to make millions. Some, like charities or government-run organizations (like the NHS), have the primary aim of providing a service to help the community or satisfy a need.
Quick Review Box:
The "Big Five" Aims:
1. Profit (Making money)
2. Survival (Staying open)
3. Growth (Getting bigger)
4. Market Share (Winning the most customers)
5. Providing a Service (Helping people)
Key Takeaway: Aims give a business a sense of direction and help the owners make decisions.
3. Why do Objectives Change? (Evolution)
A business's goals aren't set in stone. They evolve (change) over time. Here is how and why:
Step 1: The Start-up Phase
When a shop first opens, the owner is usually just worried about survival. They need to make sure enough people know they exist so they can pay the rent.
Step 2: The Established Phase
Once the business is safe and has regular customers, the aim often shifts to profit and growth. They might want to earn more money for the owners or expand the business.
Step 3: The Mature Phase
A very large, successful business might shift its focus to market share (becoming the #1 brand) or even ethical/social objectives (like reducing plastic waste) to keep their reputation high.
Did you know?
Netflix started by mailing DVDs to people's houses! Their original objective was just to survive against video rental stores like Blockbuster. Now they are a global giant, and their objectives are about growth and creating original content.
4. Why Different Businesses Have Different Objectives
You might be asked why two businesses have totally different goals. It usually comes down to these factors:
- The Size of the Business: A small sole trader (like a local hairdresser) might just want to earn a comfortable living (profit), while a Public Limited Company (PLC) like Tesco has to answer to shareholders who demand massive growth.
- The Type of Ownership: A charity focuses on providing a service, whereas a private limited company usually focuses on profit.
- The Age of the Business: As we saw above, new businesses focus on survival; old businesses focus on growth.
- The Market/Competition: If a new competitor opens up next door, a business might change its objective from "growth" back to "survival" or "protecting market share."
5. Common Mistakes to Avoid
Mistake: Thinking that "Profit" and "Revenue" are the same thing.
Correction: Revenue is all the money that comes in. Profit is what you have left only after you have paid your costs! You can have high revenue but still make a loss if your costs are even higher.
Mistake: Thinking all businesses want to grow as big as possible.
Correction: Some small business owners prefer to stay small so they can manage everything themselves and keep a good work-life balance. This is called "lifestyle" business aiming.
Section Summary - Key Takeaways
1. Aims are long-term goals; Objectives are specific targets to reach those goals.
2. The 5 main aims are Profit, Survival, Growth, Market Share, and Providing a Service.
3. Objectives change as a business grows (e.g., moving from survival to growth).
4. Factors like business size, age, and competition determine what a business's goals will be.
Memory Aid: Use the acronym P.G. S.M.S. (like a text message!) to remember the aims:
Profit
Growth
Survival
Market Share
Service