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Business 1.3 - Setting business aims and objectives (The role of…
Business 1.3 - Setting business aims and objectives
What are aims and objectives?
Aim = a general goal of a business
Objective = a specific target that is set for a business to achieve
Aims and objectives provide a focus for everything you do
The purpose of setting objectives
Helps with decision making and establishes priorities
Helps investors to understand the direction in which the business is heading, therefore they might be more willing to agree to certain decisions
Provides a target, so everyone can compare the actual results with the planned results to show how successful a business has been
Can motivate everyone because they know what they are trying to do and how to measure their success
The role of objectives
Survival
To get the business's name known, lower prices may be charged and the entrepreneur may make lower profits than they would have liked
Some business may have to accept lower prices and lower profits to get some sales if the economy falls
Earning a profit
Profit occurs when the value of what a business sells over a given time period is greater than the costs of providing and selling these products
If a profit cannot be made, the business is likely to close
The business needs to make enough profit to cover the opportunity cost of the resources etc
Shareholder value
Shareholders employ managers to run the business on their behalf
Managers will aim to reward their shareholders by
Generating profits to pay dividends
Running the business well so that people would want to buy shares
Customer satisfaction
Providing a better service or a wider range of products than their competitors
More customers = more profits
Fast delivery, excellent customer information, a wide variety of products etc
Market share
The sales of one product or business as a percentage of the total market sales
E.g. 20-30 percent of a market's sales within five years
Growth
Sell more products
Open more stores
Increase revenue
Being ethical
What is regarded as right and wrong
By being ethical, businesses may benefit by
Getting favorable media coverage
Using the ethical message in its marketing
Attracting customer, investors and employees
Environmental and sustainability targets
Make sure that their activities do not damage the environment
Limit the energy they use
Limit their carbon footprint
Reduce wastage
Reuse some of their supplies
Effective objectives
What the target is
When it has to be achieved
Who is to achieve it
How to achieve it
Changing objectives
At first, the objectives of a business should be to survive the first few months or years
Later, they may want to grow the business and get bigger
Bigger business are usually open to more attention from the media and government
Using objectives to measure success
You can only know if someone is being successful if you know what they are trying to achieve
Business objectives provide a point of focus, helping businesses to make decisions about what to do and to review how things are going
By having objectives, you can see how to catch up the time to make sure you do everything you want in the year