AS Business Studies 9609
Business Studies – Business Objectives
- Objectives in the private sector, public sector and social enterprises.
- The importance of business objectives (SMART)
- Difference between mission statement, aims, objectives, tactics and strategy
- How objectives might change over time
Business Objectives
Think about the following five financial and non-financial objectives. It’s important to explain why these objectives will be suitable or how these objectives might change. Remember that private sector companies will have different objectives compared to the public sector (government-owned). A social enterprise will also have different objectives compared to a large multinational. It’s also true for a new business to focus on survival as the objective. When it comes to business objectives context is important, context regarding the type of business, stage of business or whether the business is owned in the private sector or public sector.
Financial objectives
- Survival (New businesses)
- Profit
- Sales
- Market share
- Financial security
Non-financial objectives
- Social objectives (Social enterprises)
- Personal satisfaction
- Challenge
- Independence
- Control
As a business changes so will the objectives and aims of the business. The following are some common changes a company might need to consider. It’s important to understand that objectives will be different in the private sector compared to the public sector.
Private sector objectives
Manufacturers, retailers, banks, architects, and builders owned by private investors (not the government) are in the private sector.
- Maximise profits by increasing sales (market share)
- Reducing costs
- Increase market share and expand the business
Public sector objectives
The BBC, Met Office, Royal Mint, Public schools, and NHS hospitals are all owned by the government in the public sector (owned and controlled by the government for the benefit of the public and paid for by taxpayers)
- Provide social services
- Increase living standards within the country
- Gain trust and voters – this can include cost reduction
Common business aims and objectives
Focus on survival or growth
Entering or exiting markets
Growing or reducing the workforce
Increasing or decreasing the product range
In 2002 William Chase started a business on his Herefordshire farm making crisps. In 2016 he sold to Amplify Snacks who made ‘Poshcorn’ for £300m. Tyrells now have a wider range of snacks and crisps.
Increasing the product range
A business may increase its product range so customers have more choices, resulting in more sales and increased profits.
On the other hand, a business may decrease the product range and go back to the core business, to get rid of products that are obsolete, out-of-date or not selling. Changing objectives can also be due to the level of competition forcing a business to diversify.
Objectives change over time
New objectives in response to market conditions
There may be lots of new competitors entering the market, this will mean the business has to change its aims. Increased unemployment in a country can affect the demand for the business’s goods or services.
Changes in response to technology
Technology can lead to changes in production processes, for example, a new bagging technique for crisps which keeps them fresher. Or technology such as people using the Internet to shop online instead of going into high street stores.
New objectives in response to performance
A business that has made a large profit may decide to grow and expand by taking on more employees. A company that has had a bad year may decide to reduce the number of employees (redundancies) and focus on the core business instead.
New objectives in response to legislation
Minimum wage levels may affect a business because they have to pay higher wages. This could lead to the business not being able to hire additional employees or even force businesses to relocate. Other legislation could be corporation tax, health and safety etc…
The mission statement is the overall aims and purpose of the business. The strategy is how the business will achieve its mission or aims over the long term.
Remember that the objectives will help the business achieve its long-term strategy. As such the objectives of a business should be based on the strategy of the business. Companies also often employ a range of short-term tactics to help achieve their objectives.
Social Enterprise
Social enterprises are businesses trading for social or environmental purposes. A social enterprise is not a charity as they usually sell a service or product. Therefore not relying on donations. Social enterprises have three objectives known as the triple bottom line which are social, environmental and economic.
Strategy versus objectives
It’s important to note that a business strategy will be the long-term goal of the business. Objectives will be set based on the business strategy. The mission statement is the overall purpose of a business and is also published publicly, therefore a business will not include any strategic details in the mission statement as this will be seen by competitors.
Social business objectives
Social objectives are set by companies as part of the business’s corporate social responsibility (CSR objectives). Companies often set social objectives to reduce the impact on the environment. Often social objectives also include paying fair wages in developing countries and helping society. Compliance with laws to minimise negative externalities, such as a bar operating sensible hours to avoid noise pollution in a small town.
Ethics
Ethics are the moral principles that guide human behaviour. Society judges what is acceptable behaviour and what is not. Advertising unhealthy food to kids is considered unethical. Ethical objectives go beyond legislation. Just because something is legal does not mean a business should do it.
Research a few companies to find their mission statement and objectives and if they have clear CSR policies in place.
Businesses with strong CSR policies benefit from gaining a good reputation and avoiding expensive legal battles. Remember that a business operating in the private sector with the main objective of maximising profit can also have strong social or ethical objectives. It’s important to understand that businesses will have more than one objective but be clear that the objectives of business will depend on a range of factors.
Section A 1.4 Business Objectives Practice for Paper One
Section B 1.4 Business Objectives Practice for Paper One
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