Changes in Business Aims & Globalisation

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Business Objectives Change Over Time

As a business evolves and grows, its aim and objectives are likely to change.

Stage of business life

The key aim and objective for new businesses may be survival and growth.
However, as it grows and becomes more financially stable, the key aim may change to maximising long term profits and its objective may change to expanding into new countries in order to do so.
In the same way that the environment a business faces is constantly changing, the objectives must change with it.

New legislation

New laws may be introduced that affect the way a business has to operate.
A change in the minimum wage would affect a business’ cost objectives. A change in the minimum wage is likely to affect supermarkets, like Tesco plc, more than other businesses because they have lots of low paid employees.

Changes in the economy

A recession is likely to have a negative effect on a company’s growth, profit and sales.
A company’s objectives relating to sales or revenue may need to change to be more realistic in a time when it is harder to sell goods and services.

Changes in society

In recent years, society has placed a greater importance on the environment and how business practices can have a negative effect on the environment.
This has meant businesses need to adjust their environmental objectives accordingly.
Iceland promising to remove plastic packaging from its products by 2023 is a sign of this.

Changes in technology

New technology can affect a business’ operations or eventually the business’ product itself.
A business may need to invest to build a new product and so getting the latest technology may become an objective itself.
Amazon bought Kiva Robotics so that it could use robots (automation) in more of its factories and fulfillment centres (distribution warehouses).

Globalisation is the process where people, businesses, governments and markets around the world become more connected. Technological advances and free trade movements have increased globalisation a lot in the last 50 years. Some benefits of globalisation are:

Single global market

The emergence of a single global market has meant that UK companies are no longer competing with just other companies in the UK, but also companies all over the world.
They can access more consumers and have more growth opportunities, but also face more competition.

Reduce costs

UK businesses can import cheaply from other countries where rent or labour costs may be lower. This may enable the businesses to cut costs and increase profits.

Globalisation - Drawbacks

There are some drawbacks to globalisation for UK businesses:

Increased competition

A global market has created higher levels of competition. More competition usually has a negative effect on profits.
If a business charges a higher price, then customers may just buy competitors’ products instead.
If foreign competitors are better at producing high quality goods then UK businesses could suffer from a fall in demand and sales.
- This has happened to the UK car industry in the last 30 years. Manufacturers from Japan (Toyota), Germany (BMW) and the USA (Ford) have all competed with UK car manufacturers like Rover.

High UK wages

Many foreign companies have taken advantage of the fact that there are higher wages in the UK. This has meant that other companies can produce goods and provide services of a similar quality to UK goods and services for a much cheaper price.
This means that UK companies are less able to compete on price. While this is good for consumers, it isn't good for the profits of UK businesses.

Ethical issues

There are ethical issues involving the working conditions in developing countries.
Some UK businesses outsource labour to many developing countries in places like sweatshops.

Fluctuating global economy

UK businesses become more dependent on the state of the economy in foreign countries. If there is a recession in other countries, this may affect the sales of UK businesses.