Business Objectives
Business: Edexcel IGCSE, topic 1.1.2
The Role of Objectives in Running a Business
Objectives set targets for particular aims that a company wants to achieve. Objectives are more specific than aims. Once the management of a business has set its overriding purpose or aim, they must then define the business objectives.
Objective to maximise profit
- E.g. if profit maximisation is the business' aim, then an objective might be to earn over £10,000 in revenue or keep overall costs to a maximum of £8,000.
Objectives are measurable targets
- Specific business objectives help firms to achieve their aim as they include measurable targets for the firm to work towards.
- Targets allow a business to see which areas (e.g. growth, sales, profits) need to be improved.
- Having targets for objectives can help a business to improve continuously.
Different Companies Have Different Objectives
There are 3 key factors that influence a firm’s objectives:
The size of a business
- New companies, like a Brexit consultancy set up in 2016, might focus on growth and survival because of the need to establish themselves and their high chance of failure.
- This might mean they need to focus more on short-term objectives.
- Smaller companies like Revolut or Monzo (banking apps) rely much more on word of mouth. Customer satisfaction may be a key objective.
- Larger businesses, or companies (like Tesco plc) face more scrutiny from the public.
The level of competition
- If a business is operating in a highly competitive market, then their objectives may change from increasing market share or growth to survival.
- Survival is important when there is a lot of competition as it represents the likelihood of a business to survive when faced with high competition.
- A price war between rivals drove out supermarket Kwik Save from the supermarket industry in the 2007.
Type of business
- Not-for-profit businesses will usually focus more on the social and ethical objectives than for-profit firms.
- For example, TOMS shoes donates a pair of shoes to children in Africa for every pair of shoes that you buy.
Test yourself on Business Objectives
Which of these is true?
If profit maximisation is a new biscuit business' aim, which of the following could not be one of their key objectives?
Smaller companies like Revolut or Monzo (banking apps) rely heavily on word of mouth. Which is most likely a key objective for them?
Which objectives do not-for-profit businesses usually focus more on compared to for-profit firms?
What factors influence a firm's objectives?