Business aims and objectives
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What the business wants to achieve.
Contents |
Aims
It is possible to classify aims into different categories:
- Commercial aims
- Social aims
- Profit as an aim
- Service as an aim
Commercial aims
Commercial aims have a direct effect on the commercial efficiency or profitability of the business. This will often mean that the business wishes to increase profit but they could also include increasing market share, increasing competitiveness and producing a better or bigger range of products.
A large business will often tie its aims into its overall policy or strategy. These may be included in the business's mission statement (sometimes referred to as a vision statement). A mission statement states the overall aims of the business and its values; however it may simply have more to do with the image that a business wants to project. Johnson and Johnson's mission statement begins "We believe that our first responsibility is to the doctors, nurses and patients, to mothers and all others who use our products and services". This projects a very positive image of Johnson and Johnson. Later on in the mission statement we find a commercial aim, We must constantly strive to reduce our costs in order to maintain reasonable prices.
Social aims
Some aims are social rather than commercial. The Body Shop aims to dedicate our business to the pursuit of social and environmental change. This is an aim that is for the good of society rather than a commercial one.
Profit as an aim
Few businesses state their aim as maximising profit. This may be because customers may think they are only interested in profit and they do not care how they make it. It is argued that most businesses will have the aim of maximising profit as that is what will lead to its owners making the most money.
Service as an aim
Some organisations, such as schools, hospitals and councils who are responsible for providing services may have aims such as increasing efficiency and the effectiveness of the service provision to the local community. These organisations, which are often funded by the government or charities, may be more concerned with providing their service than making a profit.
Objectives
Aims show what the business is trying to achieve in the long term. Objectives are used to highlight how those aims are going to be achieved. Often these objectives will be measurable. This allows the business to decide whether they have completed the objective or not. Objectives can be in the form of targets and challenges for the businesses to achieve, for example:
- selling more products or providing more services than a competitor;
- selling more products or providing more services than in the previous year;
- producing new goods or providing a new service;
- improving a product or service.
Sometimes a business will use SMART objectives. A SMART objective will have to comply with the following points:
- Specific - you should know when an objective has been reached by making it as definite as possible;
- Measurable - you should be able to measure whether the objective has been achieved;
- Attainable - the target must be possible to achieve;
- Relevant - it should form part of the business's overall aim;
- Time-related - the objective should be achieved in a specified time period.
Factors Affecting Objectives
The aims and objectives can vary depending upon a number of factors.
The state of the economy During a recession the business may concentrate upon survival, but during a boom or periods of growth the business may try to make a large profit or increase sales
Ownership Often the government will own businesses that aim to provide a good or service to the population. The aim will normally be something other than profit, e.g., a hospital may aim to see all patients with an hour of arriving or a school may aim to have 50% of its pupils achieve five or more GCSEs from A* to C. location Businesses in some areas may aim to expand within the UK or move into new markets abroad.
Financial situation Companies that have just started out or are facing tough times (such as during a recession) may aim just to survive. Other businesses who are in a strong financial position may aim to increase sales and profits;
The type of market Some markets, such as farming, traditionally make relatively little money so their objectives will differ from markets where the owners are used to making high levels of profit.
Qualitative Objectives
Qualitative objectives cannot be easily measured because they refer to quality rather than quantity. The business may simply have to state how it is doing in achieving the objective rather than saying that 50% or all of it has been completed. Examples of qualitative objectives are:
- Customer satisfaction - it is very difficult to say whether or not a consumer is satisfied. Some businesses try to measure customer satisfaction by counting how many customers return in the future, by sending out questionnaires or they will monitor the number of complaints they receive. Once this has been done it is possible to set measurable objectives for the future, for example reducing the number of complaints by 10%.
- Being socially aware - many businesses have an objective to become more socially or environmentally aware in their treatment of workers, suppliers or customers. It is very difficult to measure for example, whether the price you pay to workers in a developing country is a fair one.
- Developing a good reputation - many businesses want to build up a good reputation for supplying a particular good or service. Again there are difficulties in measuring what customers think of you.
Conflicting Objectives
Although the groups within a business may all agree with the aims of the business, they may disagree about how to achieve them. For example a business who wishes to become more efficient; the managers may wish to set an objective of introducing more automisation, whereas the worker would want an objective of increasing training as automisation would lead to redundancies.
Another conflict may arise between owners and managers. The owners would want the business to make as much profit as possible, whereas the managers would want to enjoy many expensive perks (company cars and longer holidays for example) that would reduce the profit of the business.
