Setting business aims and objectives

Overview

Setting aims and objectives is the starting point for any business, whether it's a small local start-up or a multinational PLC. This topic is foundational for GCSE Business; it provides the context for almost every other decision a business makes, from marketing strategies to financial planning. Examiners expect candidates to clearly distinguish between broad, long-term aims and specific, measurable objectives. More importantly, you must be able to apply this knowledge to different business contexts. A common pitfall is giving generic answers without considering the specific size, ownership type, or competitive environment of the business in the case study.

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Key Concepts

Aims vs Objectives

Many candidates lose marks by confusing these two terms.

• Business Aim: The overarching, long-term goal of the business. It provides direction. For example, 'to be the leading provider of eco-friendly packaging in the UK'.
• Business Objective: A specific, measurable step taken to achieve the aim. Objectives should follow the SMART criteria. For example, 'to increase sales of recycled boxes by 15% within the next 12 months'.

SMART Objectives

For an objective to be effective, it should be SMART:

• Specific: Clearly defined.
• Measurable: Can be quantified (e.g., in £ or %).
• Achievable: Possible to attain with current resources.
• Realistic: Relevant to the business and its market.
• Time-bound: Has a clear deadline.

Main Types of Business Objectives

Candidates must be familiar with seven key objectives:

1. Survival: The primary objective for most new start-ups. In the first year of trading, avoiding failure and maintaining positive cash flow is critical.
2. Profit Maximisation: Making as much profit as possible. Profit is total revenue minus total costs. This is essential for rewarding owners and funding future growth.
3. Growth: Expanding the business. This could be domestic (more stores in the UK) or international. Growth can lead to economies of scale.
4. Market Share: The proportion of total sales in a market held by one business. Increasing market share often means taking customers away from competitors.
5. Customer Satisfaction: Meeting or exceeding customer expectations. High satisfaction leads to customer loyalty and positive word-of-mouth.
6. Social and Ethical Objectives: Operating in a way that benefits society or the environment. This is the primary aim of social enterprises and charities, but is increasingly important for all businesses (Corporate Social Responsibility).
7. Shareholder Value: Maximising the return for investors through rising share prices and dividend payments. This is the dominant objective for Public Limited Companies (PLCs).

How Objectives Change

Examiners frequently test your understanding of how objectives evolve. Objectives are not static; they change based on:

• Business Lifecycle: A start-up focuses on survival. An established business focuses on profit and growth. A mature PLC might focus on shareholder value and ethical goals.
• Business Type: A sole trader may just want to earn a living wage. A charity aims to maximise its social impact, not profit.
• External Environment: During an economic recession, even a large, established business might revert its objective back to survival.