Setting business aims and objectives: Changing objectives

The idea

Business objectives are not fixed forever; they change as internal and external circumstances change. A business may start with an objective to survive, then later set objectives for growth, market share or profitability. Internal triggers include poor cash flow, new ownership, a change in leadership, or the need to cut costs after a fall in demand. External triggers include a recession, new competitors, changes in consumer tastes, new technology, or government legislation such as a higher minimum wage. For example, a retailer facing an online rival might change from a profit objective to a survival objective, then later to an objective of increasing online sales by 20% within a year. Changing objectives can cause uncertainty, so managers should communicate the reasons clearly and adjust plans and resources accordingly.

What earns the marks

• Objectives change over time because business conditions change; survival may be the priority in a crisis, while growth or increased market share may become the priority once trading stabilises.
• Internal factors such as cash-flow problems, new leadership, changes in ownership or poor performance can cause a business to revise its objectives.
• External factors such as recession, new competition, changing consumer tastes, technological change or new legislation can make existing objectives unrealistic or irrelevant.
• Changing objectives affects functional plans: marketing, operations, finance and human resources may need new targets, budgets and timescales.
• Managers should communicate the reasons for change and involve employees, because sudden changes can reduce motivation and cause uncertainty.

Common mistakes and how to put them right

• Treating objectives as permanent.

  Put it right by explaining that objectives are reviewed and revised when internal or external conditions change.

• Giving only one cause of change, such as a new competitor, when the question asks for a range.

  Put it right by covering both internal and external triggers.

• Assuming a change in objective automatically improves performance.

  Put it right by explaining that the change must be communicated, resourced and monitored to have a positive effect.

Exam tips

• For 'analyse' questions, develop a chain of reasoning: state the trigger, explain why the old objective is no longer suitable, then explain the likely effect on the business.
• Use the case-study context to make the answer specific, naming the business, its market and the particular change it faces.
• For evaluation, weigh the benefits of changing objectives against the risks, such as disruption, cost or lower staff morale, before reaching a justified conclusion.