Business Aims & Objectives

Business Aims An aim or goal is a statement of purpose Business aims or goals describe the overall rationale of the business; he reasons why the firm is in business

Mission Statement A mission statement is a written statement making clear to all stakeholders a firm’s overall aims and values It describes what the company wants to achieve and how it wants to act It sets out the vision and values of a business It enables the stakeholders of a business to understand to understand why the business is doing what it is doing!

Difference Between Aims & Objectives General statement of purpose E.g. we want to grow business in European markets Objectives Measurable target E.g. we want to achieve sales of €10 million in European markets in 2004

Why Set Objectives Objectives give business a clearly defined target Plans can then be made to achieve these targets Can help motivate employees Enables business to measure progress towards to its stated aims

Criteria for Business Objectives Specific Measurable Achievable Realistic Timed

Levels of Business Objectives Objectives are set at various levels in a business Corporate objectives Targets the whole business is trying to achieve Often related to what the owners of the business want to focus on (e.g. survival, growth, profits) Departmental objectives Objectives for specific functions in the business E.g. objectives for the marketing department to achieve Need to be consistent with corporate objectives

Typical Business Objectives Growth say by increasing sales and/or market share e.g. from 10% to 20% in next 12 months. Growth often allows firms to enjoy the benefits of Economies of scale and the competitive advantage that comes from the resultant lower unit costs Market leadership and the enhanced ability to set a price that meets objectives Higher profits which mean higher salaries for managers and a higher share price for owners. Profit say increasing return on capital employed to 5% by 2004 or improving earnings per share to maximise shareholder value and generating funds to support investment further and growth. Can mean making cost reductions a target Survival small and simply want to continue in business by reaching break even within 12 months Newly established firms may want to establish themselves in the market and ‘get known’ – they expect initial losses

Reasons Why Business Objectives Change Over Time A business may achieve an objective and will need to move onto another one E.g. survival in first year may lead to an objective of increasing profit in second year Competitive environment might change E.g. launch of new products from competitors Technology might change product designs

Main Conflicts in Business Objectives Growth versus profit E.g. achieving higher sales in short term (by cutting prices) will reduce short-term profit Short-term versus long-term E.g. business may decide to accept lower cash flows in short-term whilst it invests heavily in new products or plant and equipment

Objectives of Public Sector Organisations Required to deliver more than just a profit for shareholders Many provide a form of public service (e.g. Royal Mail, BBC) in addition to commercial activities May be involved with monitoring or control of private sector activities E.g. Inland Revenue controls payment of tax by individuals and businesses Aims of such enterprises would include ensuring compliance with law rather than, say, achieving a profit