3.1.3 - Setting aims and objectives

• What are the aims and objectives of a business?

  The overall purpose and long-term goals
• What is a mission statement?

  A general description of the business's aims
• What are objectives in a business context?

  Specific targets to meet business aims
• How do shareholders benefit from a company's performance?

  Through dividend payments or share price increases
• What is a common objective for small businesses?

  To keep the business operating for a time
• What does profit maximisation involve?

  generating the highest possible profit for your business after costs are subtracted
• What is market share?

  The proportion of total sales in a market
• What is sales minimisation?

  Selling as much as possible without losses
• How can businesses increase profits through expansion?

  By expanding domestically or internationally
• What are social and ethical responsibilities of businesses?

  Responsibilities to society and the environment
• Why might business objectives change internally?

  Due to achieving previous objectives
• What external factors can cause a change in business objectives?

  New competitors or economic changes
• How can technological change affect business objectives?

  By introducing new technology from rivals
• What societal concern can lead businesses to change their objectives?

  Increased concern for environmental issues
• Who can influence changes in business objectives?

  Owners, shareholders, or the Board of Directors
• How many main business objectives are there?

  7
• Name the 7 main objectives

  1. shareholder value
  2. customer satisfaction
  3. survival
  4. profit maximisation
  5. marketshare/sales maximisation
  6. growth
  7. social/ethical responsibilities
• what is a share price

  amount it will cost one share in a business
• what is shareholder value?

  value of shareholders' dividend payment or the share price
• what is customer satisfaction?

  is the measure of how products or services provided by a company meet or surpass customer expectations.
• what is survival?

  business operating for a certain amount of time - its a common objective for small businesses
• what is profit maximisation?

  strategic level of achieving the highest revenue or profit
• what is marketshare?

  the proportion of total sales in a market made by one business
• What is growth?

  the process of expanding and increasing the scale of a business's operations over time
• what are the social/ethical responsibilities?

  businesses have responsbilities to society - e.g not manufacturing products in sweat shops
• Internal reasons why objectives change -

  • business has already achieved its previous aim
  • businesses' view has changed in the view of the owners/shareholders
• External reasons why objectives change -

  • a new competitor may cause objectives to change (e.g from profit maximisation to survival)
  • change in the economic environment (e.g to seek/not seek expansion)
  • technological change (e.g competitor brings out a new product of tech)
  • people more concerned about the environment