Enterprise (0454) | Business objectives

Study Notes: Business Planning - Business Objectives (Syllabus Section 7.1)

Hello future entrepreneurs! This chapter is all about understanding the 'why' behind a business. Every enterprise, big or small, needs a goal. If you don't know where you are going, how will you ever plan the journey?

We will learn the difference between long-term dreams (Aims) and short-term targets (Objectives), and explore the variety of goals enterprises pursue, from making money to helping the community. Don't worry if this seems tricky at first; we’ll use simple steps and examples to make it super clear!

1. Aims and Objectives: The Essential Distinction

In Enterprise (0454), you must be able to clearly define and distinguish between Aims and Objectives. Think of it like planning a trip:

Aims: The Long-Term Vision

An Aim is the general, long-term direction or aspiration of the enterprise. It is usually quite broad and doesn't contain specific numbers or deadlines. It is what the enterprise ultimately wants to achieve.

• Example of an Aim: To be the market leader in sustainable fashion.
• Example of an Aim: To provide high-quality education to children in rural areas.

Objectives: The Short-Term Targets

An Objective is a specific, measurable target set to help the enterprise achieve its overall aim. Objectives are shorter-term and must be specific enough so that the enterprise can measure its success.

• Example of an Objective: To increase sales of sustainable clothing by 20% within the next financial year.
• Example of an Objective: To open three new schools in rural districts by December 2025.

2. The Diverse Range of Business Objectives

Not all enterprises exist just to make money! The syllabus requires you to understand a range of objectives that businesses pursue. We can group these into three main categories:

A. Financial Objectives (Focusing on Money)

i. Profit

This is perhaps the most common objective for a business enterprise. Profit is what remains from sales revenue after all costs have been paid. Many businesses aim to maximise profit.

• Key Concept: Profit = Revenue - Costs.
• Did You Know? Charitable organisations do not aim for profit; they record a surplus (when revenue is greater than expenditure).

ii. Sales Revenue (or Turnover)

This objective focuses on the total value of goods or services sold over a period. An enterprise might set an objective to increase sales revenue, even if profit margins are temporarily lower, often to gain market share.

iii. Cash Flow

Cash flow is the movement of money into (inflows) and out of (outflows) an enterprise. A crucial objective, especially for new enterprises, is to ensure a positive cash flow. You can't pay wages or suppliers if you run out of cash, even if you are profitable on paper!

B. Strategic and Operational Objectives

iv. Growth

Growth means the enterprise gets bigger. This could be measured by:

• The number of employees.
• The number of stores or locations.
• Increasing the amount of products made (production).

Setting an objective to maximise growth often requires large investment and risk-taking.

v. Survival

For brand new enterprises, or those facing difficult economic times, the most important short-term objective is simply survival. If the enterprise doesn't survive, none of the other objectives matter!

C. Non-Financial and Ethical Objectives

These objectives are particularly common in social enterprises, charities, and businesses committed to corporate social responsibility (CSR).

vi. Ethical, Not-for-Profit, Social, or Belief-Based

These objectives prioritise people, community, or the planet over strict financial gain. Examples include:

• Social Objective: Employing long-term unemployed people in the local community.
• Ethical Objective: Ensuring all materials are fair trade or locally sourced.
• Belief-Based: Promoting healthy eating in schools (a syllabus example).

vii. Legal Compliance

While this is not a goal that makes money, it is a compulsory objective. Every enterprise must aim for legal compliance, meaning it obeys all local, national, and international laws (e.g., employment laws, consumer protection laws, health and safety regulations). Failure to comply can lead to massive fines or closure.

3. How Aims Influence Enterprise Activities

The aims and objectives set by the entrepreneur directly determine the actions and decisions taken by the entire enterprise. This is the practical application of objective setting (AO2).

Step-by-Step Influence:

When an entrepreneur decides on an objective, this shapes key areas of the business:

Example 1: Objective is Maximising Growth

If the objective is aggressive growth, the activities will likely be:

• Marketing: High spending on advertising and promotion to reach new customers quickly.
• Finance: Taking out large loans (debt) or issuing shares to fund rapid expansion into new markets.
• Production: Investing in large, new factories or equipment to increase output.

Example 2: Objective is Promoting Healthy Eating in Schools (Social/Ethical)

If the objective is belief-based (like healthy eating), the activities will be very different:

• Product Development: Focused R&D on creating low-sugar or low-fat recipes, even if these ingredients are more expensive than standard alternatives.
• Marketing: Campaigns targeting parents and school administrators, emphasising health benefits and nutritional information, rather than just price.
• Distribution: Establishing specific relationships with school canteens or local government bodies rather than just selling in general supermarkets.

Key Takeaway: The chosen objective acts like a compass. It tells the enterprise which path to take in terms of investment, marketing, production, and employee training. If the objective changes, the activities must also change.