🚀 Setting Business Aims and Objectives: Your Business GPS
Hey everyone! Welcome to a crucial chapter in "Business in the Real World." Think of this chapter as installing a GPS system for a business. Without directions, a business is just driving around in circles, hoping to hit success by accident!
In these notes, we will learn how successful businesses plan their journey by setting clear aims (the destination) and detailed objectives (the specific turns they need to take). Understanding this is key to figuring out why businesses succeed or fail.
1. What's the Difference? Aims vs. Objectives
Don't worry if these two words sound similar. In Business, they have very specific roles:
A. Business Aims (The Big Picture)
Aims are the long-term, general goals of the business. They provide a broad sense of purpose.
- They are often vague (not specific).
- They explain what the business wants to achieve eventually.
- Example: To become the leading shoe brand in the country.
Key Term: An Aim is the overall, long-term intention of the business.
B. Business Objectives (The Specific Steps)
Objectives are the short-to-medium term targets that help the business reach its main aim. They are specific steps that can be measured.
- They are detailed and usually include numbers and deadlines.
- They explain how the business will achieve its aim.
- Example: To increase online sales by 20% in the next quarter.
Analogy Check: Imagine you want to climb Mount Everest (this is your Aim). Your Objectives would be all the steps: walk 5km today, reach Base Camp by Tuesday, purchase new climbing gear by the end of the month.
Key Takeaway: Aims set the vision; Objectives provide the measurable targets.
2. Why Do Businesses Need Aims and Objectives?
Setting targets isn't just a nice idea—it’s essential for survival and success. Objectives serve three main purposes:
- Providing Direction:
A business with clear objectives knows exactly what tasks need doing every day. Everyone, from the CEO to the newest employee, is working towards the same target. Without direction, departments often conflict or waste time on irrelevant tasks.
- Motivating Employees:
Achievable objectives give employees something to work towards. Hitting a sales target or reducing waste by a specific amount can be very rewarding and keeps staff focused and productive.
- Measuring Performance (Assessment):
If a business aims "to be successful," how do they know if they achieved it? Objectives allow a business to measure its performance accurately. If the objective was "reduce costs by $5,000 this month," the manager can check the accounts and know immediately if they succeeded or failed, and then adjust their plans.
3. Common Business Aims
When starting or running a business, managers usually focus on a few key goals. These goals can change depending on how old the business is or how the economy is performing.
The Six Key Business Aims:
- Survival (Staying Alive!)
This is the most important aim for any new or struggling business. Before a business can think about profit, it needs to ensure it is making enough money just to keep operating and cover its costs. If a business runs out of cash, it fails (even if it has good ideas).
- Profit Maximization
This is the classic aim for most private sector businesses. It means making the largest possible profit. Profit is the money left over when all costs have been paid (Revenue minus Costs). Owners and shareholders love this aim!
- Growth
This means getting bigger. Growth can happen by increasing sales, employing more staff, or opening new stores. Growth often leads to higher profits in the future.
- Increasing Market Share
Market Share is the percentage of total sales in a specific market that a business controls.
Example: If 100 million smartphones were sold this year, and Samsung sold 30 million, Samsung has a 30% market share.
Businesses aim to increase this percentage because having a larger share means you are stronger than your competitors.
- Customer Satisfaction
Aiming to keep customers happy through high-quality products or excellent service. Satisfied customers become loyal customers, which leads to repeat business and positive word-of-mouth recommendations.
- Social and Ethical Objectives
These aims focus on the wider impact of the business, not just making money. For example, aiming to reduce pollution, use only sustainable materials, or support the local community.
Did you know? Many modern consumers actively choose businesses that demonstrate strong ethical behaviour, making this aim crucial for long-term reputation.
Quick Review: When Aims Change
A new café owner’s main aim is Survival for the first year. Once the café is popular, their aim might change to Profit Maximization or Growth (opening a second branch).
4. Creating Effective Objectives: The SMART Framework
We know objectives must be measurable, but how do we make them truly effective? Managers use the SMART framework. This is a crucial memory tool for your exams!
A good objective must be:
S – Specific
- The objective must clearly state what needs to be achieved.
- Bad Objective: Sell more phones.
- SMART Objective: Increase sales of the new 'Z' model phone.
M – Measurable
- You must be able to count the result, usually using numbers (quantifiable).
- SMART Objective: Increase sales of the new 'Z' model phone by 15%.
A – Achievable (or Agreed)
- The objective must be realistic. There is no point setting an objective to increase sales by 500% if the market is only growing by 5%. This demotivates staff.
- Tip: Objectives should be challenging but still possible to achieve with the resources available.
R – Relevant
- The objective must matter to the overall business aim. If the aim is "Profit Maximization," an objective about increasing staff training (cost) might not seem relevant unless you can show it immediately leads to higher sales.
T – Time-bound
- There must be a deadline. Without a deadline, tasks are often postponed forever.
- Final SMART Objective: Increase sales of the new 'Z' model phone by 15% within the next three months.
Don't worry if this seems tricky at first! Just remember that SMART turns a vague dream into a usable plan.
5. Conflicting Objectives and Stakeholders
When a business sets aims, they have to consider the different groups of people who have an interest in the business – these are called stakeholders.
Key Term: A Stakeholder is any individual or group that has an interest in, or is affected by, the actions of a business.
Because different stakeholders want different things, pursuing one aim often makes it harder to achieve another—this is called conflict.
Common Examples of Conflict:
- Conflict between Profit and Ethics
Scenario: A business aims for Profit Maximization. An objective might be to buy the cheapest materials possible from overseas suppliers. However, this conflicts with the Social Aim of being ethical, as those suppliers might use poor working conditions or pollute the environment.
The Business must choose: High profit now, or better reputation/ethics later?
- Conflict between Growth and Survival
To achieve rapid Growth (e.g., opening five new stores quickly), the business might need to take out huge loans. This increases financial risk, potentially threatening Survival if the new stores fail to make sales.
- Conflict between Owners and Employees
Owners aim for Profit Maximization (by keeping costs low, including wages). Employees, however, have their own objective: maximizing their wages and benefits. Raising employee wages decreases the firm's profit, creating a direct conflict.
Key Takeaway: Managers must constantly balance the needs and demands of different stakeholder groups, meaning compromises are often necessary when setting objectives.
Final Study Tip for Success
Remember that aims and objectives are not fixed forever. Successful businesses constantly review and adjust their objectives based on changes in the economy, competitor actions, or stakeholder demands. Always ask yourself: "Is this target helping the business achieve its overall aim?"
Good luck with your studying!