Business Aims and Objectives by bmd18385

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									REVISED GCSE
FACT FILES
Unit 2:
The Business Environment
For first teaching from September 2009
For first award in Summer 2011


Business Aims and
Objectives
Aims and Objectives

                                                                     Aims and objectives
              Learning Outcomes                                                               A business aim is a goal that a
                                                                                              business wants to achieve, e.g. to
                                                                                              increase sales whereas a business
At the end of this unit students should be
                                                                                              objective is the stated measurable
able to:                                                                                      target of how to achieve these aims,
                                                                                              e.g. to increase sales in NI by £5mn.
  demonstrate and apply knowledge and understanding
  of business aims;                                                                           Each individual business will
                                                                                              have its own particular aims and
  explain how the aims of a firm affect its activities;
                                                                                              objectives however the most
  compare the aims of public and private sector                                               common aims of private sector
  organisations; and                                                                          firms are:

  analyse how the aims of social enterprises differ from             Survival
  other business sector organisations.
                                                                     Statistics suggest that a large proportion of new businesses
                                                                     fail within the first 12 months, therefore when a new
                                                                     business first starts operating, its main aim is likely to be
                                                                     survival. To survive all a business has to do is ensure that it
              Setting the Scene
                                                                     breaks even, in other words it must ensure that the money it
                                                                     receives from selling its products is at least enough to cover
                                                                     its outgoings.
Volkswagen
Volkswagen is the world’s second largest car maker, and is           If a business can survive in the short term then it may be
the firm which owns the Audi, Lamborghini and Bentley                able to set alternative long term aims such as growth or
brands. In 2007 it sold a record 6.2 million cars and boosted        increasing profit.
profits by 40% to reach £4.7bn. In recent years it has been
                           expanding into emerging markets           Profit Maximisation
                           and has improved its market share
                                                                     Profit maximisation or profit growth is the primary aim of
                           in Europe.
                                                                     most private sector organisations such as Volkswagen.

                          Volkswagen said it expects growth
                                                                     To calculate the level of profit, Volkswagen will subtract
                          to continue in 2008, with nearly all
                                                                     the cost of producing cars from the revenue received from
                          brands bringing out new models.
                                                                     selling them. The case study above shows that Volkswagen
                          “We expect deliveries to customers
                                                                     increased profits by 40% in 2007 to reach a total of £4.7bn
                          to exceed the record set in 2007 with
                          sales figures rising in the Asia-Pacific
                                                                     The owners of Volkswagen, the shareholders, will want the
                          and central and Eastern Europe
                                                                     business to make as much profit as possible since it will
                          regions in particular,” the company
                                                                     mean higher dividend payments for them. They will also
said in a statement. The company aims to overtake Toyota
                                                                     want the firm to maximise profits so that they can reinvest
as the world’s leading car manufacturer in the next ten
                                                                     some of these profits to help the business grow.
years.
Growth
                         For many firms the main objective                  Case Study
                         is to increase the level of sales
                         or market share. Firms set this
                         aim because they believe that          Green is the new gold in IT world
                         the best way to achieve greater        Hi-tech companies are competing on a new front - to
                         profits is to achieve greater sales.   become the greenest business.
                         For example one of Volkswagen’s
                         aims is to grow the business over      A year after pledging to become the greenest company on
                         the next ten years and overtake        the planet, computer maker Dell has introduced measures
                         Toyota as the world’s largest car      aimed at claiming the “green crown”. Dell is the first
                         manufacturer.                          hi-tech vendor to reach a milestone in energy efficiency
                                                                by offering goods that use less power under the EPA’s
Improving the corporate image                                   Energy Star standard. It is also boasting a new record in
For larger companies a very common aim is to improve            recycling 46,000 tonnes of IT equipment from customers
the image of the company, the brand or the product.             in 2007, a 20% increase on the previous year. Dell says it is
Firms such as Volkswagen often spend huge amounts of            saving roughly $2m a year through operational efficiency
money sponsoring charitable or sporting events. While           improvements.
this sponsorship can be very expensive and therefore can        (Adapted from BBC News June 2008)
reduce profits it is carried out in the hope that the firms
image will be enhanced as a result which should ultimately      1. Explain the difference between an aim and an objective.
lead to a greater level of sales.
                                                                2. Why might winning the “green crown” be likely to
                                                                   increase Dell’s sales?
Concern for the environment
                                                                3. What impact would going green be likely to have on
                                                                   Dell’s costs?

                                                                Alternative business aims
                                                                The discussion above focused on the most common
                                                                aims for private sector organisations, however, there are
                                                                alternative forms of business enterprise which will have a
                                                                very different set of aims and objectives.
In recent years consumers have become more aware of
the impact of production on the environment. In order to        Public sector organisations
appeal to these consumers, firms have begun to place a          Businesses in the public sector are set up with the aim of
greater emphasis on environmental aims such as reducing         providing a public service rather than with making a profit
packaging or reducing their carbon footprint. For example,      or increasing sales. Organisations such as the NHS do not
Volkswagen has begun production of the Polo BlueMotion          aim to make a profit but rather provide a high class health
which has the lowest Co2 emissions of its class. Again it is    system which is based on clinical need rather than on the
hoped that showing concern for the environment in this          ability to pay.
way will lead to higher sales and therefore greater profits.
                                                                Social enterprises
                                                                Social enterprises are private organisations that are run
                                                                along business lines, but where any profits are reinvested
                                                                into the community, or into social or environmental projects.

                                                                Examples of social enterprises include cooperatives, credit
                                                                unions and housing associations. These businesses are
                                                                run like any other commercial business however all profits
                                                                earned by the business go back to the business to help
                                                                achieve its social or environmental objectives.
             Activity                                                          Revision questions

Fifteen                                                          1. Explain the difference between a business aim and a
                                                                    business objective.
In 2002, celebrity chef Jamie Oliver combined two
                                                                 2. Explain how a firm such as Volkswagen would calculate
ambitions: to open a top class restaurant and to give
                                                                    profit.
disadvantaged youngsters the chance to gain professional
                                                                 3. What is the most likely short term objective for new
training that would set them up for life. He set up the
                                                                    businesses?
Fifteen Foundation and opened the first Fifteen restaurant
in London. The restaurant was staffed entirely by young          4. How do the aims of public sector organisations differ
disadvantaged people who had been trained as part of                from those of private sector organisations?
Jamie’s TV show.                                                 5. How do the aims of a social enterprise differ from those
                                                                    of private sector firms?
Fifteen was set up as a social enterprise, not a privately
owned business, so all profits generated by the restaurant
go straight back into the scheme to help train other
disadvantaged young people. Jamie Oliver is one of nine
trustees of the Foundation and, as with all board members,
has no financial interest in the business. Fifteen is now one
of London’s most popular and successful restaurants and
the foundation has opened further restaurants in Cornwall,
Amsterdam and Melbourne.

1. What is a social enterprise?
2. How do the aims of a social enterprise differ from those
   of a PLC?
3. What happens to the profits made by the Fifteen
   Foundation?



             Key Terms
•	 A	business aim is a goal that a business wants to achieve,
   e.g. to increase sales.
•	 A	business objective is the stated measurable target of
   how to achieve a business aim, e.g. to increase sales in NI
   by £5mn.
•	 Public sector organisations are businesses set up with
   the aim of providing a public service rather than making
   a profit.
•	 Social enterprises are private organisations that are run
   along business lines, but where any profits are reinvested
   into the community or into social or environmental
   projects.

								
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