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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