A Level Business Studies - Business Objectives and Missions

Why do businesses exist?

•    To provide goods and services for customers

•    Customers can be from the UK or abroad – individuals, other businesses or government departments.

•    A business that meets the needs of the customer is more likely survive long term.

•    Most business are started by a single individual or small group.

•    People who have an idea and want to develop it with a business are called entrepreneurs.

•    Entrepreneurs often take risks and reap the profits or losses that come with this.

•    Motivation for setting up a business varies

•    Some do it because they have a talent or skill they wish to use to provide goods/services

•    Some try to fill a gap in the market

•    All businesses are likely to  have a purpose or a mission and objectives or goals they wish to achieve.

Relationship between mission and objectives

•    Mission is an essential purpose or  intention.

•    Usually stated in qualitative rather than numerical terms

•    Mission statement is the means of communicating to key stakeholders what the organisation is doing/should be

•    Business objectives enable a business to achieve an aim of mission

•    Set at corporate level or are departmental level.

•    Corporate objectives govern the objectives set by each department or divison

•    Aims of a business determine the way in which it is intended the business will develop

Fact File – Disney

•    To provide quality entertainment for the whole family

•    Objectives indicate how the business will try to achieve its basic purpose of meeting the entertainment needs of its customers, while at the same time generating earnings

Fact File – Other examples

•    Microsoft's mission is 'to enable people and businesses throughout the world to realise their ful potential' and they do this by 'striving to create technoogy that is accessibly to everyone – of all ages and abilities.

•    H&M's mission is 'to offer fashion and quality at the best price'.

•    McDonald's mission is 'to be our customers' favourite place and way to eat and drink'.

Why businesses formally identify their business mission

•    Small businesses are likely to know the goals of the business

•    Large businesses use it to define what the business is trying to do in a way everyone understands. Stating the business mission provides a common purpose for all to work towards which builds team spirit and encourages commitment.

Why set objectives?

•    Co-ordinate business activity and give direction

•    Effective objectives are SMART

•    S is for specific – clearly and easily defined

•    M is for measurable – quantifiable (e.g to increase market share from 10 to 15% in two years)

•    A is for agreed – managers and subordinates are involved in setting the objectives

•    R is for realistic – achievable and not in conflict with other objectives

•    T is for time bound – based on a timescale (open 20 stores in the next two years)

•    This enables the business to assess the extent to which the aims have been achieve and to ensure staff are clear about what they are tring to do.

•    Motivates staff as they have had a say

•    Objectives form the basis for decisions on strategy

•    These are medium to long-term plans that allow a business to achieve its objectives.

•    No single business objective that all should aspire or that guarantees success

Common Business Objectives

•    Profit maximisation is often seen as the most important

•    Minimising costs in order to improve profit margins

•    Effective utilisation of capacity and improving staff productivity

•    Can be influenced by competition, spare capacity, efficiency, economy, etc.

•    Growth – may relate to market share/ sales turnover, number of outlets, number of business areas.

•    Often linked to another objective.

•    External factors and financial health of a business influence the attainment of objectives related to growth

•    Survival may be the goal of small businesses or new businesses or businesses in competitive markets.

•    Increasingly important in times of uncertainty or difficult economic situations.

•    Objectives might be to achieve minimum levels of sales and sales revenue to ensure costs are met and market share is retained

•    Maintaining appropriate levels of stock in order to meet demand

•    Maintaining the required number of experienced staff to meet production needs

•    Cash flow – a business must ensure it has sufficient cash flowing into the buusiness to cover an amount which may need to be paid out

•    Healthy cash flow is vital

•    Social and ethical issues are evident in non-profit organisations e.g charities which are set up with a purpose to achieve one of these objectives.

•    Shelter's key objective is 'to relieve hardship or distress among homeless people and among those in need who are living in adverse housing conditions'.

•    Can be related to youth activity, animal welfare, community involvement, fairtrade and packaging.

•    Enhances brand images and reputation, therefore improving sales and profit.

Other Objectives

•    Diversification – where a business moves into the production or sale of different goods and services.

•    Spread risk by reducing dependency on single market/product

•    Achieves growth and increases profits

•    Includes development of niches markets, raising additional finances, achieving cost savings, and ensuring effective communication.

•    Market Standing – businesses may be seen as most innovative or progressive.

•    Linked to corporate image and reputation

•    Appropriate corporate image leads to achievement of other objects e.g growth/profit. Nature of this depends on target market.

•    Meeting the needs of other stakeholders – other than social and ethical objectives, objectives may be to satisfy owners or shareholders.

•    Businesses also place a high value on meeting needs of other stakeholders including customers, workers and the local community which enhances reputation.

Hierachy

•    Mission statement

•    Corporate aims

•    Corporate objectives

•    Departmental objectives

1.    A business may exist because a person believes that they have a talent or skill which can offer people a good service. This means that they will try to create a business which showcases this in the most positive way possible, which should attract customers. They may see a gap in the market and try to fill this with their business, which would maximise the profits the business takes.

2.    The word 'mission' is used to define the business' aims and long-term goals. It is the same as corporate aims and brings the business closer together, through the motivation of staff and by working towards a common goal.

3.    A business objective is a goal that needs to be met to realise the aims of the business or organisation. It can be medium to long-term, corporate or departmental. For example, one of Disney's business objectives is 'to be one of the world's leading producers and providers of entertainment and information, using its portfolio of brands to diffrentiate its content, services and consumer products'.

4.    The mission is the organisation's long-term aims. The objectives of a business is a goal that should be achieved to realise the stated aims of a business. A business mission must be established before the business can set any objectives. The mission will play a part in how the business grows and provides a key point from which objectives can derive from.

5.    Survival may be an important business objective when the business is small and is in a competitive market. If they have a small market share then it would be crucial to focus on meeting demand for stock and having knowledgable staff who can be prepared for when demand increases. It is important for the business to stay alive in times of economic difficulty, so the business will focus on profits and growth and will set objectives around this.

6.    Growth would be important for a newly established estate agent as growth is linked to many other objectives. For example, the business may set a goal to become the market leader in terms of profits. Because this new business is in a competitive market, it is crucial to grow the business in order to keep it's independence as otherwise, it might be lost in larger businesses. Growth will also create a strong reputation for the business, which will mean that customers will be more loyal and therefore, the business will always have a steady flow of people who use the service. Ultimately, growth is important because the competitive market could see businesses get taken over by larger companies which would see the business lose it's independence. In the short term, having objectives relating to growth can see the business survive which is important for new businesses like the estate agency. In the long term, the business will be able to establish itself as the market leader and anchor itself in the mind's of many potential consumers, which would see the company grow even more.

7.    Social and ethical objectives may link to growth and profit objectives for a fashion retailer because businesses who do good and ethical businesses are perceived as good by the general public. A fashion retailer would want to get an edge over competitors, and so by promoting themselves in an ethical way, they would gain this advantage. This would improve their reputation and enhance brand image, leading to more people buying from the businesses which therefore, increases profits. The business may also grow from this, as many people value an ethical business over one that is not, and so the market share could increase in the long-term.

8.    Smart stands for: specific (clear), measurable (e.g to increase sales by 10%), agreed (by both managers and subordinates), realistic (a goal that can actually be achieved and does not conflict other aims), time bound objectives (e.g over 18 months). For example, to increase market share by 5% in the next 2 years.

9.    To increase sales by 3 per cent over the next 18 months.

10.  There is usually a hierarchy of objectives in most organisations. This is because the mission statement often influences how other objectives are set. Ordering these aims allows for a more determined and focussed approach to achieving these goals as the mission statement gives subordinates a common goal which they can work towards, providing them with motivation. The objectives get more specific as you go from mission to corporate aims, to corporate objectives to departmental objectives. The mission statement is at the top because it has great influence on how the business works and can affect how a business goes about achieving the other goals. Departmental objectives are more specific and allow for the business to meet their corporate objectives, and thus, it's overall mission. Setting these in this order allows for the mission to have a strong direction, and it can guide the actions of the business.