OCR GCSE Business (1-9)

Business 1 (01)

1.4 Business aims and objectives

From the OCR specification

• The aims and objectives of a business– Profit, survival, growth, providing a service,

market share

• How and why objectives may change as businesses evolve

• Why different businesses may have different objectives

Worksheet

Lesson objectives• To be able to identify the aims and objectives

of a business

• To be able to describe how and why objectives may change as the business evolves

• To be able to discuss why different businesses may have different objectives

Starter• Do you have any of these aims?

– To get a better phone for your birthday

– To pass your maths GCSE

– To get a part time job

– To become a YouTube sensation

– To get through the year without a detention

– To learn the guitar

TO BE ABLE TO IDENTIFY THE AIMS AND OBJECTIVES OF A BUSINESS

Aims and objectives introduction

• Aims are the strategic goals of a business; for example to grow

• Objectives are more specific steps; for example to increase market share by 5% over the next year

Why does a business set aims and objectives?

(a) Setting business objectives gives specific

targets by which business performance can be

measured

(b) Setting objectives can be used to motivate

workers to achieve

(c) Setting objectives clarifies business direction

and aids decision making

Profit

• Profit is total revenue (money into a business) minus total costs (money out of a business)

• A business will aim to maximise profit, they must do this therefore in only two ways:

– Increase revenue into the business

– Reduce costs out of the business

Survival

• In its first year of trading a start-up business may aim to just survive

• When the business is more established the aims may change but if there is a recession or problems in the market then the business may keep this as one of their aims until sales improve

Growth

• As businesses trade and develop over time, the objectives may change and they owners may wish to grow the business

• This may mean the business will need;

– To sell more goods or services

– To produce more goods

– To provide more services

Providing a service

• A service is a task that is performed for money;– Hairdresser– Gardener– Cleaner– Insurance– Banking

• A business may aim to provide a new service or improve on an existing service

• A business that wishes to provide a service for the good of the local community is called a social enterprise

Market share

• A business may aim to increase their market share. This is the percentage of sales held by a business in a market.

• They will have to take sales away from competitors to achieve this aim

• This could be done through;

– Heavy promotion and discounts

– To make the products look more appealing

TO BE ABLE TO DESCRIBE HOW AND WHY OBJECTIVES MAY CHANGE AS THE BUSINESS EVOLVES

Start-up or established?Choose aims and objectives from this list and place

them where you think they should go

1. To increase awareness by customers

of the business

2. To increase profits and meet returns

on investment

3. To increase market share

4. To achieve market dominance

5. To grow the reputation of the

business

6. Survival

7. To be UK market leader

8. To increase customer satisfaction

levels

9. To be innovative, introducing new

products to the market

10.To reduce the costs of the company

by 25% by 2018

• To increase awareness by

customers of the business

• To grow the reputation of the

business

• Survival

• To increase profits and meet returns on

investment

• To increase market share

• To achieve market dominance

• To be UK market leader

• To increase customer satisfaction levels

• To be innovative, introducing new

products to the market

• To reduce the costs of the company by

25% by 2018

TO BE ABLE TO DISCUSS WHY DIFFERENT BUSINESSES MAY HAVE DIFFERENT OBJECTIVES

Different businesses have different objectives

Do you think these businesses have the same objectives?

Different businesses have different objectives

Do you think these businesses have the same objectives?

Different businesses have different objectives

Do you think these businesses have the same objectives?

Sample questions

Sample question 1

Answer question 1

(a)Central government does not set business objectives; owners/directors/managers do this.

(b) Diversification relates to the range of business activities undertaken, it does not explain the reason for different businesses having different objectives.

(c) Correct answer: The objectives of a business change throughout the business’ lifetime.

(d) Copyright legislation stops one business copying another’s designs etc., but it does not cover objectives. A business is free to choose objectives as it deems to be appropriate.

Sample question 2

[1]

Answer question 2

(a)Setting business objectives gives specific targetsby which business performance can be measured.

(b)Setting objectives can be used to motivate workers to achieve.

(c)Setting objectives clarifies business direction and aids decision making.

(d)Correct answer: Setting objectives may increase management workload, but this is not a benefit to a business. High workloads lead to inefficiency, mistakes, demotivation and stress.

Sample question 3

[1]

Answer question 3

(a)Market share measure the proportion of the market secured by a firm, the number of staff employed is irrelevant.

(b)Correct answer: Making products more appealing should increase sales, and hence market share.

(c)Reducing output is likely to reduce sales rather than increase market share.

(d)Spending less money is likely to increase profit, but has no link with market share.

• State and explain one reason why a dentists partnership objectives may have changed after its first year of business

• Previous objectives met

• External influences have changed – increased competition, increasing/decreasing exchange rate, increasing unemployment

• Internal influences – e.g., death of a partner

Glossary

• Aim of business; A purpose or intention (general statement)

• Objective of business; how a business will achieve an aim (steps)

Resources written by Sarah Hilton for revisionstation.co.uk