Changing Business Objectives (AQA GCSE Business)

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Aims & Objectives in Different Businesses

  • Business aims and objectives can vary significantly between different businesses for numerous reasons, including:

    • New businesses are likely to prioritise survival, whilst established businesses may be more likely to pursue growth

    • Small businesses may be focused on the personal objectives of their owners, such as achieving a good work-life balance, whilst very large businesses, such as PLCs, are likely to aim to satisfy the needs of their shareholders

    • Non-profit organisations are likely to prioritise their social aims and objectives, whereas for-profit businesses will often prioritise maximising sales and minimising costs

Diagram: Reasons for Different Business Objectives

1-3-1---why-aims-and-objectives-vary-between-businesses

Businesses objectives are influenced by a range of factors

Industry

  • Businesses operating in different industries will have different objectives and aims

    • E.g. A healthcare company's primary objective might be to improve the health and wellbeing of people, while a financial services firm's objective might be to maximise profits

Size

  • The size of a business can also influence its aims and objectives

    • E.g. A small business may focus on survival and achieving sustainable growth, while a larger corporation may prioritise product diversification and market dominance

Culture

  • Each business has its own unique culture, which reflects its values, beliefs, and overall vision

    • E.g. A business with an employee-focused culture is likely to prioritise their wellbeing, whilst a business with a target-driven culture is more likely to focus on financial objectives

Ownership structure

  • The legal ownership structure of a business can influence its objectives

    • E.g. A family-owned business may prioritise long-term stability and legacy over short-term profitability, whilst a large public limited company is likely to prioritise maximising shareholder value

Geographic location

  • Aims and objectives can differ depending on the area in which a business is located

    • E.g. Businesses in developing economies may prioritise job creation, with support from their government, whilst businesses in more developed economies may prioritise innovation and technology adoption

Aims & Objectives as Businesses Evolve

  • As a business grows in size and evolves, its objectives can change

    • These changes are often necessary to ensure that the business remains competitive, profitable, and compliant with regulations

Diagram: How Business Aims & Objectives Evolve

2-1-5-how-business-aims-and-objectives-often-evolve

Business objectives can evolve in several ways over time

Focus on survival or growth

  • A start-up business is likely to aim initially to survive by breaking even and becoming profitable

  • As the company grows and becomes more established, its objective may change to focus on growth

    • This may include expanding into new markets or investing in new products or services

Entering or exiting markets

  • A business may decide to enter a new market to expand its customer base or to diversify its products/services

  • Conversely, a business may decide to exit a market if it is not profitable

Growing or reducing the workforce

  • A growing business may need to hire additional employees to support its expansion

  • Conversely, a business may decide at any point to reduce its workforce to cut costs or streamline operations

Increasing or decreasing product range

  • A business may choose to increase its product range to expand its customer base or to stay competitive in the market

  • Alternatively, a business may decide to decrease its product range if certain products are not proving to be profitable

    Factors Which Cause Business Objectives to Evolve


Factor


Explanation


Example

Market conditions

  • Market conditions such as competition, demand, and changing consumer price sensitivity can have a significant impact on a business's aims and objectives

  • Uber and Lyft were initially focused on capturing the largest share of the ride-hailing market (market share)

  • As competition intensified, both companies shifted their focus to profitability, and their objectives changed accordingly (profit maximisation)

Technology

  • A business may shift its focus from traditional brick-and-mortar retail to online retail as technology allows for a more cost-effective way to reach customers

  • Amazon began as an online bookstore, but as technology advanced, it expanded into a wide range of retail categories, such as electronics, clothing and groceries

  • Their objective changed from increasing market share to market development

Performance

  • If a business is not meeting its sales goals in one area, it may change its objectives to try and improve its financial performance

  • In some cases, this may involve retrenchment

  • In 2018, Ford announced that it was shifting its focus away from producing passenger cars and focusing more on SUVs and trucks

  • The move was driven by the company's poor financial performance and the new objectives were aimed at improving sales and profitability

Legislation

  • A company may need to shift its focus to comply with new regulations or capitalise on new opportunities created by changes in legislation

  • With the passage of the Affordable Care Act in the USA in 2014, healthcare providers had to adjust their aims and objectives to comply with new regulations and take advantage of new opportunities created by the law

Internal reasons

  • Factors such as changes in management or the company culture can also influence a business's aims and objectives

  • In 2014 Microsoft appointed Satya Nadella as the company's CEO

    • He shifted the company's focus from software to cloud services and the company's objectives changed accordingly

Examiner Tip

You may be asked to analyse the impact of changing business objectives. Look for clues in the case study about the effects on stakeholders such as employees, owners or suppliers. You will need to use this context to support your answer and build strong chains of argument.

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