1.3 - Why Business Aims & Objectives Change
Factors that cause business objectives to change
Business objectives are the goals that guide a company's actions, but they often evolve over time due to various external and internal influences. As businesses develop gradually, they must adapt their aims to maintain success and respond to challenges. These changes help ensure sustained growth or survival in a competitive environment.
Market conditions
Markets are constantly changing, requiring businesses to adjust their objectives to stay relevant.
- Adaptation to competition - A shop facing more online rivals might change from aiming to open new branches to focusing on strengthening its current position.
- Response to economic challenges - In times of recession, a hotel group could shift its priority from expanding to simply staying operational.
Technology
Rapid advances in technology can transform how businesses operate, leading to revised objectives.
- Automation and efficiency - A factory introducing machines to replace manual labour might refocus from production processes to boosting sales volumes.
- Cost reduction and scale - Adopting new tools often helps achieve economies of scale, where average costs fall as output increases, prompting goals centred on larger production.
- Market expansion - A neighbourhood bookstore could add online sales platforms to reach more customers, altering its aim from local service to wider market penetration.
Performance
A business's results can vary, with periods of steady profits sometimes disrupted by issues, directly affecting its goals.
- Shifting after growth - A café chain that has grown quickly through new outlets might then prioritise increasing profits rather than adding more sites.
- Addressing profit impacts - If lowering prices to attract customers reduces earnings, the business may revise objectives to restore financial health.
Legislation
New laws can force businesses to alter their operations and objectives, often promoting more responsible practices.
- Environmental regulations - Rules on emissions, which are gases released into the air, might lead a production firm to adjust its goals towards reducing pollution.
- Broader compliance - Laws on worker rights or customer protection encourage firms to consider the needs of all stakeholders, such as employees and the community.
Internal reasons for changing objectives and differences between large and small businesses
Changes within a business, like shifts in leadership, can prompt new objectives. Additionally, the size of a business influences its priorities, with small and large firms often having distinct focuses.
Internal reasons for objective changes
- Ownership or management shifts - If a family-run company gets a new leader, it might move from seeking stability to pursuing quick growth.
- Investor pressures - New owners could push for short-term profit boosts to maximise returns, such as higher dividend payments.
Differences between large and small businesses
Small businesses employ fewer than 50 people, while large ones have more than 250. Their objectives reflect these scales.
| Aspect | Small businesses | Large businesses |
|---|---|---|
| Primary focus | Often prioritise survival and supporting the owner's lifestyle | Typically emphasise growth and maximising profits |
| Key objectives | Value non-financial goals like personal independence and job satisfaction | Concentrate on financial aims such as expanding market share and increasing revenue |
| Common priorities | Aim for sustainability rather than rapid expansion | Focus on large-scale operations and economies of scale |
| Shared elements | Both need to generate profit, but small firms may balance this with personal rewards | Both need to generate profit, but large firms often pursue aggressive expansion |
Types of business objectives
Business objectives can be financial or non-financial, depending on the organisation's needs. Public sector organisations, which are government-run, have unique goals focused on service delivery.
Financial objectives
These centre on money-related goals to ensure the business's economic success.
- Profit maximisation - Aiming to achieve the highest possible earnings.
- Sales growth - Focusing on increasing the volume of goods or services sold.
- Revenue improvement - Boosting income from sales, which is essential for all businesses.
Non-financial objectives
These emphasise aspects beyond money, often linked to long-term stability or personal values.
- Increasing market share - Gaining a larger portion of the total market.
- Independence and control - Maintaining decision-making freedom, especially in small businesses.
- Survival - Ensuring the business continues operating through tough times.
Public sector organisation objectives
These differ from private businesses as they prioritise public benefit.
- Improving service quality - Enhancing the standard of services provided to the community.
- Increasing revenue - Generating more income to fund operations, often through fees or grants.
- Survival - Maintaining existence to continue delivering essential public services.