Aims and objectives: the goal and the measurable step towards it
Definition
Business aim: the broad, long-term goal the owners are working towards, written in words rather than numbers.
Business objective: a specific, measurable target, with a figure and a deadline, that moves the business towards its aim.
- A business aim is the direction of travel, such as 'grow the business', 'be the best-known bakery in Leeds' or 'earn a living from the stall'.
- A business objective turns that direction into something countable, such as 'increase sales by 10 per cent by next March' or 'open a second shop by December 2027'.
- The measurable part needs three pieces: what is being counted, how much it must change, and the date it will be checked.
- Because an objective carries a number and a date, the owner can check progress halfway through and change the price or the advertising spend before the year is lost, which a vague aim never allows.
Note
- Non-financial aims such as personal satisfaction, independence and social objectives are covered in the next guide, 1.3.1b.
- Why two businesses in the same market choose different aims is covered in 1.3.1c.
The five financial aims a start-up chooses between
Definition
Market share: the proportion of all the sales made in a market that one business wins, usually written as a percentage.
- Survival: keeping the business trading, with enough cash to pay suppliers, rent and wages, through the first year.
- Profit: the money left from revenue once every cost of running the business has been paid.
- Sales: raising the number of units sold, or the revenue those sales bring in.
- Market share: the slice of the market the business holds, which only moves if the firm grows faster or slower than its rivals.
- Financial security: a steady, dependable income that covers the owner's bills every month.
Example
- Aldi and Lidl compete on price and carry a narrower product range than Tesco and Sainsbury's.
- Low prices pull shoppers away from the wider-range supermarkets, so Aldi and Lidl take a larger share of grocery spending.
- The narrow range is what makes those prices affordable to run, because fewer product lines mean lower stockholding and simpler shops.
- The aim being served here is market share, and every individual sale earns less than the same item would at a higher price.
Financial aims pull against each other
- The five aims compete for the same money and the same price decision, so a business that pushes hard on one usually gives up part of another.
- Chasing market share by cutting prices wins customers from rivals, but each unit now earns less, so total profit can fall even though more units are leaving the shelves.
- Chasing profit early carries the opposite cost, because holding the price high protects the money made on each sale but sends price-sensitive shoppers to a cheaper rival, so sales and share both slip.
- Aiming at financial security means turning down the risky expansion that would have lifted sales, so the owner swaps possible growth for a wage they can rely on.
Exam technique
- Check whether the question asks for an aim or an objective, because a target with no figure and no deadline will not be credited as an objective.
- Name the aim, then say why this business chose it, using its age, its cash position or its rivals as they appear in the source booklet.
- On a justify or evaluate question, say what the firm gives up by choosing that aim, since the trade-off is where the higher marks sit.
- Replace 'to make money' with something countable such as 'to make £30,000 profit in year two', because the vague version scores nothing.
Self review
- What is the difference between a business aim and a business objective?
- Rewrite the aim 'grow the business' as a measurable objective.
- Define market share.
- Why does survival usually come before profit for a start-up?
- Explain why cutting prices to win market share can reduce profit.
