2.1.2 Changes in business objectives

Why business aims and objectives change as businesses evolve?

• market conditions

• technology

• performance

• legislation

• internal reasons

market conditions

• may be lots of new competitors entering the the market → business has to change their aims → increased market share → takes customers away

• may be increased unemployment in the country which is affecting the demand for business’ goods/services

• state of economy will either lead to profit maximisation or survival

technology

• may be in production process eg a new bagging technique for crisps which keeps them fresher

• may be tech products offered e.g Dyson arrived on the vacuum cleaner market, it meant changes for all competitors to their aims & objectives as they scrambled to keep up with innovations

performance

• if the business has done well in a year and made lots of profits it may decide to grow and expand and take on more staff 

• however if a business has had a bad year it may decide to reduce number of staff and focus on the core business instead

legislation

• minimum wage law in Uk so a business may change its aim, as growth may be slower because they have to pay higher wages when minimum wage goes up

• new objective may include cutting costs/reduce staff

internal reasons

• if business expands it may want to have objectives of higher market share → increased rev/higher production levels

• if business changes leadership → new boss is appointed, it’s common for there to be some changes to aims & objectives as the leader may focus on something else

Explain one reason why competition may affect a business’ choice of objectives (3)

• entrance of new comp change current objectives

• o.g objective may have been to expand

• but more sensible to aim to retain its current market

reasons why a business might have an objective to increases efficiency

• efficiency → improve efficiency - to increase profit , to streamline to be able to compete better (give opinions to decrease price)

• cut costs

• reduce waste → lean organisation 

• make more in the same time period

• increase productivity (reduced average costs) e.g better use of tech, robotics, processes

Discuss a reason why a business might have an objective to increases efficiency (6)

• maximise profits

• cut costs

• reduce waste become lean organisation

• lead to increased amount of profit

• increase productivity

• business will make more products in the same time period reducing avg costs per unit

• result in increased amount of profit as business has cut costs while selling products at same price

How a business aims and objectives change as businesses evolve?

• focus on survival/growth

• entering / existing markets

• growing/reducing workforce

• increasing product range

• decreasing product range

• focus on survival/growth

• survival in first year

• after initial start up whish to grow & expand

• entering / existing markets

eg starts to sell into another market like China

may include joint venture/merger as part of the new plan

• growing/reducing workforce

e.g if a strawberry farm wants to grow and expand they may take on temporary strawberry pickers

• increasing product range

customers have more choice, the business will make more sales, the revenue will increase and so will profit

• decreasing product range

go back to core business → get rid of products that are old, obsolete, out-of-date/aren’t selling

also withdraw product for safety reasons

eg Tesco reducing number of products in stores from 90,000 by 30% as it was confusing customers

Explain One reason why market conditions can affect business objectives (3)

• through introductions of new competitors

• business will have to change their aims and objectives from profit maximisation to increased market share

• will focus on attracting customers away from competitors

Discuss one reason why a business might set an objective to increase product range (6)

• appeal to larger range of customers

• sales maximisation (increase rev)

• increases choice

• satisfy customer needs

• may increase customers loyalty (can get all things in one place)

• repeat business → sales for future