Business 2.1

What is meant by the term business objective?

Short-term steps (SMART targets) a business takes in order to achieve its overall aims

What is meant by the term: business aim

Overall long-term target or goal made by the business

SMART stands for:

- specific

- measurable

- achievable

- relevant

- time-bound

Examples of financial aims/objectives

• Business survival

• Profit maximisation

• Growth

• Market share

• Increased shareholder value

Examples of non-financial business aims/objectives

• Social and Ethical

• Customer satisfaction

Definition of business survival

Operating for a certain amount of time - typical for new businesses

Profit maximisation

Once a business has reached break-even point they may aim for this

Growth - domestic or international

• number of employees

• number of products sold

• income from sales

market share

percentage of the market that the business occupies

increased shareholder value

important for a limited company - if the value of shares increases, shareholders will be happy

social & ethical

a company may aim to be more sustainable or environmentally friendly, giving them a positive reputation.

customer satisfaction

key for firms in a competitive market

Two ways a business can grow?

Internal/Organic and External growth

How can a business finance growth?

• retained profits/selling of assets

• loan capital

• share capital

• stock market floatation (public limited company)

Examples of organic growth

• Launching a new product

• Exploited new technology

• Gone into new markets (changing the marketing mix)

The 4 Ps

• Product

• Price

• Promotion

• Place

Benefits of organic growth

• Low risk

• Allows the business to develop core strengths - do what it’s good at

• Financed internally - retained profit

• No culture clash

examples of external growth

1. Merger

2. Takeover

Merger definition

Two businesses join together to form one business under joint ownership

Takeover definition

One business buys/acquires the other

Benefits of external growth

• Quick/instant growth

• Sharing business skills

• Access to other business's customers

• Gain an instant market presence

Advantages of Mergers

• Achieve synergy

• Cost savings

• Increase of market share

• Sharing of business expertise

Disadvantages of Mergers

• Disagreements and culture clash

• Government intervention

Advantages of Takeovers

• Quicker growth than mergers, with instant access into new markets. -instant market share, growth and skills

• Less conflict

• Cost cutting

Disadvantages of Takeovers

• Costly

• Problems with integrating staff

• Risky