Business Paper 2 - Aims and Objectives (206)

Business Aims

what the business wants to achieve in the future, and they tend to be quite generic and broad - they set out the goals for the business

Vision Statement

a description of what a business sets out to achieve in the medium to long term - it should provide a clear guide to senior management of the future direction of the business

example: Ikea: “to create a better everyday life for the many people”

Advantages:

• a clear vision can give the business a clear identity and ethos

• can help in setting objectives and support the business strategy

• focus senior managers on the tasks to achieve the vision

• communicates to employees how they can contribute and can improve employee engagement

Objectives

targets the business will set to achieve its aims - more specific and measurable

• survival - around 30% of businesses fail within 2 years of being set up, and in some industries this figure is much higher - for a small business, the initial objective is to survive the difficult time of gaining customers, establishing a good local name and building a reputation - even for some big businesses survival can become a priority.

• profit maximisation - the objective of most businesses, especially those operating in the private sector, is to maximise profits - profit maximisation is possibly the main aim for most businesses and entrepreneurs

• growth and gaining market share - some businesses will spend money to gain customers, reducing profits in the short run, but hopefully increasing profits in the longer term- they may even be able to force other competitors out of the market, by using short run, loss making pricing strategies

SMART Objectives

objectives that are specific, measurable, achievable, realistic and time based - they are quantifiable, therefore can be used more easily to monitor progress

• SMART objectives are more precise than normal objectives, and are more quantifiable, therefore can be used more easily to monitor progress

• SMART objectives also enable feedback and learning within the organisation, so that management can monitor achievement and make changes where necessary

Mission Statement (Advantages + Disadvantages)

a broad statement of its aims and values - it will guide the everyday operations and decision-making of the business

example: McDonalds - “Our mission is to make delicious feel-good moments easy for everyone”

Advantages:

• helps to ensure that all employees are clear on the purpose of the business so everyone can be focused on the same goals and objectives

• gives some transparency for investors/shareholders – they understand how their capital will be put to use

Disadvantages:

• the mission statement and values might not carry a huge importance as they are often vague and express an aspiration rather than a reality and therefore are very often never achieved