Aims and Objectives

Business Studies

Objectives

• To understand the purpose of a business. • To understand why business set aims and

objectives. • To be able to give examples of different

business aims.

Starter Activity

Task 1 - Think about yourself for a minute and list all the aims you have. – This year – Next year – In about 5 years time

Task 2 – Now think of a few aims Lloyds TSB bank would have?

Aims

• To make a profit – Magic formula

• To increase market share • To provide services to customers • To improve the quality of the goods and

products

Making a profit

• List some typical business that are interested in making a profit

• What is profit?

SALES REVENUE - – COST = PROFIT (Price * quantity ) - expenses

What is sales revenue

• Sales revenue = Selling price * no. item sold

• For example, 10 CD sold

£10 each

Selling price = 10* £10 = £100

1. Making Profit

• All private business are interested in making profit.

• They want the sales revenue to be more than the total cost

• The owners of business are sometimes called ‘entrepreneur and so risk their capital to earn profits.

• Some of the profit can be re-invested.

Diagram showing making profit

Sales Revenue Expenses

Profit

LessReward for owners

Re-invested in the business

Increasing market Share

• Market share is the proportion of the total market sales that are made by one company to brand or product.

• The market sales figure is the total value of sales made by all firms in the market during one year

Market share using formula

Sales Brand X

Total market sales * 100 = % market share

Example – Woof brand last year has sales of £30 million CD’s and the total market worth £100 million

£30m .

£100m * 100% = 30%

Market share

• The business with the biggest market share is known as the MARKET LEADER.

• If a business is growing in market that means it is winning customers from its competitors

• However if the market is growing, .i.e there are more customers buying the product/service then market share can also grow

• Example, Walker is market leader in the crisps industry and golden wonder is small competitors and so they would want increase market share by winning walkers customers.

UK supermarket’s market share

UK supermarkets Market Share(source TNS 2006 from BBC news)

Tesco:, 30.6, 37%

Asda:, 16.6, 19%

Sainsbury's:, 16.3, 19%

Morrison's:, 11.1, 13%

Somerfield:, 5.4, 6%

Waitrose:, 3.7, 4%

Iceland:, 1.8, 2%

Tesco:

Asda:

Sainsbury's:

Morrison's:

Somerfield:

Waitrose:

Iceland:

Providing services

• Majority of business in the UK do not manufacture a product and instead provide a service to their customer.

• Business include: banks, transport firms, advertising agencies, advertising agencies, retailers etc…

• Free services provided by local or central governments include: the NHS, Local authority schools.

• However, most business charge for their services

Providing services

• Businesses such as the Post Office have mixed objectives

• Its is owned by the state (government) but it is run like a business and charges for its services.

• It has to fulfil obligations such as postal deliveries in rural areas which may not be profitable.

Improving quality of the product or service

• In most markets customers have a choice about the product or service that they use.

• If quality is not good customer may go to competitors.

• Customers expect high standards. • Business continue to improve service to

better the quality.

How can businesses improve the quality

• Improving the design of a product, e.g mobile phones, cars etc..

• Making them more reliable • Giving a quick service • E.g. restaurants will provide good-quality food at

reasonable prices In a pleasant environment. • Taxi firm will offer a reliable service. • Business that cannot provide good quality

service will not survive.

Other business Aims.

• All business need to make a profit esp. for long run

• New business may only need to survive (cover all their total costs) – E.g. break-even in the first year, for example.

• A large business may aim to develop and launch new products or break into new markets

• The aims of a business will affect the behaviour of the firm, e.g. how it organises itself.

• Break-even-point – where the Total Revenue = Total cost (so not profit or loss is being made)

Mission Statements

• Mission or vision statement. • Mission statement – gives key aims of the

business and how it intends to operate and achieve these aims

• E.g Ford Motor Company’s vision is ‘ to become the worlds leading company for automotive products and services’

• Vodaphones is ‘ our shared vision is to be the world’s mobile communications leader’.

• However Oxfam – ‘Oxfam works with others to overcome poverty and suffering.