An aim is where the
business wants to go in the future, its goals. It is a statement of purpose,
e.g. we want to grow the business into whole Europe. A business aim is the goal
a business wants to achieve. A primary aim for all business organisations is to
add value and in the private sector this involves making a profit. More
strategic aims include expansion, market leadership and brand building.
Business objectives are the stated, measurable targets of how to
achieve business aims. For instance,
we want to achieve sales of €10 million in European markets in 2004. A business
objective is a detailed picture of a step you plan to take in order to achieve
a stated aim. These need to be SMART in order for the business to know what
progress it has made towards achieving the objective.
Making a profit
All
business activity costs money. Businesses have to pay for items such as raw
materials, wages and salaries, and other running costs. To cover their costs, businesses must sell the goods
and services they produce. If the income
a business receives from selling its products is less than its costs, the
business will make a loss. If the
income of a business is the same as its costs, the business will break even. If
its income is greater than its costs, the business will make a profit.
So making a profit is a main aim of most businesses as it is this that provides
the owners of the business with their reward for putting money into (investing
in) the business, and also enables the business to develop and become more
successful.
Increasing market share
The market for a product is the system of
buyers and sellers of that product. All businesses operate in the markets for
their products. The more buyers, or customers, a business has for its product
the higher the volume of sales it will achieve. Higher sales mean more income
and therefore profit. The market share that a business has is the value
of its sales as a proportion of the total sales by all businesses operating in
that market. In order to make more profit another aim of most businesses is
therefore to increase its market share.
Providing
goods and services
Businesses can only make sales by
providing goods and services. These are what customers buy and provide the
business with an income.
The goods and
services that businesses provide must therefore be what customers want, and
sold at a price that customers are prepared to pay. When people want a product
they create a demand for it. To be effective, that demand must be backed up by
the willingness and ability to pay for it. All businesses must therefore aim to
provide a product for which there is effective demand. The product must meet
the needs of customers and be competitive with the products of other businesses.
Improving quality
One of the
things customers look for in a product is quality. All things being equal,
customers will buy from a supplier who offers the best quality product. In
order to attract and keep customers, therefore, a business must aim to provide
a high quality product.
SMART objectives and targets
As well as
aims such as making a profit, increasing market share, providing goods and
services, and improving quality, businesses must set clear objectives that
establish what they have to do in order to achieve their aims. For Example a
business may aim to make a profit – but what does it have to do to achieve
this? We have seen that in order to make a profit the income of a business must
exceed its expenditure. In planning how it is going to make a profit,
therefore, the business must set targets that establish:
·
How much it intends to spend
·
How much income it expects to receive
These targets should be
·
Specific as to
what must be achieved
·
Measurable, so
that their achievement can be judged
·
Achievable, so
that those responsible know that the target can be met
·
Relevant to
the aims of the business
·
Time based to
give a framework for timescale of the target
