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Level 1
Business Studies
1.1 - AS90837
Demonstrate an understanding of internal
factors of a small business
Aims and Objectives
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Aims show what a business
is trying to achieve in the long
term.
Aims and Objectives

Objectives are used to highlight how those aims
are going to be achieved. Objectives can be in
the form of targets, for example:
1.
selling more products or providing more services than a
competitor;
selling more products or providing more services than in
the previous year;
producing new goods or providing a new service;
2.
3.
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Setting Objectives
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In most businesses, the owners decide on the
objectives for the business.
When a business first starts trading it has few loyal
customers and no reputation. The most likely objective
for a start up business is simply survival.
As the business grows and begins to win market share,
the aim may shift towards expansion and/or increasing
profits.
Some owners have a vague idea
about their objectives. The best
types of objective are SMART.
Objectives – other examples
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Maximise profit
Be the biggest in the market
Provide the highest quality product possible
Maximise sales and wealth creation
Maintain market share or a reasonable income
Expand the business
Limit environmental damage
Contribute to community groups / organisations
SMART Objectives
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Sometimes a business will use SMART objectives. A
SMART objective will have to comply with the following
points:
Specific - you should know when an objective has been
reached by making it as definite as possible;
Measurable - you should be able to measure whether
the objective has been achieved;
Attainable - the target must be possible to achieve;
Relevant - it should form part of the business's overall
aim;
Time-related - the objective should be achieved in a
specified time period.
SMART Objectives (continued)
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An example of a SMART objective is 'to increase profits
by 10% within the next 12 months'.
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SMART objectives allow the performance of a business
to be assessed.
Stakeholders
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While owners have a major say in deciding the aims of a
business, other interest groups called stakeholders are
usually considered.
Stakeholders are any group of people interested in the
activities of the business - they could be managers, staff
or customers.
When owners sacrifice some
profit to pay staff an annual
bonus, this is an example of
stakeholder consideration.
Qualitative Objectives
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Qualitative objectives cannot be easily measured
because they refer to quality rather than quantity.
The business may simply have to state how it is doing in
achieving the objective rather than saying that 50% or all
of it has been completed.
Examples of qualitative
objectives are on the next two
slides:
Qualitative Objectives
(continued)
1.

Customer satisfaction - it is very difficult to say whether
or not a consumer is satisfied. Some businesses try to
measure customer satisfaction by:
- counting how many customers return in the future,
- by sending out questionnaires or
- they will monitor the number of complaints they receive.
Once this has been done it is possible to set measurable
objectives for the future, for example reducing the
number of complaints by 10%.
Qualitative Objectives
(continued)
2.
3.
Being socially aware - many businesses have an
objective to become more socially or environmentally
aware in their treatment of workers, suppliers or
customers. It is very difficult to measure for example,
whether the price you pay to workers in a developing
country is a fair one.
Developing a good reputation - many businesses want
to build up a good reputation for
supplying a particular good or service.
Again there are difficulties in measuring
what customers think of you.
Conflicting Objectives
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Although the groups within a business may all agree with
the aims of the business, they may disagree about how
to achieve them.
For example, a business who wishes to become more
efficient; the managers may wish to set an objective of
introducing more automisation, whereas
the worker would want an objective of
increasing training as automisation
would lead to redundancies.
Conflicting Objectives
(continued)
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Another conflict may arise between owners and
managers.
The owners would want the business to make as much
profit as possible, whereas the managers would want to
enjoy many expensive perks (company cars and longer
holidays for example) that would reduce the profit of the
business.
Why Business Objectives Change
1.
2.
An economic recession can cause a business to
change its objectives
The aim of a business can change over time. This can
happen in response to internal
factors, such as business growth,
or in response to external factors,
such as an economic recession.
Why Business Objectives Change
(continued)
3.
4.
A small start up business may aim to survive in the first
year. Once successful, the business then sets itself the
objective of increasing profits or growing in size.
Alternatively, a profitable business that is hard hit by an
economic recession may struggle to
maintain the same level of output.
Faced with declining sales, a
business may change its objective
from growth or making a profit,
to simply surviving.