Notes

Friday/11/09/20
Lesson 1: Business Objectives
LO1: Why are objectives important for a business?
LO2: Can it be argued that the most successful corporate objectives are SMART?

An aim of a business is what a business wants to achieve in the long term. Aims tend to be general and some examples could be;
“To make people happy”
“To benefit and refresh everyone who is touched by our business”
“To be the undisputed leader in world travel”

A mission statement is a brief statement written by the business of its purpose and its objectives, designed to encapsulate its present operations. An effective mission statement should answer the following;
What do we do?
For whom do we do it?
What is the benefit?

The objectives of a business are the goals or targets that need to be met in order to achieve an aim. For example, a business might aim to grow and set annual sales targets as objectives to help achieve it.

A business needs aims and objectives because companies give themselves a sense of purpose and direction. This provides a framework around which to create their p[lans. With an overall plan in place, a company can set particular targets and monitor its progress towards reaching them.

A business’ objectives need to be SMART to measure the performance of a business.
Specific
Measureable
Agreed
Realistic
Time specific

Business survival as an objective
The business in the first year may just have survival as the objective while it builds a customer base and establishes itself in the market.
The objective is to reach a sustainable level of sales that allows the business to reach its break-even point.

Profit maximisation is the aim of most businesses, because it will give them the capital needed to expand and to grow the business.

Profit maximisation will enable the business to replace any old machines or equipment.
Sales maximisation
Profit figures tend to be annually so sales figures can be examined on a daily, weekly or monthly basis.
Managers find sales figures more satisfying as targets as profits go to owners and salaries are often linked to sales levels.
Anyone interested in investing in the business may want to see the sales data and judge it as an indicator of performance.
Often found in a sales drive environment like an estate agent or a car dealership.

Market share
Market share is the % of a market that a business has, either in revenue or in units sold.
This may be an objective in a very competitive market where consumers switch between suppliers.
Very important for investors to judge how a business is doing against competitors Loss in market share can be an indicator of long-term serious financial problems.

Cost efficiency
The most common objective in transport and construction industries where goods and services make up 70% of the cost of a project is to achieve cost efficiency.
Cost efficiency can be achieved by; paying minimum wage to unskilled workers, subcontracting where economically viable, lean production or construction where material, time and process waste is eliminated to save costs, increase the perceived value of the product through strong branding and lower the quality and the price of the product.
Lowering the average costs means economies of scale.






Employee welfare
Some businesses seek harmonious relations with their workforce as an objective, and they aim to achieve this through employee welfare.
Employees that are satisfied are loyal and hard working, they have increased morale, motivation and productivity
The business also benefits from an enhanced public image as a good place to work – which makes recruitment easier

Customer satisfaction
This objective is common in service industry and the coffee corner shop competitive market
A customer centred approach will:
Ensure repeat sales
Create brand loyalty to prevent customers from switching to similar brands
Satisfied customers will tell others and reputation and word of mouth are very cheap ways of highly effective marketing to improve sales

Social objectives

Social objectives are also known as corporate social responsibility or CSR objectives

This may involve:
Reducing impact on the environment
Fair wages in developing countries
Helping society
Compliance with laws to minimise externalities like operating sensible hours so not as to noise pollute the local community

May be the USP of the business

May be to improve corporate image




















Tuesday/15/09/20
Lesson 2: Demands

Factors leading to a change in demand:
changes in the prices of substitutes and
complementary goods
changes in consumer incomes
fashions, tastes and preferences
advertising and branding
demographics
external shocks
Seasonality

Changes in prices of substitute goods
Many goods sold by businesses have substitutes. Eg. Starbucks coffee can be replaced by Costa coffee and even other types of hot drinks like tea.

Changes
Customers sometimes purchase certain goods together because they go together. E.g If Starbucks started charging for milk and sugars then the demand would probably drop.

Changes in consumer incomes:
The number of available income consumers have will affect the demand for money products. If incomes decrease then the demand for Starbucks would go down

Fashion Tastes & preferences:
Over a period of time demand patterns change because of current trends. Starbucks has franchises in many countries across the world and therefore adapts to the tastes of the country it is trading in.

Advertising and branding:
Businesses try to influence demand for their products through advertising and other forms of promotions. Starbucks has become a strong brand across the world which affects the demands of its products.

Demographics:
Demand is affected by the size of the population and aspects of the structure such as age distribution, gender patterns, ethnic groups and geographical distribution. Starbucks is usually located in urban areas where many people live and work.

External shocks:
Factors beyond the control of the business can have an impact on the demand for products such as competition, government, economic climate/social/environmental factors. Starbucks has been impacted by pressure groups on the environment and fair trade in recent years.

Seasonality:
Some goods have seasonal demand. Hot drinks will be more popular in colder seasons.
Friday/18/09/20
Lesson 2: Demands
Factors that affect supply:
Selling price
Changes in the costs of production
Introduction of new technology
Government subsidies
Indirect taxes
External shocks

Selling price
The selling price influences the supply of the product as this has a high impact on profit for the suppliers. If the customers are unwilling to pay a high price for the product the profit margin will be low.

Changes in the costs of production
The supply of any product is influenced by the costs of production such as wages, materials, energy rent and machinery. If products costs rise sellers are likely to reduce supply.

Introduction of new technology
When new technology becomes available many businesses will start using it in their production processes. New technologies are more efficient than all the technology and will help to lower production costs encouraging the firms to offer more sales.

Government subsidies:
Sometimes the government may give money to businesses in the form of a grant. This is called a subsidy. Subsidies may be given to firms to try and encourage them to produce a particular product

Indirect taxes:
Indirect taxes or taxes imposed by the government on spending. VAT and excise duties, such as those levied on petroleum and tobacco, are examples of indirect taxes.

External shocks:
Factors beyond the control of businesses can have an impact on the supply of products such as world events, weather, government and price of related goods.