Why aims and objectives change
The objectives set at start-up in 1.3.1 do not stay fixed. A business that survived its first years no longer needs survival as its main objective, and the world around it has moved on too.
The specification names five reasons.
How aims and objectives change
The specification names four ways objectives change, and each can move in either direction.
Focus on survival or growth. The most common shift of all. A new business aims to survive; once established, it aims to grow. In a recession or after a bad year, a growing business may switch back to survival.
Entering or exiting markets. A business may enter a new market — a new region, a new country, or a different type of customer — to grow. Or it may exit a market that has become unprofitable or too competitive, to concentrate resources where it does well.
Growing or reducing the workforce. Expansion means recruiting; contraction means redundancies. Both are consequences of the objective rather than objectives in themselves.
Increasing or decreasing product range. A wider range reaches more customers and spreads risk across several products. A narrower one concentrates effort on the best sellers, reduces costs, and simplifies operations.
Worked example
A clothing business has traded profitably for six years. A recession begins and sales fall by 20%. Explain how its objectives are likely to change, and why.
- Identify the reason from the specification's list: market conditions, and performance.
- Before the recession it was established and profitable, so its objectives were probably growth, higher sales and perhaps market share.
- Falling consumer income means customers cut spending on clothes, which are not essential — so sales fall and cash flow tightens.
- The objective is likely to shift back from growth to survival.
- Say how that shows up in practice, using the specification's four ways.
Answer: Its objective is likely to shift from growth back to survival, because falling consumer income has cut sales of a non-essential product. In practice that could mean reducing the product range to concentrate on best sellers, exiting its least profitable stores or markets, and reducing the workforce — all aimed at protecting cash flow until conditions improve.
Common mistake
Changing objectives is not a sign of failure. Responding to new conditions is what a well-run business does — and an answer that treats a shift from growth back to survival as a mistake misses the point of the topic.
- Aim
- what a business is ultimately trying to achieve, such as survival, growth or profit
- Objective
- a specific, measurable target set in order to reach an aim; objectives change as a business develops and as its market changes
Before you practise
- Objectives change in response to market conditions, technology, performance, legislation and internal reasons.
- Four of those five are external; only internal reasons come from within.
- The four ways objectives change: focus on survival or growth, entering or exiting markets, growing or reducing the workforce, increasing or decreasing product range.
- Each can move in either direction — a business can shift from growth back to survival.
- The shift from survival to growth is the most common change as a business becomes established.
- Changing objectives is a sign of responsiveness, not failure.