REVISED GCSE

FACT FILES
Unit 2:
The Business Environment
For first teaching from September 2009
For first award in Summer 2011

Business Aims and

Objectives
Aims and Objectives
Learning Outcomes
At the end of this unit students should be
able to:
demonstrate and apply knowledge and understanding
of business aims;
explain how the aims of a firm affect its activities;
compare the aims of public and private sector
organisations; and
analyse how the aims of social enterprises differ from
other business sector organisations.
Setting the Scene
Volkswagen
Volkswagen is the world’s second largest car maker, and is
the firm which owns the Audi, Lamborghini and Bentley
brands. In 2007 it sold a record 6.2 million cars and boosted
profits by 40% to reach £4.7bn. In recent years it has been
expanding into emerging markets
and has improved its market share
in Europe.
Volkswagen said it expects growth
to continue in 2008, with nearly all
brands bringing out new models.
“We expect deliveries to customers
to exceed the record set in 2007 with
sales figures rising in the Asia-Pacific
and central and Eastern Europe
regions in particular,” the company
said in a statement. The company aims to overtake Toyota
as the world’s leading car manufacturer in the next ten
years.
Aims and objectives
A business aim is a goal that a
business wants to achieve, e.g. to
increase sales whereas a business
objective is the stated measurable
target of how to achieve these aims,
e.g. to increase sales in NI by £5mn.
Each individual business will
have its own particular aims and
objectives however the most
common aims of private sector
firms are:
Survival
Statistics suggest that a large proportion of new businesses
fail within the first 12 months, therefore when a new
business first starts operating, its main aim is likely to be
survival. To survive all a business has to do is ensure that it
breaks even, in other words it must ensure that the money it
receives from selling its products is at least enough to cover
its outgoings.
If a business can survive in the short term then it may be
able to set alternative long term aims such as growth or
increasing profit.
Profit Maximisation
Profit maximisation or profit growth is the primary aim of
most private sector organisations such as Volkswagen.
To calculate the level of profit, Volkswagen will subtract
the cost of producing cars from the revenue received from
selling them. The case study above shows that Volkswagen
increased profits by 40% in 2007 to reach a total of £4.7bn
The owners of Volkswagen, the shareholders, will want the
business to make as much profit as possible since it will
mean higher dividend payments for them. They will also
want the firm to maximise profits so that they can reinvest
some of these profits to help the business grow.
Growth
For many firms the main objective
is to increase the level of sales
or market share. Firms set this
aim because they believe that
the best way to achieve greater
profits is to achieve greater sales.
For example one of Volkswagen’s
aims is to grow the business over
the next ten years and overtake
Toyota as the world’s largest car
manufacturer.
Improving the corporate image
For larger companies a very common aim is to improve
the image of the company, the brand or the product.
Firms such as Volkswagen often spend huge amounts of
money sponsoring charitable or sporting events. While
this sponsorship can be very expensive and therefore can
reduce profits it is carried out in the hope that the firms
image will be enhanced as a result which should ultimately
lead to a greater level of sales.
Concern for the environment
In recent years consumers have become more aware of
the impact of production on the environment. In order to
appeal to these consumers, firms have begun to place a
greater emphasis on environmental aims such as reducing
packaging or reducing their carbon footprint. For example,
Volkswagen has begun production of the Polo BlueMotion
which has the lowest Co2 emissions of its class. Again it is
hoped that showing concern for the environment in this
way will lead to higher sales and therefore greater profits.
Case Study
Green is the new gold in IT world
Hi-tech companies are competing on a new front - to
become the greenest business.
A year after pledging to become the greenest company on
the planet, computer maker Dell has introduced measures
aimed at claiming the “green crown”. Dell is the first
hi-tech vendor to reach a milestone in energy efficiency
by offering goods that use less power under the EPA’s
Energy Star standard. It is also boasting a new record in
recycling 46,000 tonnes of IT equipment from customers
in 2007, a 20% increase on the previous year. Dell says it is
saving roughly $2m a year through operational efficiency
improvements.
(Adapted from BBC News June 2008)
1. Explain the difference between an aim and an objective.
2. Why might winning the “green crown” be likely to
increase Dell’s sales?
3. What impact would going green be likely to have on
Dell’s costs?
Alternative business aims
The discussion above focused on the most common
aims for private sector organisations, however, there are
alternative forms of business enterprise which will have a
very different set of aims and objectives.
Public sector organisations
Businesses in the public sector are set up with the aim of
providing a public service rather than with making a profit
or increasing sales. Organisations such as the NHS do not
aim to make a profit but rather provide a high class health
system which is based on clinical need rather than on the
ability to pay.
Social enterprises
Social enterprises are private organisations that are run
along business lines, but where any profits are reinvested
into the community, or into social or environmental projects.
Examples of social enterprises include cooperatives, credit
unions and housing associations. These businesses are
run like any other commercial business however all profits
earned by the business go back to the business to help
achieve its social or environmental objectives.
 Activity Revision questions

Fifteen 1. Explain the difference between a business aim and a

business objective.
In 2002, celebrity chef Jamie Oliver combined two
2. Explain how a firm such as Volkswagen would calculate
ambitions: to open a top class restaurant and to give
profit.
disadvantaged youngsters the chance to gain professional
3. What is the most likely short term objective for new
training that would set them up for life. He set up the
businesses?
Fifteen Foundation and opened the first Fifteen restaurant
in London. The restaurant was staffed entirely by young 4. How do the aims of public sector organisations differ
disadvantaged people who had been trained as part of from those of private sector organisations?
Jamie’s TV show. 5. How do the aims of a social enterprise differ from those
of private sector firms?
Fifteen was set up as a social enterprise, not a privately
owned business, so all profits generated by the restaurant
go straight back into the scheme to help train other
disadvantaged young people. Jamie Oliver is one of nine
trustees of the Foundation and, as with all board members,
has no financial interest in the business. Fifteen is now one
of London’s most popular and successful restaurants and
the foundation has opened further restaurants in Cornwall,
Amsterdam and Melbourne.

1. What is a social enterprise?

2. How do the aims of a social enterprise differ from those
of a PLC?
3. What happens to the profits made by the Fifteen
Foundation?

Key Terms
• A business aim is a goal that a business wants to achieve,
e.g. to increase sales.
• A business objective is the stated measurable target of
how to achieve a business aim, e.g. to increase sales in NI
by £5mn.
• Public sector organisations are businesses set up with
the aim of providing a public service rather than making
a profit.
• Social enterprises are private organisations that are run
along business lines, but where any profits are reinvested
into the community or into social or environmental
projects.