Why do businesses set aims and objectives?

Business set aims and objectives to:provide directionallocate resourcesmeasure successimprove performancemotivate employees

Business Aims and Objectives

Q: What are the aims and objectives of business?

Business aims and objectives provide a clear direction for the company and help in setting priorities and goals, as well as making informed decisions.Business aims are the broad, general goals that summarize what a company wants to achieve, while business objectives are specific, measurable targets that help a company achieve its aims.

Q: What is the difference between aims and objectives in business?

Business aims are more broad, general statements that summarize what a company wants to achieve, while business objectives are more specific, measurable steps that help a company accomplish its aims.

Business Case Studies

Business Development

Business Operations

Change Management

Financial Performance

Human Resources

Influences on Business

Introduction to Business

Managers

Nature of Business

Operational Management

Organizational Behavior

Organizational Communication

Strategic Analysis

Strategic Direction

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People with goals succeed because they know where they are going...It's as simple as that."

- Earl Nightingale

As with people, successful businesses also have clearly defined aims and objectives. Let's take a look at what these are exactly and why it is essential for businesses to have them.

Business aims and objectives definition

Business aims and objectives help guide a company's decisions and play a big part in deciding if the business will be successful.

Business aims are the broad, general goals that summarize what a company wants to achieve, while business objectives are specific, measurable targets that help a company achieve its aims.

Together, business aims and objectives provide a clear direction for the company and help in setting priorities and goals, as well as making informed decisions.

Setting business aims and objectives

If business objectives are specific and measurable targets that help achieve business aims, we can consider them as steps taken by a company to reach its business aims. Objectives guide the next step to be taken to move closer to the company's aim. Objectives are also measured to make sure that all the right steps are orderly executed to achieve the aims.

To help managers and employees develop, manage and track objectives the right way, they create SMART objectives. This is a smarter way of creating objectives as it helps to put together an action plan, increase productivity, and track progress. SMART is an acronym that stands for Specific, Measurable, Achievable, Relevant, Time-oriented.

Business Aims and Objectives, SMART objectives, StudySmarter SMART Objectives for Businesses, StudySmarter

Examples of aims and objectives

Financial aim - make a profit of £24,000 by the next financial year.

The objective for this aim would be: make profits of £2,000 for the next 12 months.

Financial aim - increase revenue in the next five years.

Objectives for this aim would be as follows:

Increase product awareness
Acquire new customer
Create or improve digital platform
Increase conversion rate
Reduce overhead costs

Non-financial aim - Become the most sustainable company in the industry.

Objectives for this aim would be as follows:

Use recycled raw materials
Use production methods that reduce CO2 emissions

Some common aims and objectives

Some of the common financial aims and objectives are:

Increase revenue
Increase profit margins
Earn a return on investment
Attain financial stability

Some of the common non-financial aims and objectives are:

Employee satisfaction
Customer satisfaction
Social responsibility
Relation with suppliers

Importance of business aims and objectives

Setting business aims and objectives is important for a couple of reasons:

It provides clarity of direction, helping to prioritise efforts and allocate resources effectively.
It helps measure company's success, allowing to track progress and make better decisions
It increases motivation of the employees, by helping them understand long-term goals
It improves decision-making process at all levels of the organisation.

In conclusion, setting aims and objectives is a critical part of effective business management. It provides direction, focuses efforts, and drives continuous progress, helping businesses to attain their goals and succeed in the long term.

Advantages of setting aims and objectives

Setting aims and objectives are very important for a company, as it is a key component in ensuring success. It guides the course of action and helps to keep employees focused and act responsibly. It ensures clarity within the whole organisation. It also has many other advantages.

Providing direction

A set aim guides a company and its employees in making the right decisions. It directs the company in the right manner.

Business planning

A goal or aim helps to understand what the right next step is. It helps in planning every step of the business.

Employee motivation

Having a goal to reach can improve employee motivation. It can be further improved by having an incentive system in place for the first employee to reach an objective.

Less stress

Having set objectives gives employees a means to measure how much they have done and keep track of their performance. This helps to avoid unnecessary stress which employees face when they are unaware of their overall performance rate.

Less wastage of time

Setting steps (objectives) to accomplish an aim helps to achieve the aim faster. Setting objectives tells an employee exactly what is to be done next, and this saves a lot of time and prevents the employee from performing any unnecessary tasks.

Business aims and objectives examples

Let's take a look at some examples of business aims and objectives for Amazon.

Examples of Amazon's business aims:

Be the world's most customer-centric company
Increase market share in e-commerce and become number-one company in the world
Constantly improve customer experience through innovation

Examples of Amazon's business objectives:

increase Prime membership by 10% in the next year
launch two new products every year
expand the international delivery network

As you can see, each objective helps to achieve the different business aims of the company. Of course, in reality, the relationships between goals and objectives are more complex.

Business Aims and Objectives - Key takeaways

Business aims are the long-term goals a company sets for itself.
Business objectives are steps taken by a company to achieve its business aims.
Objectives should be specific and measurable.
Aims and objectives can be financial or non-financial.
Setting aims and objectives guides a company’s course of action.

Frequently Asked Questions about Business Aims and Objectives

Business aims and objectives provide a clear direction for the company and help in setting priorities and goals, as well as making informed decisions.

Business aims are the broad, general goals that summarize what a company wants to achieve, while business objectives are specific, measurable targets that help a company achieve its aims.

Providing direction, business planning, employee motivation, less stress, and less wastage of time are the advantages of setting business objectives.

An example of a business objective of a service company could be to increase customer satisfaction ratings from 3/5 to 4/5 in the next 6 months.

Usually, objectives should be related to business aims. For example, an increase in customer satisfaction helps to achieve the aim of creating a welcoming and friendly atmosphere.

The following are some of the challenges of setting business aims and objectives:

Goals are too high to achieve.
Difficulty adapting to change.
Stress on employees.
Unequal allocation of goals.

Business aims are more broad, general statements that summarize what a company wants to achieve, while business objectives are more specific, measurable steps that help a company accomplish its aims.

Business set aims and objectives to:

provide direction
allocate resources
measure success
improve performance
motivate employees

Final Business Aims and Objectives Quiz

Business Aims and Objectives Quiz - Teste dein Wissen

Question

List at least 4 advantages of setting aims and objectives.

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Answer

1) Provisioning direction

2) Employee motivation

3) Business planning

4) Less stress

5) Less wastage of time

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Question

Which of the following means long-term target?

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Answer

Company mission

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Question

Which of the following is a financial aim?

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Answer

Increase revenue by 40% in the next 5 years.

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Question

Which of the following best describes an aim?

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Answer

Long-term goal, a short statement written in broad terms

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Question

What is marginal revenue and what is the formula to calculate it?

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Answer

Marginal Revenue (MR) is defined as the change (increase) in total revenue by producing one additional unit of output.

Marginal Revenue = Change in Revenue / Change in Quantity

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Question

What are the revenue taxes used for?

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Answer

Revenue taxes are spent on social security, medical aid, child nutrition programmes, house assistance, and several other welfare programmes.

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Question

What are non-tax revenues?

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Answer

Non-tax revenue is paid by the population to the Government for Government-offered services and is a mandatory tax.

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Question

Why are revenues also referred to as 'top line'?

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Answer

The revenue appears at the top of the income statement, as it is the amount before deducting the taxes, expenses, and costs. Therefore, it is known as the 'top line'.

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Question

Name the sources of tax and non-tax revenues.

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Answer

Sources of tax revenue - corporate tax, payroll taxes, individual income taxes, etc.
Sources of non-tax revenue - electricity, police and municipal services, etc.

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Question

What is tax revenue?

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Answer

Tax revenue is the revenue received through taxation. It is the primary source of income for the Government.

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Question

What is the highest source of income for the Government?

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Answer

Corporate tax is the government’s biggest source of income.

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Question

Under which level of profits does the operating profit fall?

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Answer

The second level of profit

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Question

How are profits used?

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Answer

Profits are either taken by the owners themselves or used towards the company’s growth. Generally, a mature company’s profits are distributed as dividends and that of a fairly new company is used for the company’s growth.

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Question

Which level of profit is indicated by the gross profit?

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Answer

The first level of profit.

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Question

What is the definition of net profit and what is the formula to find it?

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Answer

The net profit reflects the residual income of the company after all the expenses and costs are deducted from the revenue.

Net profit = Total revenue - Total expenses.

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Question

State the formula for calculating the operating profit.

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Answer

Operating profit = Gross profit - Operating expense - Depreciation - Amortisation.

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Question

Give an example of gross profit.

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Answer

When a company makes a total sale of €70,000 by selling 50 wooden tables which cost them €20,000 for production, their gross profit is:

€70,000 (Sales) - €20,000 (Cost of goods sold) = €50,000 (Gross profit).

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Question

What is the formula for calculating gross profit?

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Answer

Gross profit = Sales - Cost of goods sold

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Question

Give an example of net profit.

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If a company has a total revenue of €500,000, and the total expenses of €240,000 ( Salary expense = €180,000, Operating expense = €52,000, Tax expense = €28,000), their net profit is:

€500,000 (Total revenue) - €240,000 (Total expense) = €260,000 (Net profit).

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Question

What is an example of operating profit?

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Answer

If a company has a gross profit of €300,000, operating expenses of €15,000, the amortisation is €20,000 and the depreciation of the required machinery is €10,000, then the operating profit is:

€300,000 (Gross profit) - €15,000 (Operating expense) - €20,000 (Amortisation) - €10,000 (Depreciation) = €255,000 (Operating profit).

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Question

Name the type of cost that has already occurred and can not be retrieved in the future.

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Answer

Sunk costs

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Give an example of a semi-variable cost.

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Answer

Electricity - the base is a fixed cost, but later the cost varies as per consumption.

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How is the direct cost different from the variable cost?

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Answer

Direct costs are only considered when the firm produces more than one product.

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Question

Revenue depends on the number of ___ an organisation sells and its selling price.

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Answer

items/services

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Question

It is the change (increase) in total revenue by producing one additional unit of output. What is it?

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Answer

Marginal Revenue

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Question

___ revenue includes the revenue that a company earns from its primary activities such as sales.

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Answer

Operating

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Question

Income is always higher than revenue.

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Answer

False

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Question

The tax that is levied on individuals or businesses by the Government is called...

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Answer

income tax.

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Question

This type of tax is the Government’s biggest source of income. What tax is it?

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Answer

corporate tax

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Question

A company sold 500 units of their product for £2 each. What is their revenue?

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Answer

£1,000

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Question

Income is the amount of money remaining from revenue after the subtraction of expenses.

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Answer

True

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Income and revenue are the same thing.

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Answer

False

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Question

___ the amount of revenue earned by the firm per unit of good/service sold.

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Answer

Average revenue

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Question

This type of revenue includes the revenue that a company earns from its primary activities such as sales. What type of revenue is it?

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Answer

Operating revenue

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Question

Operating revenue is revenue that a company earns from activities other than its primary activities.

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Answer

False

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Question

What does GST stand for?

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Answer

Goods and Service Tax

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Question

GST in the UK is 20 percent.

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Answer

True

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Question

If a product's price is £100, a GST of 20 percent is added, resulting in a calculated net price of...

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Answer

£120

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Question

___ is received by Government through non-tax related activities, like the profits of a Government-run organisation.

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Answer

Non-tax revenue

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Question

Corporate tax, payroll taxes, individual income taxes, etc. are sources of tax revenue.

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Answer

True

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Question

The higher the number of sales and selling price, the lower revenue.

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Answer

False

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Question

Cost is defined as the ___ value spent by a company for the production of products and operating the business.

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Answer

monetary

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Question

Administration cost and the cost of electricity in the office are direct costs.

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Answer

False

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Question

This represents the cost given up by the firm for choosing an alternate option. What type of cost is it?

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Answer

Opportunity cost

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Question

When it comes to electricity, the base is a fixed cost, but later the cost varies as per consumption. That is why electricity is a ___ cost.

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Answer

semi-variable

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Question

Which of these is a fixed cost?

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Answer

Rent

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Question

Which of these is a variable cost?

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Answer

Cost of packaging

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Question

The sum of the fixed, variable, and semi-variable cost for a particular level of output is called...

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Answer

total cost.

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Question

This is a cost that has already occurred and cannot be retrieved in the future.

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Answer

Sunk cost

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Question

When the output is zero, the total cost is equal to the fixed cost.

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Answer

True

Show question

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Business Aims and Objectives

Business Aims and Objectives

Business Aims and Objectives

Business aims and objectives definition

Setting business aims and objectives

Examples of aims and objectives

Some common aims and objectives

Importance of business aims and objectives

Advantages of setting aims and objectives

Providing direction

Business planning

Employee motivation

Less stress

Less wastage of time

Business aims and objectives examples

Business Aims and Objectives - Key takeaways

Frequently Asked Questions about Business Aims and Objectives

What are the aims and objectives of business?

What are the advantages of setting business objectives?

What is an example of a business objective?

What are the challenges of setting business aims and objectives?

What is the difference between aims and objectives in business?

Why do businesses set aims and objectives?

Final Business Aims and Objectives Quiz

Business Aims and Objectives Quiz - Teste dein Wissen

More explanations about Nature of Business

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