2.1 Growing the Business- (2.1.2 only Aims & Objectives set 2 of 4)

Question 1

2.1.2 - Explain the 5 reasons businesses aims and objectives may change.

Answer 1

• Market conditions; this includes the size of the market and the degree of competition. As competitors enter and exit the market a business may need to adjust its aims and objectives, for example if a new competitor enters a business may need to change its aim to survival rather than expansion.
• Technology; as technology is constantly changing a business may adjust its aims and objectives to take advantage of new opportunities as a result of the development of a new technology.
• Legislation; a business must comply with legislation, as such if laws change a businesses aims and objectives must change to, for example if the minimum wage is increased, this might affect a business profit maximisation aim.
• Performance; This can be in relation to financial objectives such as, profit, cash flow, market share or non financial such as productivity or customer reviews. If a business meets the benchmarks it may adjust upwards, equally if a business is struggling it may review the aims and adjust appropriately.
• Internal reasons; Changes within a business can also affect the aims and objectives, this can include changes to senior positions such as the CEO who may have a different philosophy and adjust the aims and objectives, or it could refer to staff culture or attitudes of workers.

Question 2

2.1.2 - As a business evolves, explain 4 ways their aims and objectives may change?

Answer 2

• Focus on survival or growth; often in times of economic downturn a business may focus on survival, or in a period of prosperity focus on growth
• Enter or exit markets; entering new markets is a way for a business to expand but in times of survival a business may choose to leave a market, by downscaling for example also known as retrenchment.
• Grow or reduce the workforce; in times of expansion and growth the business may decide to increase the number of employees, but in times of difficulty the business may reduce the number of employees,
• Increase or decrease the product range; decreasing the product range is an example of retrenchment, and increasing the product range would be a method of expansion.

Question 3

2.1.2 - Idenitfy 6 examples of targets for a business focusing on survival.

Answer 3

1. Decrease the product range
2. Exit markets
3. Achieve a break-even level of sales
4. Improve efficiency
5. Maintain market share
6. Reduce costs; eg close stores, reduce the workforce

Question 4

2.1.2 - Idenitfy 8 examples of targets for a business focusing on growth.

Answer 4

1. Expand the product range
2. Enter new markets
3. Increase sales
4. Increase profits
5. Increase market share
6. Takeover another business
7. Open new stores
8. Increase the workforce

Question 5

2.1.2 - Define th term ‘retrenchment’.

Answer 5

Retrenchment refers to when a business downsizes it operations. This can include reducing the workforce, exiting a market, decreasing the product range or closing branches for example.