Changes in business aims and objectives

An aim is the long-term goal a business wants to achieve, such as to grow, to survive a difficult period or to be known for excellent service. An objective is a more specific target that helps the business reach an aim. Objectives are usually measurable and have a deadline, so they turn a broad aim into something the business can plan and check.

For example, a board game café might aim to become the best-known family venue in its town within three years. One objective could be to increase weekend bookings by 20% by next March. Hitting that target moves the café closer to its aim.

Aims and objectives are not the same thing: an aim is the destination and an objective is a measurable step towards it. They are also not fixed. A business reviews and changes them as it evolves, grows or faces new circumstances. A skateboard shop that aimed to open a second store might keep that aim but change its objective from saving £6,000 for new stock to cutting delivery costs by 10% by June. A dog grooming salon that once aimed to buy a second van might later aim to offer grooming classes instead. Reviewing aims and objectives keeps them realistic and useful as the business changes.

Aims and objectives are not fixed: as circumstances change, a business reviews what it is trying to achieve and often rewrites it.

Causes outside the business

Market conditions include competition, economic conditions such as income levels, consumer lifestyles and leisure choices, demand trends or fashion, and the availability or quality of supply. When a cheaper gym opens nearby, an independent gym's plan for a second site can suddenly look unrealistic, so it switches its objective to keeping its existing members; rising demand for a new class could just as easily create an opportunity to grow.

Technology affects what a business sells, how it makes it, its costs and how it communicates. A sign-making firm whose customers now send artwork by email may set an objective to offer a design service, using new software to win work its rivals cannot do.

Legislation can ban or restrict products or practices, or add costs. New rules on displaying allergen information might lead a café to drop some dishes and set objectives for accurate labelling, changing its product range. A business may also set green objectives alongside profit as environmental law and customer expectations grow.

Causes inside the business

Business performance matters too. Falling sales and tight cash push a business to focus on survival and cutting costs, perhaps by shrinking the workforce or leaving a market, because without that it may not compete or survive. Strong profits and cash do the opposite, giving managers confidence to aim for growth.

Internal reasons come from inside: a change of ownership, leadership, size, resources, culture or priorities. New owners of a bakery may set organic sourcing and fair pay as their main aim, while a manager brought in to lead the business may put long-term survival ahead of short-term profit.

The four ways they change

Whatever the cause, the change usually appears as one of four moves: focusing on survival or growth, entering or exiting a market, growing or reducing the workforce, or increasing or decreasing the product range.

Survival means continuing to trade is the business's main priority in the short term. The aim is to keep cash coming in and cover essential costs, rather than to expand. To do this, a business may cut costs, reduce staff numbers or staff hours, reduce its product range, or leave a market where it is losing money. These actions cut spending or free up resources, which helps protect cash flow when demand is weak.

For example, a small bakery selling celebration cakes and bread might find orders fall after Christmas. It could stop making expensive celebration cakes for a few months, cut a part-time baker's hours and concentrate on bread and rolls. Sales are lower, but costs fall too, so it can keep trading until demand recovers.

Growth means the business aims to expand. It might target higher sales, a larger market share (a bigger share of the sales in its market), more output or selling in more markets, such as a second town. Growth usually needs investment, for example in equipment, staff or marketing, so the business may accept lower short-term profit in return for higher sales later.

A mobile bike repair service with steady customers might buy a second van and train an extra mechanic. Fuel, wages and training costs rise, so profit is lower this year, but it can repair more bikes and gain a bigger share of the local market.

Businesses often switch between the two. A new business may focus on survival until it has regular customers, then set growth objectives. If demand falls or competition increases, it may return to survival to protect cash flow. A survival focus is not automatically a sign of failure; it can be a deliberate, temporary choice while conditions are difficult.

Entering a new market means starting to sell in a market you did not previously serve. A business may do this because it expects the market to grow. Higher sales can raise profits, and spreading risk by selling in more than one market is called diversification.

Entering a market is not risk-free. You may be unfamiliar with customers, suppliers and rules, and you may face competition from established businesses. You may need new resources, such as machinery or skilled staff, and new marketing to attract customers, which adds to costs. For example, a bowling alley chain might enter the children's party market because demand is rising, but it must learn about party planning, train staff and advertise to parents.

A business may exit a market, meaning it stops selling there, when sales are falling, the market is shrinking, competition is too strong, the market is saturated (most customers already have the product, so sales stop growing), or the market is unprofitable. Leaving lets it focus resources elsewhere. For example, the bowling chain might leave the arcade games market because mobile games have cut demand; it can then spend money on its party rooms.

Increased competition can push prices down. Lower prices reduce the amount earned on each sale, so with costs unchanged it is harder to make a profit, and a business may exit. Technological change can also reduce sales, for example when streaming replaces DVD rentals, making another market look more profitable and encouraging an exit.

Exiting can reduce losses and free up money, staff and space. But it may involve costs, such as closing a shop or making staff redundant, and you lose sales and customers. Exiting one market does not mean the whole business closes; it may simply stop operating in that one market.

The workforce is the group of people a business employs. Its size can change when a business changes its aims, because different objectives need different amounts of labour.

Growing the workforce

A business with a growth objective may need more employees to produce extra output or serve more customers. For example, a small chain of bike repair workshops that aims to open two new sites needs more mechanics and reception staff. A larger workforce can raise output, but it also increases recruitment costs, such as advertising and interviewing, and training costs, such as teaching new staff safe working practices. These costs may reduce short-term profit even when sales are rising.

Reducing the workforce

A business focusing on survival or cost-cutting may shrink its workforce to reduce wage costs. This can happen when demand falls or when technology replaces employees. If demand falls, cash flowing into the business drops, so paying every wage becomes harder. Reducing staff can protect cash and prevent failure.

A smaller workforce can raise productivity (output per worker) if the same output is produced by fewer staff, or if machines replace people and work faster. For instance, a booking company that installs an automated system may need fewer phone staff while still handling the same number of bookings.

However, cutting jobs can create redundancy costs (payments to staff who lose their jobs), lower morale among remaining employees and lose skills that took years to build. A business must weigh lower wage costs against these drawbacks before deciding whether to grow or reduce its workforce.

A product range is the set of different products a business sells. As a business evolves, its aims and objectives may change, and it may increase or decrease its range.

Increasing the product range

A business may widen its range to satisfy demand in a growing market, because customers already want something it does not sell. A new flavour, size or colour can attract more customers. Selling several products helps spread risk: if one sells badly, the others still bring in income. Every extra product is also a chance to increase sales, as existing customers may buy more than one item.

For example, a skateboard maker might add scooters, helmets and pads. Its riders buy pads as well as decks, and parents have more gift choices.

However, a wider range raises costs and complexity: more stock to buy and store, extra equipment and more training. It can also dilute the brand if cheap items sit alongside premium ones, so customers are unsure what the business stands for, and keeping quality high is harder.

Decreasing the product range

A business may shrink its range when products are selling poorly or underperforming. Dropping them saves money tied up in stock and packaging, and lets staff focus on core products that sell best.

For example, a stationery company might stop making printed diaries once most customers use phone calendars. Dropping them frees cash and space for notebooks that still sell well.

Cutting back can reduce costs and simplify operations, but a business may lose customers and sales if shoppers take their spending elsewhere. A smaller range is not always failure: it can be a deliberate way to focus on the most profitable products.