Unit 7: Business Decision Making

Aims and objectives are stated goals and visions a business aims to achieve. They lay a foundation for all planning and strategy to set a clear and focused direction of all business decisions.

Aims are the long term goals that a business aims to achieve. They are usually broad and represent the overall vision of the organisation. Aims support decision making as they provide a focus for all initiatives to align with.

An example of a business aim at Amazon is, “To be the Earth’s most customer-centric company”.

Objectives are the specific and measurable steps that a business needs to take to meet its long term aims. They give employees clarity on what to focus on and allow the organisaiton to track performance against planning.

An objective at Amazon to support their aim could be, "Increase the accuracy of personalised product recommendations by 15% within the next 6 months, as measured by the click-through rates on recommended items."

Typical Aims and Objectives

Profit Maximisation

Profit maximisation aims to achieve the highest possible profit margin by increasing sales revenue or reducing costs. Profit maximisation has the benefits of increasing shareholder value and satisfaction, attracting future investments, and financial resources to fund growth and providing a buffer for economic downturns.

For example, "Increase net profit margins by 10% within the next fiscal year by reducing operational costs through efficiency improvements."

Sales Maximisation

Sales maximisation aims to increase total volume of sales (units sold), even at the expense of reduced profit margins. This strategy may be used by firms penetrating new markets, clearing excess inventory, operating in an off peak season or time or operating in very competitive markets. Sales maximisation has the benefits of increased market share, increased brand recognition and economies of scale. 

For example, "Achieve a 15% increase in total units sold by the end of Q3 through prices reductions."

Market Share

Market share refers to the percentage of an industry's sales that a particular company controls. Strategies to enhance market share may include aggressive marketing, competitive pricing, and product differentiation. Higher market shares have the benefits of increased bargaining power with suppliers, brand recognition, customer loyalty, improved reputation and economies of scale.

For example, "Expand market share by 5% in the North American region within 12 months by introducing two new product lines and enhancing distribution channels. 

Brand Recognition

Brand recognition is how well consumers can identify a brand through its logos, slogans, and colors. It helps create awareness and familiarity, leading to customer loyalty. Companies invest in marketing, public relations, and social media to improve their brand visibility and stand out from competitors.

For example, "Increase brand awareness by 25% by the end of Q4, as measured by social media engagement and website traffic."

Product Development

Product development is the creation new products or improvements made to existing ones to better meet customer needs. This involves investment into research, design and testing. This is essential to adapt to changing customer preferences allowing businesses to remain competitive. 

For example, "Launch three new products within the next 18 months, achieving at least 20% of total revenue from these new products within the first year of their release."

Market Development

Market development aims to expand a company’s presence in new markets or customer groups. This can involve entering new locations such as different countries or targeting different demographics. Strategies include market research, forming partnerships with firms in those markets, and adapting the marketing mix for different markets.

For example, "Enter two new international markets with individualised product ranges by the end of Q2."

Diversification

Diversification involves selling new goods and services to new customers. This strategy creates a broad product portfolio and involves adapting marketing strategies dependent on the target group. This strategy spreads risks as it reduces vulnerability to market fluctuations. 

For example, "Introduce a new product aimed towards pensioners within the next six months, aiming to generate 15% of overall revenue from this service within its first year."

Efficiency Savings

Efficiency savings aim to lower operational costs without changing the final product. This can be achieved through adapting processes, use of technology or training. Efficiency savings can boost profitability without compromising the quality of their products or services.

For example, "Reduce production costs by 8% by Q2 through Kaizen management approaches."

Growth

Business growth aims to increase size, measured by employees, revenue, market share, asset value, or output. Strategies include expanding products, boosting marketing, or mergers. Benefits of growth are economies of scale, higher revenue, and improved brand recognition.

For example, "Increase the workforce by hiring 20 new employees within the next 12 months to enhance operational capacity and improve service delivery."

What is the link between a business vision, aims and objectives?

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