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Business · Growing the business

Changes in business aims and objectives

A business's aims do not stay the same. As it grows, and as the world around it changes, its objectives shift - from survival to growth, from one market to many, and sometimes back again.

  • 6 key terms
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Teacher resources

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Student handouts

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Last Lesson

Answer from memory before the answers appear.

  • What is organic growth?

    Growth from within, through new products or new markets.

  • What is the difference between a merger and a takeover?

    A merger is agreed joining; a takeover is one business buying control of another.

  • Give one advantage of becoming a PLC.

    Can raise large sums by selling shares to the public.

  • Name one internal source of finance for growth.

    Retained profit or selling assets.

Learning Objectives

  1. 1Explain why business aims and objectives change as businesses evolve.
  2. 2Explain how aims and objectives change: survival or growth, entering or exiting markets, growing or reducing the workforce, increasing or decreasing the product range.
  3. 3Explain how objectives such as profit maximisation, market share and sustainability become more important as a business grows.

Aims Change as a Business Grows

A start-up's aims are rarely the same as an established business's.

  • Start-up

    Survival: winning enough customers to cover costs.

  • Established

    Profit and growth: increasing sales, opening new sites and launching new products.

  • Large business

    Market share, profit maximisation and returns for shareholders.

  • Increasingly

    Sustainability and social responsibility, as customers and shareholders expect larger businesses to behave well.

Why Aims and Objectives Change

  • Market conditions

    New competitors, changing customer tastes or a recession may force a change of direction.

  • Technology

    New technology creates new opportunities or makes existing products obsolete.

  • Performance

    A business doing well may aim to grow; one doing badly may return to survival.

  • Legislation

    New laws, such as environmental rules, can force a business to change what it does.

  • Internal reasons

    A new owner or manager, a takeover, or a change in what the owners want.

How Objectives Change

  • Survival or growth

    What it means: Switching focus between staying in business and expanding. Example: A chain closes loss-making shops to survive a recession

  • Entering or exiting markets

    What it means: Starting or stopping selling in a location or segment. Example: A retailer opens stores abroad, or pulls out of a country

  • Growing or reducing the workforce

    What it means: Hiring more staff, or making staff redundant. Example: A growing tech firm doubles its staff; a struggling one cuts jobs

  • Increasing or decreasing the product range

    What it means: Launching new products, or cutting ones that do not sell. Example: A café adds lunches; a phone maker drops unpopular models

Objectives of a Growing Business

As it grows, a business's objectives often shift towards these.

  • Profit maximisation

    Making as much profit as possible, often to reward shareholders in a PLC.

  • Market share

    Becoming the biggest business in the market, to gain power over prices and suppliers.

  • Growth

    Expanding into new locations, products and countries.

  • Sustainability

    Reducing environmental impact and behaving responsibly, which customers and investors increasingly expect.

Case study

Tesco: Entering and Exiting a Market

In 2007 Tesco, the UK's largest supermarket, entered the United States with a chain of small grocery stores called Fresh & Easy. Its objective was growth in a huge new market. But American shoppers did not take to the stores, and the business lost money year after year. In 2013 Tesco changed its objective and pulled out of the US, selling Fresh & Easy and writing off more than £1 billion. Poor performance in a new market had forced Tesco to change its aims and refocus on its home market.

2007 Tesco enters the US with Fresh & Easy
2013 Tesco exits the US after heavy losses

Changing Course

For each situation, explain how the business's objectives are likely to change and why: a café chain whose sales fall sharply in a recession; a toy company whose most popular toy is suddenly banned by a new safety law; a clothing retailer that has just been taken over by a larger rival; a small tech company whose app becomes a worldwide hit.

1. Name the reason for change.

2. Describe the new objective.

3. Say what the business will actually do.

A good answer shows: A new objective for each business, linked to the reason for change - market conditions, legislation, internal reasons or performance.

Can I...?

  1. 1Explain why a start-up's aims differ from a large business's.
  2. 2Explain five reasons why aims change.
  3. 3Explain four ways aims and objectives change.
  4. 4Explain profit maximisation, market share and sustainability as objectives.

Summary & Exam Focus

  • Aims change as a business grows and as its environment changes.
  • Reasons: market conditions, technology, performance, legislation and internal reasons.
  • Changes: survival or growth, entering or exiting markets, growing or reducing the workforce, increasing or decreasing the product range.
  • Larger businesses often focus on profit maximisation, market share and sustainability.

Exam focus

Explain one reason why a business might change its objectives. (3 marks) (3 marks)

Name the reason, then explain how it forces a change in what the business is trying to achieve - and what it will now do differently.

Key terms

The vocabulary this lesson expects you to use. Each one is linked from the first place it appears above.

Aim
A general, long-term goal a business wants to achieve.
Objective
A specific, measurable target that helps a business achieve its aim.
Profit maximisation
Aiming to make as much profit as possible.
Market share
The percentage of total sales in a market made by one business.
Sustainability
Operating in a way that does not harm the environment or use up resources for future generations.
Redundancy
When an employee loses their job because it is no longer needed.

Questions and answers

7 questions set on this lesson, with the mark schemes and model answers open.

1. Exam question State 1 mark Foundation

State one reason why a business might change its objectives.

Mark scheme — 1 mark available

  • Any one of: market conditions; technology; performance; legislation; internal reasons — 1 mark

Model answer

Changes in market conditions.

2. Exam question Outline 2 marks Foundation

Outline one way a business might change its objectives if its sales fall sharply.

Mark scheme — 2 marks available

  • A change identified, e.g. growth to survival / exit a market / reduce workforce / cut product range — 1 mark
  • Developed: what the business would do — 1 mark

Model answer

It might change its focus from growth to survival (1), for example by closing loss-making branches to cut costs (1).

3. Exam question Explain 3 marks Foundation

Explain one reason why a business might change its objectives.

Mark scheme — 3 marks available

  • A reason identified — 1 mark
  • First linked point of explanation — 1 mark
  • Second linked point of explanation — 1 mark

Model answer

A change in technology (1). New technology may make the business's existing products obsolete, so sales fall (1). The business may therefore change its objective to developing new products that use the new technology, to protect its sales (1).

4. Exam question Analyse 6 marks Core

Source: Coastline Travel PLC runs holidays to 30 countries. Last year its profit fell by 40% as rising costs and falling customer incomes hit demand. Its board has decided to stop selling holidays to eight countries and to reduce its staff by 10%. Analyse the reasons why Coastline Travel PLC has changed its objectives.

Mark scheme — 6 marks available

  • AO2 (Application, 3 marks): uses the context - 40% fall in profit, 30 countries, exiting eight, 10% staff cut — Level 1-3
  • AO3a (Analysis, 3 marks): chains of reasoning explaining why the objectives changed — Level 1-3

Model answer

Coastline's performance has worsened: profit fell by 40%, so its objective has shifted from growth towards survival and protecting profit. Stopping holidays to eight countries means exiting the least profitable markets, which cuts costs and lets it focus on its most popular destinations. Market conditions are also a reason. Rising costs and falling customer incomes mean fewer people can afford holidays, so demand has fallen. With fewer customers, Coastline needs fewer staff, which is why it is reducing its workforce by 10%. This lowers its wage costs so it can stay profitable until demand recovers.

5. Multiple choice 1 mark Foundation

Which objective is a brand-new business most likely to have?

  1. A Survival Correct
  2. B Becoming a PLC
  3. C Maximising market share worldwide
  4. D Taking over its rivals

Why: New businesses usually aim first to survive.

6. Multiple choice 1 mark Core

A business stops selling in a country where it is making losses. This is:

  1. A Entering a market
  2. B Increasing the product range
  3. C Exiting a market Correct
  4. D Growing the workforce

Why: Stopping selling in a location is exiting a market.

7. Multiple choice 1 mark Stretch

Which is an INTERNAL reason for objectives to change?

  1. A A new law on packaging
  2. B A recession
  3. C A new competitor
  4. D A new owner with different priorities Correct

Why: A new owner or manager is inside the business; the others are external.