EDEXCEL GCSE BUSINESS · PAPER 2
Changes in business aims and objectives
Growing the business · Lesson 2 of 4
Teacher copy - includes the notes for whoever is teaching from it.
Last Lesson
Answer from memory before the answers appear.
1. What is organic growth?
Growth from within, through new products or new markets.
2. What is the difference between a merger and a takeover?
A merger is agreed joining; a takeover is one business buying control of another.
3. Give one advantage of becoming a PLC.
Can raise large sums by selling shares to the public.
4. Name one internal source of finance for growth.
Retained profit or selling assets.
Learning Objectives
1. Explain why business aims and objectives change as businesses evolve.
2. Explain how aims and objectives change: survival or growth, entering or exiting markets, growing or reducing the workforce, increasing or decreasing the product range.
3. Explain 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
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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. |
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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. |
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Internal reasons A new owner or manager, a takeover, or a change in what the owners want. |
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Deciding a New Direction
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In a large business, the directors review the business's objectives regularly. A strong year might lead them to aim for new markets; a weak one might mean closing stores and focusing on profit. |
As a business grows, its directors regularly review and change its objectives. |
PART ONE
How Aims and Objectives Change
Four ways a business changes direction.
How Objectives Change
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Change |
What it means |
Example |
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Survival or growth |
Switching focus between staying in business and expanding |
A chain closes loss-making shops to survive a recession |
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Entering or exiting markets |
Starting or stopping selling in a location or segment |
A retailer opens stores abroad, or pulls out of a country |
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Growing or reducing the workforce |
Hiring more staff, or making staff redundant |
A growing tech firm doubles its staff; a struggling one cuts jobs |
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Increasing or decreasing the product range |
Launching new products, or cutting ones that do not sell |
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
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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. |
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2007 Tesco enters the US with Fresh & Easy |
2013 Tesco exits the US after heavy losses |
Key Terms
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Aim A general, long-term goal a business wants to achieve. |
Objective A specific, measurable target that helps a business achieve its aim. |
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Profit maximisation Aiming to make as much profit as possible. |
Market share The percentage of total sales in a market made by one business. |
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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. |
Your Task: Changing Course
10 minutes
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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.
Note: Encourage specific changes - "close loss-making branches" rather than "survive".
Can I...?
☐ Explain why a start-up's aims differ from a large business's.
☐ Explain five reasons why aims change.
☐ Explain four ways aims and objectives change.
☐ Explain profit maximisation, market share and sustainability as objectives.
Summary
✓ 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.
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EXAM FOCUS Explain one reason why a business might change its objectives. (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. |
Exam Practice: Changes in Aims and Objectives
Answer all questions. Use the context of the business in the question where one is given. · 20 minutes
▸ Question 1 · 1 mark · State. State one reason why a business might change its objectives.
▸ Question 2 · 2 marks · Outline. Outline one way a business might change its objectives if its sales fall sharply.
▸ Question 3 · 3 marks · Explain. Explain one reason why a business might change its objectives.
▸ Question 4 · 6 marks · Analyse. Analyse the reasons why Coastline Travel PLC has changed its objectives.
Question 1 · 1 mark · State
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“State one reason why a business might change its objectives.” |
HOW TO ANSWER IT Command word: State. Worth 1 mark, so plan before writing.
Question 1 · mark scheme
1 mark available. Award a mark for each point made.
▸ Any one of: market conditions; technology; performance; legislation; internal reasons. 1 mark
▸ Model answer. Changes in market conditions.
Question 2 · 2 marks · Outline
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“Outline one way a business might change its objectives if its sales fall sharply.” |
HOW TO ANSWER IT Command word: Outline. Worth 2 marks, so plan before writing.
Question 2 · mark scheme
2 marks available. Award a mark for each point made.
▸ 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).
Question 3 · 3 marks · Explain
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“Explain one reason why a business might change its objectives.” |
HOW TO ANSWER IT Command word: Explain. Worth 3 marks, so plan before writing.
Question 3 · mark scheme
3 marks available. Award a mark for each point made.
▸ 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).
Question 4 · 6 marks · Analyse
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“Analyse the reasons why Coastline Travel PLC has changed its objectives.” — 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… |
HOW TO ANSWER IT Command word: Analyse. Worth 6 marks, so plan before writing.
Question 4 · mark scheme
6 marks available. Award a mark for each point made.
▸ 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.