| Trainee Manager Institute: NIBM
Status: Offline Posts: 2 Management Paradise Rupees.: 255 Join Date: Sep 2009 | Re: business environment -
September 29th, 2009
When a sole trader sets up they may have some unstated aims or objectives - for example to survive for the first year. Other businesses may wish to state exactly what they are aiming to do, such as Amazon, the Internet CD and bookseller, who wants to “make history and have fun”.
An aim is where the business wants to go in the future, its goals. It is a statement of purpose, e.g. we want to grow the business into Europe.
Business objectives are the stated, measurable targets of how to achieve business aims. For instance, we want to achieve sales of €10 million in European markets in 2004.
A mission statement sets out the business vision and values that enables employees, managers, customers and even suppliers to understand the underlying basis for the actions of the business.
Business Objectives
Objectives give the business a clearly defined target. Plans can then be made to achieve these targets. This can motivate the employees. It also enables the business to measure the progress towards to its stated aims.
The most effective business objectives meet the following criteria:
S – Specific – objectives are aimed at what the business does, e.g. a hotel might have an objective of filling 60% of its beds a night during October, an objective specific to that business.
M - Measurable – the business can put a value to the objective, e.g. €10,000 in sales in the next half year of trading.
A - Agreed by all those concerned in trying to achieve the objective.
R - Realistic – the objective should be challenging, but it should also be able to be achieved by the resources available.
T- Time specific – they have a time limit of when the objective should be achieved, e.g. by the end of the year.
The main objectives that a business might have are:
Survival – a short term objective, probably for small business just starting out, or when a new firm enters the market or at a time of crisis.
Profit maximisation – try to make the most profit possible – most like to be the aim of the owners and shareholders.
Profit satisfying – try to make enough profit to keep the owners comfortable – probably the aim of smaller businesses whose owners do not want to work longer hours.
Sales growth – where the business tries to make as many sales as possible. This may be because the managers believe that the survival of the business depends on being large. Large businesses can also benefit from economies of scale.
A business may find that some of their objectives conflict with one and other:
Growth versus profit: for example, achieving higher sales in the short term (e.g. by cutting prices) will reduce short-term profit.
Short-term versus long-term: for example, a business may decide to accept lower cash flows in the short-term whilst it invests heavily in new products or plant and equipment.
Large investors in the Stock Exchange are often accused of looking too much at short-term objectives and company performance rather than investing in a business for the long-term.
• Alternative Aims and Objectives
Not all businesses seek profit or growth. Some organisations have alternative objectives.
Examples of other objectives:
Ethical and socially responsible objectives – organisations like the Co-op or the Body Shop have objectives which are based on their beliefs on how one should treat the environment and people who are less fortunate.
Public sector corporations are run to not only generate a profit but provide a service to the public. This service will need to meet the needs of the less well off in society or help improve the ability of the economy to function: e.g. cheap and accessible transport service.
Public sector organisations that monitor or control private sector activities have objectives that are to ensure that the business they are monitoring comply with the laws laid down.
Health care and education establishments – their objectives are to provide a service – most private schools for instance have charitable status. Their aim is the enhancement of their pupils through education.
Charities and voluntary organisations – their aims and objectives are led by the beliefs they stand for.
Changing Objectives
A business may change its objectives over time due to the following reasons:
A business may achieve an objective and will need to move onto another one (e.g. survival in the first year may lead to an objective of increasing profit in the second year).
The competitive environment might change, with the launch of new products from competitors.
Technology might change product designs, so sales and production targets might need to change.
My personal objectives are:-
1. Provide a benefit. A new business stands a greater chance at success if it is responding to a need of a consumer. Your potential customers will buy your products or service if they see that it provides some benefits to them. You must be able to respond to their "what is it for me" question.
As a new business owner, your main task is to understand the difference between the features of your business and the benefits it provides. For example, if you are in the business of selling baby gift boxes, the feature and benefits are:
Feature: Baby toys, books, CDs and videos not found in department stores Benefit: The customer will be able to conveniently find in one location the baby gift items she or he wants.
Remember, customers buy on the basis of the benefits, and not the features of your products. This is what you are going to use as your main selling proposition, or what you will highlight to convince people to buy your products and services. By understanding the business and its benefit to consumers, entrepreneurs can differentiate their business and create niches in the market where they can enter and survive long enough to build
2. Determine the fit with your market. Before you can start marketing your new business, you first need to determine your target market. That's right: not everyone is your customer. Some people erroneously think that they should sell to everybody, and that targeting will limit the scope of their pool of potential customers. Wrong! The purpose of defining your market is to make your life easier and increase the effectiveness of your promotional activities. You can't strike anywhere: you need to focus your energy and money.
To identify your market, you need to look at your market data and personality attributes of those whom you think would most likely buy your products. Aside from the demographics of your potential customers (age, gender, income level, geographic location, etc.), you also need to determine lifestyle factors. Are there any special interest activities that they belong to? Are there any social factors and cultural involvement that govern your customers? How do you think your market will use your products or services?
3. Right timing is everything. Some new businesses are way ahead of their times. You may have a brilliant idea, but if the market is not ready for your products, the venture will fall by the wayside.
If you have a product that is so new in the market, be prepared to take on the cost of informing the buyers. Since they are not familiar with your products, show them how it will benefit their lives and demonstrate how they can use it. Infomercials, while costly, are very good vehicles for very new products.
4. Be ready to support your business. One business reality is that you need money to earn more money. You need resources to allow you to buy equipment, supplies, procure or manufacture products, package your products well and market it. Will your existing capital allow you to buy all the assets that you need in your business? How are you going to finance your inventory? If you are starting an online business, do you have the resources to create your site and pay for its upkeep? If your business does not show a profit within the year, do you have the money to support yourself?
When starting a new business, you need to consider three major expenses and plan for them accordingly: your living expenses, direct costs and overhead. Living expenses is the "salary" you must produce to support yourself and your family. Direct costs include supplies, materials, and others that you need to produce your product or deliver your service. Overhead is the cost of running a business, and it covers marketing, utilities, office furniture and equipment.
Sure, you can start a business even with little cash, but you need to be extremely creative in stretching your money and be prepared to compromise the growth of your business. You will have no choice except to build your business gradually.
However, having money is not enough to assure success. The dot-com woes, especially, showed that you can burn millions and millions of dollars only to end up a failure. Digital Convergence, for example, got $250 million of funding for investors to distribute Cue Cats barcode readers for free yet laid-off most of their staffs after their business model showed to be unsustainable. The key is to use whatever money you have-- smartly.
5. Develop a blueprint for success. You cannot go into a business unprepared. It is important to have a plan. Think of going to business like going to war: you need to develop strategies to help you overcome your enemies. Without thinking through what you want to achieve and how to get there, you are a sitting duck waiting to be clobbered.
Starting a new business entails a thorough and objective analysis of both your personal abilities and the business requirements. You need to have a clear strategy for marketing and the production aspects of your business. If you are a retail store, you need to have a plan in terms of procurement and sourcing. For all the excitement of a new business, you need to know where and how you will get the funds to finance your business. Do you have the available resources to make this business a success? And a million other details.
A business plan is essential. Even if you do not want to write it all down (especially if you do not have investors), the process of preparing a business plan allows you to think through of every aspect of your business. It makes you think about the viability of your business and helps you avoid costly mistakes. When starting a business, you base your projected performance on a set of assumptions. If you have a plan, you will be able to test your planning assumptions and create fall-back measures in the event that real life proves to be vastly different from your initial visions.
If you think through your business well, you can discover problem areas early on and initiate efforts to correct the problem. Remember, the business owner with a realistic plan has the best chances for success.
6. Market, market, market. In this world dominated by hype, you must be prepared to publicize the business or its chance for success will be slim. Unless you are a nationally known name with built-in clientele or your business is located in a prime location, you need to promote customer awareness for your business. If you're on the Web, you cannot expect to just sit in a corner and expect people to stumble on your site.
Your marketing plan should revolve around three goals. The first is to inform customers what you have. You can do this by letting customers know what you have for sale, either through press releases for possible publication in print and TV media, brochures for your customers and leaflets distributed in your neighborhood.
The second goal is to persuade potential customers to do what you want them to do - buy from you. If you're in e-business, you do this by writing a very good sales copy on your site including testimonials from satisfied clients. If you have sales representatives, they could do the persuading in your behalf.
The third function of marketing your business is to remind existing customers to come and buy again. If you are a Web marketer, you do this by sending a regular product updates, special offers and promos to customers' emails. As a smart marketer, you know that you need to hold on to your existing customer base as it is much harder (and more expensive) to get a new customer than to sell to someone who already knows your product and the quality of your customer service. |
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