Changing Objectives as Businesses Grow

Nothing is achieved and then finished

Ask a business what its objective is and the answer depends entirely on when you ask. In year one it is usually survival. By year five, survival is not an objective at all. That is the whole of this topic. Objectives are not targets a business reaches and crosses off; they are re-set, repeatedly, as conditions change. Exam questions here are almost always asking you to explain a re-setting: what changed, and what the business should do about it.

Five reasons objectives change

Learn these as a checklist. Almost any case study in this topic is one of them:

Match each change to the reason behind it

Which one could you actually test?

Below is a statement from an invented bakery, written for this module. Tap the sentence that states an objective you could actually measure.

• Two years ago we set out to survive our first winter.
• We want to be the best bakery in the region.
• We aim to increase revenue by 20 per cent, from 250,000 pounds to 300,000 pounds, by the end of next year.
• We care deeply about our customers.

Did they meet it?

That bakery aimed to grow revenue by 20 per cent from 250,000 pounds. Actual revenue for the year was 290,000 pounds. By what percentage did revenue actually grow?

Year one against year five

The bakery grew by 16 per cent, not 20. That is a miss, and a business at this stage has a different set of objectives from the one it had when it opened.

What should change?

A business is two years old, has survived and is now reliably profitable. What is most likely to happen to its objectives?

• Survival is replaced by objectives about profit, growth and market share
• They stay the same, because the current objectives are clearly working
• The business stops setting objectives, since it is no longer at risk
• Survival becomes an even more important objective as the business grows

Order the shift

Put the objectives of a typical business into the order they usually appear over its life.

• Survive: cover the costs and get through the first year
• Break even, then begin making a profit
• Grow revenue and win market share
• Widen the product range, or enter new markets
• Review performance and re-set the objectives again

A changed objective changes decisions

Knowing WHY an objective changed is half the answer. The marks are in the other half: what the business then does differently. A change of objective shows up as concrete decisions - entering or exiting a market, changing the size of the workforce, widening or narrowing the product range, or moving spending between parts of the business. So never stop at "the objective changed". Say which decision follows from it, and the answer moves from description into analysis, which is where the marks are.

Three pressures

The invented bakery again. Each situation puts an objective under pressure; choose what should happen to it.

• A large chain opens two doors away and sales fall sharply. What happens to the objectives?
• New legislation bans the packaging the bakery uses, raising costs. What is the sensible response?
• The 20 per cent growth objective was missed, at 16 per cent. What now?

Which are genuine reasons?

Select the TWO that would genuinely cause a business to change its objectives.

• A new technology changes what customers now expect as standard
• Performance last year came in well below the target that was set
• The owner prefers a different form of words for the same idea
• Objectives should always be replaced every year, whatever has happened

Objectives are never finished

Objectives are not achieved once and finished; they are _____. A new business usually starts with _____ as its main objective and later moves to profit, growth and market share. They change because of market conditions, technology, _____, legislation and internal reasons. A useful objective is _____, so you can tell whether it was met. And when a target is missed, the useful response is to judge why and _____ it rather than to abandon it.

Judge the bakery's 16 per cent

The bakery aimed for 20 per cent revenue growth and achieved 16 per cent, in a year when a large competitor opened nearby. Evaluate what its objectives should be for the year ahead.

• Say what the evidence shows about how the business actually performed
• Identify which of the five reasons for changing objectives applies here, and why
• Recommend the objectives for next year, and make at least one of them measurable
• Say what the business would have to do differently as a result, and give one drawback of your recommendation