Aims of Businesses in the Private Sector

Private businesses mainly exist to make a profit but may also have a wide range of additional aims, which include those on the right.

Business Aims: Making Profits

Making profits is the core aim for most private businesses. If a business fails to make a profit over a sustained period of time, it is likely that the business won't survive.

Key Stakeholders Interested in Profit

There are a number of key stakeholders who are very interested in private businesses making profit, including:

Shareholders: Want to see a return on their investment, which requires the business to make a profit.
Employees: Want to work for a profitable business for increased job security and potential benefits such as pay rises or bonuses.
Suppliers and Creditors: Prefer working with profitable businesses to ensure:
- Confidence in receiving payments for purchases or agreements
- Potential for long-term custom

Profit Maximisation

Over time, businesses may shift their focus from just making a profit to profit maximisation. Essentially, profit maximisation occurs when a business analyzes its processes, products, and services with the aim of streamlining them to maximize the profits it makes.

This can be achieved through a variety of ways such as:

Changing supplier or production processes to reduce the cost of sales and increase profit margins in each sale.
Offering additional products and services to customers when purchasing a core product to increase the profit made in the sale.
- - For example:
    - When purchasing trainers from JD Sports, you may be offered an additional product which protects your trainers.
    - When purchasing a car, you may be offered a warranty for peace of mind.
- Restructuring the business to:
  - Reduce the number of employees
  - Change employees' roles and responsibilities
  - The aim of restructuring is typically to either reduce the wage bill or make roles more profit-centered.

Business Survival

Survival is another pivotal aim for any business and should never be removed, no matter how large the business grows.

The fortunes of even the most successful businesses can turn around.As a business grows, it's crucial to adapt strategies to ensure survival. This involves:

- Keeping up with technological advancements
- Adapting to changes in the business environment
- Continually meeting the needs and wants of customers
- Maintaining competitiveness

Key Points:

Survival remains a constant aim, regardless of business size
Success doesn't guarantee future survival
Adaptation is key to long-term survival
Meeting customer needs is crucial for competitiveness

Break-even

Break-Even Point

The break-even point is a significant measure which identifies the point where the business is no longer making a loss nor is it making a profit. Breaking even is usually one of the first aims set by businesses when they launch. It essentially calculates the amount of products or services which the business needs to sell in order to cover its outgoings, such as:

Start-up costs
Running costs

Once calculated, the break-even point provides the business with a measurable aim:

A set amount of products to sell to break-even
Typically attached to a target date

This allows the business to effectively monitor and assess progress.

Key Benefits of Calculating Break-Even:

Sets a clear, quantifiable goal
Helps in financial planning
Provides a benchmark for performance evaluation
Assists in pricing decisions

This format uses bullet points to organize the information clearly and highlight key concepts. The term "breaking even" is in bold to emphasize its importance. I've also added a small section on the benefits of calculating the break-even point to provide additional context for your students.

Growth

Many businesses will aim to achieve growth, whether this be based on:

The number of stores they operate.
The number of countries they operate within.
The number of customers they serve.
The number of products they sell.

Importantly, business growth isn’t limited to the examples in the list above and can provide a business with many benefits such as: increased revenues, a broader customer base, and economies of scale etc.

However, not every business aims to grow, in fact some businesses may actually proactively avoid growth as they want to maintain full control of their business’ operations and ensure quality standards are consistently met etc. which can be impacted with growth, which also comes with added pressure, responsibility and scrutiny for the owners.

Market Leadership

Market leadership is an aim that can be set by businesses of any size, though it's typically pursued by larger companies. The competition for market leadership is intense in every industry and significantly influences the strategic approaches of involved businesses.

The diagram on the right analyses the UK supermarket industry by brand in 2020: It shows that Tesco is currently the market leader, aiming to maintain this status. It is also likely that larger rivals like Asda and Sainsbury's aspire to achieve market leadership and potentially have that as one of their business goals. This competition can influence business operations through:

Price wars
Heavy investment in marketing
Store refurbishments
Technology advancements to attract customers

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