Financial Objectives (SQA National 5 Business Management): Revision Note
Exam code: X810 75
Revenue and profit objectives
Revenue objectives
Revenue is the total amount of money a business receives from selling its goods or services, before costs are deducted
Some organisations set a goal of increasing revenue, even if this does not immediately mean higher profit
A revenue objective might be chosen to
Grow the customer base by attracting more people to buy their products
Increase market share by boosting sales compared to competitors
Encourage brand awareness through higher sales volume, even if prices are kept low
Case Study
Edinburgh Castle is Scotland’s most popular paid tourist attraction, welcoming over a million visitors each year
The castle aims to use this high visitor number to generate revenue that supports its own upkeep and helps fund the conservation of other historic sites across Scotland
To achieve this, it sets different ticket prices for adults, concessions and children, and offers online booking discounts to attract early purchases and group visits
Marketing campaigns promote the castle internationally to increase visitor numbers from Europe, North America and Asia
Additional services such as guided tours, audio guides, gift shops and cafés provide extra income
Special events, including concerts and seasonal activities, encourage repeat visits and boost overall spending
Profit objectives
Making a profit means that the money a business earns from sales is greater than the costs of running the organisation
For most private sector firms, this is the main aim, as profit allows them to survive, grow, and reward owners or shareholders
Some businesses go further by aiming for profit maximisation
They focus on trying to earn the highest possible profit
To achieve this, they must carefully manage their selling price, the number of sales, and the costs of production to find the most profitable balance
Survival
Survival is the most fundamental goal for any business
To stay open, a business must at least cover its costs and bring in enough income to keep trading
New start-ups often set survival as their main objective in the early years, when they are building up customers and developing a reputation
In addition, small firms may focus on survival during tough times – for example, in periods of economic downturn or when facing strong competition from larger rivals
Market share and market leadership
Market share shows the volume of total sales in a market that belongs to one business compared with its competitors
A firm may set the goal of expanding its market share by:
attracting customers away from rivals
persuading existing customers to spend more
moving into new regions or customer groups
A higher market share gives a business more power to influence prices, build stronger brand recognition and make it harder for competitors to challenge them
E.g. In the Scottish grocery retail sector, Tesco has long been a dominant supermarket chain.
Rivals like Co-op and Aldi have worked to grow their market share by opening more local convenience stores and appealing to value-conscious shoppers
Market leadership means holding the largest share of sales in a particular industry or market
A market leader is often seen as a top brand and tends to set trends and standards that competitors follow
E.g. in Scotland, AG Barr’s Irn-Bru is often considered a market leader in the soft drinks industry, despite global competition from Coca-Cola and Pepsi
Achieving market leadership brings benefits such as stronger brand recognition, greater bargaining power with suppliers and the ability to shape customer expectations
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