1 - Introduction to business Flashcards
What is an organisation?
A social arrangement for the controlled performance of collective goals, which has a boundary separating it from from its
environment
What is a business?
An organisation that is oriented towards making a profit for its owners to maximise their wealth and that can be regarded as an entity separate from its owners.
Limited company is owned by the shareholders
What are NFPs
They are frequently structured and run like a business so they benefit from the economy, efficiency and effectiveness in using resources that profit orientation brings
Generally focussed on on providing goods and services to their beneficiaries at minimised costs
How do the 3 E’s work together?
Economy x Efficiency = Effectiveness
Inputs x conversion processes = outcomes
Who are primary and secondary stakeholders? What is at stake? What do they typically expect of the business?
Primary:
Shareholders or partners. They have money invested and they want to see their wealth maximised. Profits in the form of dividends and capital growth in terms of share price
Secondary:
Directors/managers/employees/trade unions. Livelihood, career and reputations are at stake. They want fair remuneration, career progression and a nice place to work
Customers. They want quality, price, value, good service and good credit terms
Suppliers want prompt payment
Lenders want interest and repayment of capital
Gov want fair business policies, compliance with regulations and taxes to be paid
Analysts, advisers and experts want repeat work and to get paid
Local community and public will be looking for employment and fair employment practices and fair business practices
Natural environment - take reasonable care of the environment
Is wealth maximisation always the primary objective?
May not always be the case
Management has no personal interest in maximising wealth
The market lacks competitive pressure, mitigating the need to focus on this
Managers choose profit satisficing, choosing to achieve a satisfactory level of profit
The business seeks to maximise revenue over profit to increase market share
How do planning and control system work?
Objectives, plans and standards, actual performance, comparison of performance with plans/standards (if any deviations identified see if there is any control action you can fit in step 2 and 3), on target means no corrective action required
What is a mission? RSVP
The businesses basic function in society, is expressed in terms of how it satisfies its stakeholders
Reason - why does organisation exist and for who?
Strategy - What do we do? How do we do it?
Values - What the organisation believes to be important, that is its principles
Policies and standards of behaviour - Mission should influence what people actually do and how they behave: the mission of a hospital is to save lives, and this affects how doctors and nurses interact with patients
What are visions?
It is a vision of the future. If they complete their mission in the future, then they have achieved their vision.
What are the characteristics of operational goals?
SMART
Specific
Measurable
Achievable
Relevant
Time-Bound
What are the different types of standards?
Physical
Cost
Quality
Sustainability definition:
The ability to meet the needs of the present without compromising the ability of future generations to meet their own needs
Sustainable development definition:
The aim of pursuing economic activity without causing permanent harm to society and the planet
Natural capital definition:
The stock of renewable and non renewable natural resources taht combine to yield a flow of benefits or services to people. Resources such as food air water are renewable but oil and gas are non renewable
Enterprise value definition
Expectations over the short to long term value of future cash flows
What are impacts and dependencies?
Impacts - How an organisations actions affect ESG issues
Dependencies - How current ESG issues can effect the entities ability to maintain value
3 scopes of GHG emissions
Scope 1 - Directly by organisation
Scope 2 - Indirectly by the organisation
Scope 3 - Indirectly responsible through its supply network (downstream) or customers and treatment of the product at end of its life (upstream)
