1.1 nature and purpose of a business Flashcards
why do businesses exist?
to satisfy our wants and needs
define a want
something that you can survive without, but would like to satisfy a need
define a need
something that you need in order to live
define a good
a physical product such as a house or designer suit.
define a service
an intangible item such as insurance or decorating.
define a product
a more general term which includes goods and services
what are the 4 functional areas of a business?
Operations, Human resources, Marketing and Finance
what are the 3 types of businesses?
business to business, business to consumer and consumer to consumer
what are the 3 sections in which a business can operate in?
Primary: Obtaining raw materials
Secondary: Manufacturing raw materials to create something
Tertiary: Supplying a service (selling the products)
what is the transformation process?
Adding value by turning inputs such as raw material into outputs
define mission statement
Sets out a businesses overall purpose to direct and stimulate the entire organisation
define aim
long term plans of the business from which its corporate objectives are derived.
define objective
Medium to long term goals established to coordinate the business
what does SMART stand for?
specific, measurable, agreed, realistic, time specific
profit objective
making as much profit as possible but also considering reputation and not exploiting the customer
diversification objective
producing an increased range of unrelated goods and services.
growth objective
focus on increasing customer numbers as opposed to profit. Secure the growth today, and the profits will follow.
cash flow objective
making sure they stay in positive cash figures, being able to pay debts on time. Can be more important for small businesses.
survival objective
the business to continue to trade over a defined period of commercial pressure
social and ethical objective
social: giving local people jobs,Building a local playground
ethical: based on moral principles
what are the benefits of setting objectives?
Gives everyone a common goal
Motivates employees
Provides analysis which can help track progress
Can compare themselves to competitors
See what is going wrong and make adjustments
define business costs
Any expenditure that a business has due to trading
define fixed costs
Do not change based on output
define variable costs
Change depending on output
