1.1.7 Business contexts, drivers for change and their challenges Flashcards
Organisational context
In the world of business, organizations often have multiple stakeholders, including owners and various other parties with vested interests. The ownership of a company can be divided into shareholders, each with their own expectations and goals. While shareholders primarily seek profits, other stakeholders, such as employees and customers, may have different interests, such as job security and quality products/services. This diversity of interests can create conflicts within an organization. Management plays a crucial role in addressing these competing interests by balancing the needs of different stakeholders. They must make decisions that maximize shareholder value while also considering the welfare of employees and meeting the expectations of customers.
Financial context
In the financial context of business, revenue and profit are fundamental concepts. Revenue represents the total income generated by a company from its operations, such as sales of goods or services. Profit, on the other hand, is the amount left after deducting all expenses from the revenue. Shareholder value is closely tied to profit since shareholders often receive dividends based on the company’s profitability. However, businesses face a challenge in deciding whether to distribute profits to shareholders or retain them for future growth. When raising business finance, companies must consider factors like the cost of borrowing, returns on investment, and the impact on cash flow. Additionally, businesses need to account for capital depreciation, which reduces the value of assets over time
Market context
In the market context, businesses aim to meet the needs of consumers while navigating the influence of competitors. Identifying consumer needs is crucial for product development and marketing strategies. However, businesses also face the challenge of reconciling the relationship between price, quality, and costs when responding to competitive market pressures. Competitors often set the benchmark for pricing and quality, and businesses must find ways to differentiate themselves. Balancing these factors effectively is essential for long-term success.
Human resources
Human resources management in business encompasses various aspects, including skills shortages, recruitment, remuneration, contracts, incentives, promotion, training, development, unions, industrial action, workforce motivation, working practices, technology, and globalisation. Businesses must adapt to changing workforce dynamics, technological advancements, and global markets. Attracting and retaining skilled employees is a constant challenge. Furthermore, businesses need to consider factors like fair remuneration, employee contracts, and incentives to motivate their workforce. The role of unions and industrial action can also impact labour relations and business operations
