3.1 WHAT IS BUISNESS? Flashcards
Define a Mission Statement
Overall reason for a business’ existence
A long term goal (10+ years)
Advantages of Mission Statements
- May improve motivation
- Teamwork: common focus for everyone in organisation
- Can help determine a business’ strategic position
Why is it important to share a mission statement with employees?
Gives:
- Sense of direction - follow same path
- Sense of motivation - makes them more productive
Why is it important for leaders to think back to mission statements?
- Keeps them on focus
- Stay ethical to the task, ward off pressure groups
Define corporate/strategic objectives
Goals for the whole organisation, purpose of showing direction to staff and the whole organisation
What dictates the corporate objectives?
Mission statement
Give an example of a mission statement
‘to accelerate the world’s transition to sustainable energy’
- Tesla
Internal influences on corporate objectives
- Business ownership / leadership
- Power of stakeholders (employees)
- Ethical actions
Disadvantages of corporate objectives
Shareholders may be bias to shareholder maximisation so many corporate objectives may be necessary to avoid this
May be too vague for each department
Define shareholder maximisation
A maximum return to shareholders is and ought to be the objective of all corporate activity
During a recession, a business may need to change its objectives. What to?
Survival
Define functional objectives
Objectives for each department
Advantage of using functional objectives
Being more specific means more motivating for each employee, feel like they are more of a contributing factor.
Define strategy and tactics
Strategy: how we do things, medium/long term plan of action, put in place to achieve a business objective.
Tactics: short term that helps to achieve a strategy- daily activities such as sending emails
Suggest the tiers associated with missions, aims and objectives
- Mission / Corporate Aim
- Corporate Objective
- Functional Objective
- Strategies
- Tactics
What makes an effective mission statement?
- Unique (to competitors)
- Defines the market of operation
- Relevant to all major stakeholders
- Excites, inspires, motivates and guides
What is profit?
- A return on investment
- Reward for taking risks
- A measure of business success
- Motivating factor
- Helps to create positive cash flow
Define Revenue
Amount/value of a product that customers actually buy from a business
Define Demand
Amount of a product that customers are prepared to buy
Factors that affect level of demand
- Price
- Competitors
- Government/laws
- Tastes/trends
- Changes in technology
- Demographic changes
- Ethics
Ways to increase revenue
- Increase amount sold
- Achieve higher selling price
Give examples of business objectives
- Maintain / increase market share
- Develop new products
- Increase quality
- Enter a new market
- Build a competitive advantage
Define sole-traders
An individual owning a business on their own
Can employ people, but they don’t share any ownership
UNLIMITED LIABILITY
Define UNLIMITED LIABILITY
Full legal responsibility for any debts
Personal assets can be taken
Disadvantages of UNLIMITED LIABILITY
- Personal assets can be taken
- Bigger risk than limited, meaning taking out a loan may be more difficult
Define LIMITED LIABILITY
Business has separate legal responsibility for any debts