3.1.1 - What Is Business? Flashcards
Business objectives
Goals that must be achieved to realise the stated aims of an organisation, department or individual team.
What term are business objectives usually
Medium to long term
Profit
Total revenue minus the total cost
Revenue (sales revenue)
Money into the business, this could be through sales or investments
Costs
Money out of the business
Profit maximisation
The aim of most businesses, because it will give them capital needed to expand and grow the business
What does profit maximisation do
Enable the business to replace any old machines or equipment
Shrinkflation
Where manufactures keeps the price the same but makes products smaller
How can a business grow (2 ways)
Organically- taking on more staff and opening more stores or producing more goods
Inorganically- help of other company, merger or take over
What are the 4 main business objectives
Survival
Ethical
Social
Cash flow
What does it mean to have ‘survival’ as your business objective
To have a sustainable amount of sales that allows the business to reach the break even point, this means not as much profit at first but when the business rises it will comfortably raise
When is survival often used
Start of the business
What does it mean to have ‘cash flow’ as your business objective
Makes sure that the company have enough money in the business to pay their day to day expenses
What does having positive cash flow mean
The business would not have to borrow from a bank, usually through overdraft which can be expensive
What does it mean to have ‘social’ as your business objective + example
May mean:
- reducing impact on environment
- fair wages in developing countries
- helping society
- compliances with laws to minimise negative externalities, e.g. pub operating sensible hours not to cause noise pollution to locals
E.G. Body shop and change please
Some facts about body shop
- sustainably sources their shea butter from a woman’s association in Ghana since 1994
- pay fair prices, empower women
- funds community projects positively, impacted lives of 49,000 across 11 villages every year
Some facts about change please
- social enterprise supporting people out of homelessness
- training and employing hopeless people to help them move forward
What does it mean to have ‘ethical’ as your business objective
Society judges what is acceptable behaviour and what is not, go beyond what is law (pollution and slave labour)
Ethics
Moral principles behind human behaviour, the business knows right from wrong
SMART (business objectives)
S- specific
M- measurable
A- agreed/achievable
R- realistic
T- time bounded
Mission statement
Formal phrase that sets out aims and values of a business or organisation
What is the hierarchy of objectives in a business (most strategic to least strategic)
Mission
Corporate
Functional
Unit / team
Individual
What is the hierarchy of objectives in a business (most detailed to least detailed)
Individual
Unit / team
Functional
Corporate
Mission
Why does a business set objectives?
The performance of the company can be measured against how well it met its set objectives
- objective is set
-performance is monitored
-performance is evaluated
