Business Objectives - PMGSSE Flashcards
What does PMGSSE stand for
Profit, Market share, growth, share price, social, environmental
What are some methods to maximise profits?
- Increase revenue (sales)
- decrease operating costs
- Create more innovative products
- deliver better service
- introduce a new product
- well targeted marketing campaign
Caution: Lowering prices does not always lead to improved profit.
What is profit?
Profit is what remains after all the business expenses are deducted from sales/revenue
Why is the Size of the Profit the main indicator of success?
it shows how effective the firm has been in utilising resources to generate profit.
When does Profit Maximisation occur?
Profit maximisation occurs when there is a maximum difference between the total revenue and total expenses.
What is the Profit Maximisation Formula?
PROFIT = TR - TC
Maximum profit = TR at maximum difference from TC
Total Revenue (TR)= Total sales x Price
Total Cost (TC) = total expenses incurred in operating the business
What is Market Share?
Market share is a businesses share of the total industry sales for a particular product
How do you calculate Market Share?
It is calculated by dividing a business’s sales (from that market) by the total sales of all businesses in that market and expressing this as a percentage
Why do businesses want to increase its market share?
An increase in market share suggests that the business is performing successfully.
Increasing market share is an important goal for businesses that dominate the market, because small market gains often translate into large profits.
What is a strategy to increase market share?
Decreasing price is a common strategy to increase market share. Although, this reduces a firms profit margin.
What are some of the limitations of Market Share for businesses?
- In most industries, market share is usually a goal only for large businesses
- Small market share gains often translate into large profits for businesses who have large percentages
- The market share of SMEs is usually restricted to the size of the business
What are SMEs?
Small to medium enterprises
What are some business growth goals?
How large the business wishes to be and how they wish to expand
Can start small and then use financial resources to expand
What are two ways businesses can achieve growth goals?
Internally (organically) or externally
What are some Internal ways a business achieves growth?
Internal growth:
- Employing more people
- increasing sales
- introducing new innovative products
- purchasing new equipment
- establishing more outlets
What are some External ways a business achieves growth?
External Growth:
Merging with or acquiring other businesses
- Merging = Combining with other businesses
- Acquisition = The purchasing of another Business
What are the three social goals of a business?
- Community Service
- Provision of Employment
- Social Justice
