Chapter 1 - Summary

Question 1

Who should set the objectives of the business?

Answer 1

The owners.

Question 2

List the main stakeholders of a business.

Answer 2

Employees
The Government
Suppliers
Community
Customers
Shareholders

Question 3

What is a stakeholder?

Answer 3

An individual or organisation that affects and is affected by the activities of an organisation that affects and is affected by the activities of an organisation.

Question 4

What would owner’s objectives be?

Answer 4

Maximise their returns, for example they want to be paid high dividends.

Question 5

What would the objectives of employees be?

Answer 5

Earn more as a reward for their efforts. They may also want the business to grow so they have promotion opportunities.

Question 6

What would the objectives of suppliers be?

Answer 6

Paid on time.

Question 7

What would the objectives of the community be?

Answer 7

Want the business to behave responsibly, the business may therefore set a target in local area for recycling and low noise pollution, etc.

Question 8

What are the objectives of the customers?

Answer 8

Buyers can affect sales and therefore profits, this means that the buyers can affect what constitutes a realistic objective for a business in terms of, say, the likely level of sales and profits.

Question 9

Objectives of employees

Answer 9

Secure jobs, higher earnings.

Question 10

Objectives of Owners/Shareholders

Answer 10

High dividends and share price.

Question 11

Objectives of local community

Answer 11

Local jobs, minimise environmental impact on the community, eg) little noise pollution or congestion.

Question 12

Objectives of Government

Answer 12

The business should behave legally, pay taxes and grow

Question 13

Objectives of suppliers

Answer 13

Get paid on time, kept informed of changes to the business, eg) proposed reduction in output

Question 14

Objectives of customers

Answer 14

The business should be useful, provide accurate information on products, good service, and value for money

Question 15

Impacts of a business on stakeholders.

Answer 15

Success of the business will affect number of people employed and salaries.
Values of owners and managers will affect the treatment of employees and ethics.
Any business will likely have a large impact on the local area.
The treatment of suppliers will affect success
Success of a business will affect its share price and dividends
A business may try to reduce tax it pays by using whatever legal means it can, or the business could pay what it thinks is a fair tax, even though it could pay less.

Question 16

How stakeholders influence businesses

Answer 16

Negotiation
Direct action
Refusal to co-operate
Voting

Question 17

What is negotiation?

Answer 17

Employees may negotiate for better pay or suppliers may demand better terms and conditions.

Question 18

What is Direct action?

Answer 18

Customers can stop buying the products of a business if they are unhappy with the way it behaves (Boycotting). Employees can go on strike and refuse to work if they do not get what they want.

Question 19

What is refusal to co-operate?

Answer 19

Local councils can refuse to co-operate with a business if they do not like its behaviour. For example, they could refuse planning permission for it to redevelop or expand its operations. Employees could resist any changes that the owners suggest and could show they are unhappy by not working hard.

Question 20

What is voting?

Answer 20

The owners of a business can make their views clear and can vote on what the organisation should do next. For example, if three people set up a business, it may be that two of the owners outvote the other one when deciding what should be done.

Question 21

What does a business need to think about, when dealing with stakeholders?

Answer 21

How it communicates, does it need to keep them informed? How?
Wether it should involve certain stakeholders in discussions, such as expansion.

Question 22

Why is business location important?

Answer 22

Costs
Sales
Image

Question 23

What are costs in relation to location?

Answer 23

The amount paid in rent or to buy a premises varies according to location. The rent for premises in the centre of London, for example, is greater than for offices in central Wales. The cost of facilities can affect the profit a business makes.

Question 24

What are sales in relation to location?

Answer 24

Location may affect wether or not the business gets customers. A hotel or theme park in the wrong location may struggle to attract visitors.

Question 25

What is image in relation to location?

Answer 25

For some products, where they are produced can have an important impact of their image. A perfume shop from Southampton or a wine from Bradford May struggle to sell. A language school on the coast or a gift shop in a tourist town may be more successful.

Question 26

How does the type of business influence location?

Answer 26

A web design business could be set up anywhere with a web connection, however a shop must be located close to its potential customers. A service delivering flowers needs to account for the road system.

Question 27

How does proximity to market affect location?

Answer 27

A business will want to know where its customers are located and ensure that it can reach them easily. More important for some industries than others.

Question 28

How do competitors influence business location?

Answer 28

In some cases a business will not want to be too close to its rivals, such as petrol stations. However, in other cases, a business will want to be close to its rivals, hotels for example.

Question 29

How does availability of raw materials affect business location?

Answer 29

Some businesses rely on availability of raw materials. A wine business will be located near the vineries.

Question 30

How does availability and cost of labour affect business location?

Answer 30

Some businesses need highly skilled workers, therefore they locate themselves near universities so they can easily recruit. Other businesses have relocated production to China and Vietnam where wages are much lower.

Question 31

How do transport links affect business location?

Answer 31

Businesses wanting to export might need to be near and airport or a port so. They can transport goods easily. If you do business in London but can not afford London rent, you might choose to locate in the suburbs, where rents are cheaper but roads and train links are effective.

Question 32

How do costs affect business location?

Answer 32

Rents can be very expensive and new businesses may not have the funds to be able to pay, so will set up from home initially. Larger businesses compare costs of that location to potential revenue, it generally is the case that locations with higher costs actually lead to more profits.

Question 33

What factors influence business location?

Answer 33

Costs
Proximity to market
Type of business
Availability of resources
Transport links
Technology

Question 34

Advantages of locating overseas

Answer 34

Cheaper labour
Access to resources that are not easily sourced in the UK
Financial incentives from foreign governments
Avoids protectionist measures by foreign governments, reducing cost as they don’t incur import tariffs.
Overseas markets may be growing fast, therefore you need to locate overseas to satisfy market demand.

Question 35

Disadvantages of locating overseas

Answer 35

There may be different rules and regulations in other countries
Customers may have different tastes