Corporate Culture

Question 1

What are the aims and objectives of Private firms?

Answer 1

• Profitability
• gaining market share
• survival
• increasing brand identity
• ethics and going green
• increasing shareholder value

Question 2

What is Profitability?

Answer 2

• Making a profit
• that is a return on the capital invested in the business
• profitability can be measured in a number of ways, e.g. gross profit, gross profit margin, net profit and net profit margin
• when examining profits, firms will need to make comparisons with rival firms to benchmark their own profitability
• profit maximisation is often based on maximising brand value and minimising costs.

Question 3

What is gaining market share?

Answer 3

• some firms will spend to gain customers, reducing profits in the short run, but hopefully increasing profits in the longer term.
• they may even be able to force other competitors out of the market, by using loss making pricing strategies

Question 4

What is increasing shareholder value?

Answer 4

• measured by dividend paid and share price.

- dividend is the share of profits paid out to shareholders, so a dividend could be 4p per share.

Question 5

What is increasing brand identity?

Answer 5

• some firms may concentrate on establishing their brand name, becoming the most recognised firm in the market.
• This costs money so reducing profits.

Question 6

What is ethics and going green?

Answer 6

• there are businesses that will try to minimise their business activities impact on the environment
• they may try to make sure suppliers in developing countries get a good deal.
• they may pay their workers over the odds
• all these ethical strategies increase costs and reduce profits.

Question 7

What is survival?

Answer 7

• survival is being able to financially secure your business without going into excess debt, and
• around 30% of businesses fail within 2 years of being set up
• so for a small business the initial objective is to survive the difficult time of gaining customers, establishing a good local name and gaining a reputation.
• e.g. Euro tunnel is in a situation where it is in 6 billion pounds worth of debt and not earning enough to pay interest on this debt mountain.