Nature and purpose of business (01)

Question 1

SUMMARY

Answer 1

In summary, the following are covered in this topic:
1. The primary purpose of a business is to create value for stakeholders.
2. Value can be measured in terms of financial and non-financial benefit.
3. Stakeholders are individuals or organisations with an interest in the activities
of a business, and can influence the decision-making of the business. They
can also be affected by a business’s decisions.
4. As the interests of stakeholders vary, the interest of one stakeholder may be
in conflict with that of another stakeholder. Businesses will need to balance
the trade-offs between the varied needs of stakeholders.
5. Business objectives influence how a business allocates and uses its resources,
as well as the decisions it makes.
6. Common business objectives include survival, profit maximisation, profit
satisficing and growth.
7. As conflicts between objectives may occur, businesses should establish a
priority in the importance of objectives.
8. Objectives might change across time or the various stage of a business.