paper 1 divider 1 Flashcards
what is a business
an organisation that produces goods/provides a service that customers are willing to pay for in order to generate a profit
goods
Physical products, e.g, furniture
services
Things you cant touch, actions carried out by people, e.g, car maintenance, furniture
what do businesses produce
Goods and services in order to satisfy peoples needs (necessities) and wants (luxuries)
neccessities
Basic products that people need in order to survive, e.g, food/shelter/drink
luxuries
Non essential goods and services, e.g, dishwashers/holidays
public enterprise
Public sector, owned by the government, e.g, NHS
private enterpirise
Private sector, owned by private individuals, e.g, shareholders
non-profit making organisation
Aim to improve society and the enviroment, e.g, charities
businesses in private sector
- vary in size, owned and run by individuals
- large national and multi-national businesses owned by shareholders
entreprenuer
- an individual who takes risks to start up their own business
- start their own business to reach potential, earn more money and control
functional areas
- marketing
- finance
- HR
- operations
marketing focus
- research customer needs
- advertising
- promotion
human resources focus
- recruitment
- motivation
- dismissal
- tttraining
- redundancy
finance focus
- set budgets
- monitor cash flow
- control spending
- record profits/losses
operations focus
- purchase raw materials
- delivery to customers
- organise manufacturing
mission statements
- brief quantitive statement including a business purpose and aims
- designed to motivate employees and persuade stakeholders, including customers, investors and suppliers so they have a good perception of the business
corporate objectives
The goals of the whole business and will be determined by business size
corporate stratedgy
The plans and policies developed to meet corporate objectives
functional objectives
Targets toward specific departments which will contribute towards the achievement of corporate objectives
functional objectives, finance
- return on investment
- costs
- profit
- cash flow
- revenue
- debt finance
functional objectives, marketing
- sales volume
- sales value
- market size
- market share
- brand loyalty
- market and sales growth
functional objectives, human resources
- employee engagement
- trainining
- diversity
- value alignment
- talent development
- employee skills and number
functional objectives, operations
- costs
- quality
- speed of response
- flexibility
- dependability
- added value
- environmental
functional performance, finance
- raising finance
- cash flow
- profit
- break even
- budgets
functional performance, marketing
- market research
- segemtation
- targeting
- position
- marketing mix
functional performance, HR
- labour turnover
- job design
- motivation
- labour costs
- labour productivity
- industrial relations
functional performance, operations
- supply chain
- quality
- inventory
- lean production
- capacity
- capital intensive
mission statement advantages
provides a common vision all employees can work towards, which can unite employees
mission statement disadavnatges
if a busines actions don’t reflect the image potrayed by its mission statement, reputation is destroyed
profit optimisation
making a reasonable amount of profit, could be improved if business chooses to
growth
launch new products/expand overseas/more stores
cash flow
money coming in and out of a business
survival
continuing to trade, important for new businesses
social and ethical
considering an enviroment, these objectives can enhance a business image and reputation
SMART
specific, measurable, achieveable, realistic, time bound
long term objectives
- strategic
- set business direction
- higher investment
short term objectives
- may focus on cash flow
- require lower investments
why do businesses set objectives
- provide a target to work towards
- motivate employees
- can help with decision making
PESTLEC
political, economic, social, tech, legislation, enviromental, competition
why is profit important for business
- important source of finance for them to fund growth
- return/reward for entreprenuer and investors risk taking
revenue
the value of total sales made by a business within a given time period
costs
the expenses incurred by a firm in prducing and selling its products
why is it important to undertsnad costs
- allows managers to make informed decisions
- costs change as output changes
- allows mangers to undertsand more about the business and pricing decisions
variable costs
- costs that change as output varies
- raw materials
- can be redeuced by changing supplier to raw materials
fixed costs
- costs within dont change as output varies, e.g, rent
- can be reduced by increasing output to spread over more units of output
direct costs
a cost which can be identified with a unit of output
indirect costs
overheads, a cost which cant be identifie with a unit of output but is incurred by the business as a whole
semi variable costs
have fixed and variable elements, e.g, telephone (fixed) call charges (varibale)
how can a business maximise profits
- maximise revenue
- maximiuse costs
- both
maximisng revenue
increase quantity sold, wider distribution, lower price, packaging, sponsorhip
sustanibility of wider distribution
more consumers can acsess and buy the product, higher distribution/logistics cost
sustainbility of including the selling point
price inelastic demand, where an increase in selling price will have little impact on quantity demanded
why might they maximise revenue if its fixed costs are a large proportion of its total costs
- need to maximise revneu to ensure fixed costs and total costs are covered
- costs arent sensitive to level of sales, so a business needs to max sales to max profits
influences on setting profit objectives
- customer demand, state of economy
- share holder expectations, want higher profits
- competition, more challangeing
- extent of cost control, to offer lower prices
evaluating business profits
- age of business, new startups are less profitable
- business size, large businesses are more pprofitable
- industry, compare business
- economy, external circumstancves
- level of compeitition, decrease profits
private sector
owned and run by private individuals, for profits
sole traders
owned and run by an individual, self employed, responsible for debts
sole trader, adv
- quick and easy to set up
- full control
sole trader, disad
- long hours, few hours
- uncorpirated, can be sued
unlimited liability
- responsible for debts
- may have to use own possesions to pay debts
limited liability
- only lose what youve invested
- seperate identity from owners
limited companies
owned by shareholders
limited companies adv
- limited liability
- easier to borrow money
limited companies disad
-financial info is made public
factors influencing choice of business structure
- level of risk
- public image
- level of control over business decisions
private limited company
must have LTD in title
small business
private limited company adv
only lose whats invested
will continue if owner dies
private limited company disad
cant sell shares
banks can inspect financial records
public LC
owned by large number of shareholders
must have PLC in title
public LC adv
easier to range finance as banks are more willing to lend
public LC disad
cant sell shares
banks can inspect finanical record
factors influecing risk of legal structure
level of risk: could become a priv lc to benefit from limited liability
generate funding/growth/expanasion: sole traders cant raise share capital
level of control: control over decision lost to shareholders
social enterprise
exist to beneift society
eden project
mutual organisation
no shareholders or owners
nationwide building society
pressure group
aim to influence behaviour and decision making
green peace
charaties
depend on donations for funding
rspca
shareholders
owners of companies
attend annual general meetings
acsess and rreview business records
provide capital for a company to set up and grow
invest to get financial rewwards and dividends and capital gains
dividends
a dsitribution of company profits to shareholders
capital gains
financial differnce when a share is bought at a low price and sold at a high price
factors that influence shareprice
-profit: high dividends can be awardedd to shareholders profit risk
speculation: anticipation of high future dividends and increase share price
current share price: low could increase demands shares and share price
interest rates: savings in bank accounts earn little money
economy: more to invest in shares if economy is boosting
share price changes, short term
- on shareholders: impact capital gain, rise ion share price
- on company: none, shareholders can only sell shares if buyer can be found
share price changes, long term
- on shareholders: if the shareholder isnt buying/selling shares, changes are irrelevant
- on company: increase confidence in business and attract new investors
issues from selling shares
- raising finance
- issuing dividends
- market capitalisation
share capital
annual payments, dividends ajusted dependent on profits
loan capital
annual payments interest must be paid to bank
dividends
high=can lead to higher share price
low=impede a company ability to achieve long term growth objectives
market capitilisation
total value of all ordinary shares issued by a compan
liqudiation
problematic for customers and suppliers, cant get faulty product fixed
PEST
political
social
economic
tech
economy
state of country in terms of production and consumption of goods
gross doemstic
value of all goods and services produced by a country over time
labour supply
number of pepole willing and able to work
disruptive change
where new tech can change rules and the way things are done
effect on ownership on objectives decision making and performance
plc: focus on short term profits due to pressure from shareholders
not for profit: focuw on them beneifting sociewty and standard of service
-sole trader: growth causes change in ownership due to lots of money being needed, can get this by increasing shareholders
