The Nature And Purpose Of Business Flashcards
What is a business?
A business is an organisation that transforms inputs into outputs that are purchased by customers. they add value to the inputs (customers are willing to pay a price that exceeds that paid inputs)
What is a good?
A good is a physical, tangible item
What is a service?
A service is an intangible item
What is a product?
A product is a general term to cover goods and services
How do businesses benefit a country?
-provides jobs for people
-can improve countries reputation
-provide innovative products which improve life style or save lives
-can attract foreign investment
What are the two types of businesses?
-B2C- business to customer/ consumer
-B2B- business to business- e.g tata steel
What are the three sectors of the economy?
-primary- gaining raw materials
-secondary- manufacturers
-tertiary- supply of services
What is diversification?
-diversification is entering new markets
What is a mission statement?
A mission statement is often vague and sets out what the firm is trying to achieve e.g lowest cost producer in the industry. They tend to focus on the business’ values, non-financial goals, how they benefit the community, how they will satisfy customers
Example of a mission statement?
IKEA: to offer a wide range of well designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them
What is a mission statement beneficial?
-decision making is easier as all decisions must help the overall missions to be achieved
- everyone’s actions are directed towards the same thing
-mission statements can motivate: give workers a sense of belonging and direction
What is the negative of a mission statement?
- if unrealistic/ a public relations exercise they are ignored
What is an aim?
- an aim is a long term plan from which corporate objectives are derived. They are normally qualitative, not numerical targets e.g to deliver long term growth
What is a corporate objective?
Corporate objective is a quantifiable statement of a business goals which should include measurable targets like growth, profit, diversification, develop innovative goods. They will be quantifiable eg 10% increase in profit over the next four years
What should objectives be?
Objectives should be SMART targets ( specific, measurable, agreed, realistic, time based). They are set once a firms mission statement and aims have been set. All employees should be aware of these, meaning decisions within each functional area( department) are based on corporate objectives.
What are functional objectives?
Functional objectives are a quantifiable statement of a departments goals which should enable it to contribute to the achievement of a business objectives
Functional objectives must be coordinated so that they don’t conflict with each other. This can be harder to achieve as the firm keeps growing and communication channels become more complex .
Short run and long run objectives?
Objectives can be short term and long term objectives.
The UK is often criticised for setting objectives that are too short term and don’t involve long term planning
Which order are things set in?
-mission statement then corporate aims then corporate objectives then functional objectives
