The purpose and nature of Business Flashcards
What is a mission?
The overall goal of a business set by the boss (in a small firm) or by the board of directors (in a large one).
What is an aim?
The general statement of where a business is headed; missions take this statement and make it more motivational
E.g. An aim might be ‘to be No. 1 in the market for advanced engines’ but when dressed up as a mission this becomes ‘to provide the finest, most technologically advances power system
What is a reason to turn an aim motivational?
to excite customers and staff and help them feel a part of the project just as customers once felt buying innocent smoothies was helping ‘to make the world a little fruitier’
What is an objective?
Small targets set to help achieve the mission
Why are objectives set?
Objectives are set because a boss cannot make every decision especially bosses of large companies e.g. the boss of 21,300 people running Rolls Royce. Therefore the more junior staff have the authority to make middle-ranking decisions
Benefits of setting objective
Managers and staff are motivated because they have an aim to achieve
The business objective of making profit
This will mean to achieve sales revenue that is higher than total costs and it is vital to long-term health. As it provides the capital to fund business growth. It also provides a safety blanket that allows business to take a risk that even if it fails the business will not go under. To do this they use:
Profit Optimisation: Getting the right balance between not so much profit as to risk exploiting the customer but not so little to affect firm viability
Profit Maximisation: Attempt by a business to make as much profit as possible as fast as possible. Big companies may follow this approach if they suspect a rival is about to buy them out. So that the company will sell for a higher price.
The business objective of growth
This is to increase in size by value of sales or volume of sales (or both).
This may be organically i.e. opening new stores and launching new products or externally i.e. by joining with other businesses or taking them over.
Most common objective by online businesses. Their assumption is if we get the numbers today we will get the profit’s tomorrow
The business objective of survival
This means to continue to exist as a business. This may be the primary objective of a start up business or one experiencing difficult trading connections
The business objective of cash flow
Cash flow is the flow of cash in and out of the business over a period of time
The goal is to ensure sufficient cash is available to meet day to day expenses. This is most important for small businesses
The social business objective
To behave in a way that benefits society, this could include treating key stakeholders including suppliers and employees in a fair manner or reducing negative impacts on the environment
The ethical business objective?
To behave in a way that benefits society, this could include treating key stakeholders including suppliers and employees in a fair manner or reducing negative impacts on the environment
What are business functions?
4 main sections of the business- marketing, people, finance and operations
How do they work together?
Each function come up with their own plan for meeting the overall objective and then a marketing plan and then a financial plan
What is the order?
Objectives then strategy then marketing and people and finance and operations
