Understanding the nature and purpose of business Flashcards
What is the ‘mission’ of a business?
A business aim (general statement of where the business is heading) expressed to make it seem especially purposeful and motivating
What are SMART objectives?
Stated measurable target of how to achieve business aims
What makes up SMART objectives?
- Specific
- Measurable
- Agreed
- Realistic
- Time specific
Why do businesses set objectives?
- Managers can feel confident in making decisions
- Motivation
- Basis for devising the strategy
- Budgeting
What are the 5 legal structures that a business can choose from?
- Social enterprise
- Sole trader
- Partnership
- Limited company
- Non-for-profit
What are the advantages of being a sole trader?
- Quick and easy to set up
- Owner has complete control over decision making
- Minimal paperwork
- Easy to close/shut down
- 1 person benefits financially
- No administrative costs to pay when setting up
What are the disadvantages of being a sole trader?
- Unlimited liability
- Limited source of finance
- The business is the owner e.g. the business suffers if the owner is ill
- Pay more tax than a company
What are the advantages of being a partnership business?
- Minimial paperwork once set up
- Expertise and efforts from more than 1 owner
- Specialist skills
- Greater potential to raise finance
What are the disadvantages of being in a partnership?
- Unlimited liability
- A poor decision made by 1 owner may damage the interests of other partners
- Harder to raise financre than a company
- Complicated to sell or close
What are the advantages of being a limited company?
- Shareholders are protected
- Easier to raise finance
- Stable form of structure - business continues if shareholders change
- Can pay less tax
What are the disadvantages of being a limited company?
- Greater admin costs
- Public disclosures of company’s information
- Director’s legal duties
- Have to follow more expensive rules e.g. producing audited accounts
What do political influences include?
- Services
- Infrastructure
- Tax policy
- Regulation
- The UK in the EU
- Change of government
- Terrorism and violence
What do economic influences include?
- Growth rate
- Inflation
- Labour costs
- Business cycle (boom or recession)
- Unemployment and employment rates
- Exchange rates
- The stock market
What do social influences include?
- Demography e.g. age structure, immigration, refugees
- Education
- Cultural norms
- Income distribution
What do technological influences include?
- Online/digital developments on sales and marketing
- Robotics/automation on processes such as manufacturing
- Development of new productws which might make others obselete
- Payment methods
