Unit 1 Flashcards
what is the mission statement?
defines what an the organisation is and why it exists
what are the main common business objectives?
- survival
- growth
- profit
-customer service - corporate social responsibility (CSR)
what is CSR?
refers to the commitment of a business to behave ethically towards its workforce.
what are objectives?
goals set to achieve the overall mission of the business
what guidelines should objectives follow?
Smart
Measurable
Achievable
Realistic
Time-based (deadline)
why do businesses set objectives?
they can be used to evaluate performance (measurable & time-based)
they can provide motivation for those who are responsible (realistic and achievable)
ensures the business remains focused on their mission (specific)
what 2 categories do private sector businesses fall into?
corporate business
&
non-corporate businesses
what are corporate businesses?
public limited companies
private limited companies
what are non-corporate businesses?
sole traders
partnerships
how do corporate businesses differ to non-corporate businesses?
they have a legal identity that is separate from that of their owners
what is their limited liability limited to ?
the amount the owners have invested
what are some characteristics of private limited companies (LTD) ?
- they are normally much smaller than PLC’s
- share capital must not exceed £50,000
- shares cannot be bought or sold without the agreement of shareholders, and they cannot be sold on the stock exchange
what are some characteristics of public limited companies (PLC) ?
- shares can be traded on the stock exchange
- must have a minimum share capital of £50,000
- they have to publish more financial information
what 2 forms must those forming a company submit to the registrar of companies?
. memorandum of associations (company’s name & address)
. articles of association (internal arrangement of the company e.g. frequency of shareholders meetings)
how many people does a soletrader consist of ?
owned by a single person
how many partners does a partnerships usually consist of ?
2-20 partners
what are some advantages of sole traders ?
+ simple and easy to establish
+ the owner receives all the profits
what are some disadvantages of sole traders ?
- unlimited liability
- the owner is likely to be short of capital for investment and expansion
what are some advantages of partnerships ?
+ between all the partners they may have a wide range of skills and knowledge
+ partners are able to raise greater capital than sole traders
what are some disadvantages of partnerships ?
- control is shared amongst partners
- unlimited liability
what are some advantages of LTD’s ?
+ shareholders benefit from limited liability
+ greater access to large amounts of capital
what are some disadvantages of LTD’s ?
- cannot sell stocks on the stock exchange to raise finance
- shareholder equity is limited to £50,000
what are some advantages of PLC’s ?
+ public companies can gain positive publicity and raise finance from selling shares on the stock exchange
+ suppliers will be more willing to offer credit to PLC’s
what are some disadvantages of PLC’s ?
- a stock exchange listing places more pressure on short-term financial results, not long-term performance
- PLC’s have to publish a great deal of financial information
what is a not-for-profit business?
a business with objectives other than making a profit e.g. charity
what are some not-for-profit objectives?
. to provide services to local communities
. to give people job-related skills
. fair-trading activities (importing products from less developed countries above the market price)
what are Mutuals ?
generally private bussinesses whose ownership base is made up of their clients and policy holders, and they run for the benefit of their member’s e.g. co-op
what are public sector organisations ?
businesses and services owned by the government
e.g. police
what is privatisation ?
the process of selling a business or organisation to the private sector
what are some factor to be considered when deciding which business form is most appropriate ?
- formalities and expenses (sole-traders are cheap and easy to set up unlike incorporated businesses
- size and risk
- objectives and the owners (greater access to capital)
what are the reasons for changing business forms ?
. growth
. capital
. acquisition or takeover
why may some business move from a public to private limited company (PLC -> LTD) ?
to escape constant criticism of the city and short-term pressure of shareholder objectives
what is the role of shareholders?
to contribute with investment into the business
attend general meetings called by directors and approve their decisions
what are 2 reasons why private individuals and financial institutions may invest in shares?
dividends
capital growth (investment)
what are the reasons for changes in share prices and dividends fluctuations ?
influenced by demand for that business
( buyers > sellers, price increases
buyers < sellers, price decreases )
what influences the demand for shares of businesses ?
- performance
- expectation
- changes in market conditions of competitive environment
- world-uncertainty
which type of businesses are greater affected by their achievement of profit ?
incorporated businesses (PLC’s & LTD’s)
what does the external environment refer to ?
the aspects that are out of control of the business
what do the aspects of the external environment include ?
- competition
- market conditions
- economic factors (incomes and interest rates)
- social and environmental issues
- demographic factors
how do aspects of the external environment affect businesses ?
demand for goods/services
costs
ability to achieve objectives
how can competition specifically impact businesses, use examples to support your answer ?
- demand, strategies such as low cost products or differentiated products
e.g. the impact of aldi and lidle on tesc, sainsburys etc. - innovation and invention
e.g. apple, nike - technology
e.g. morrisons slow to introduce online shopping
how can market conditions impact businesses, use examples to support your answer ?
- size
- growth rate
- barriers to entry
- seasonal factors
- intensity of competition
(all these factors can influence the demand and costs of goods and services)
how can economic factors impact businesses, use examples to support your answer ?
(stage of the economic cycle, interest rates, inflation, exchange rates, incomes)
these factors can all impact the demand and costs of businesses significantly
how can demographic factors impact businesses, use examples to support your answer ?
- growing population
- ageing population (uk)
these factors can affect the demand and the nature of goods/services purchased. these can also affect the costs of businesses due to an ageing retirement age, before people can receive their state pension.
how can environmental issues and fair trade impact businesses, use examples to support your answer ?
- pollution
increases the costs of firms as they have to ensure they producing in a environmentally friendly way - fair trade
increasing the costs of firms as there is now more attention on firms being more considerate of farmers and suppliers in general in less developed countries to ensure they are being compensated fairly
could improve the the reputation of these firms increasing the demand for their goods/services
what is the acronym for external factors affecting businesses? ?
PESTLE
political (gov type, funding and grants)
economic
social
technological (emerging tech)
legal (regulations, employment law)
environmental
