UNIT 1 - understanding nature and purpose of business Flashcards
bs exist in many shapes and sizes and for different
purposes
wht is an important reason why businessses exist
the opportunity for making profit
but the opppportunity for making profit is not the only reasons why
businesses exist
Uwhat are the 3 other reasons businesses can exist
provide goods and services
develop a good idea
provide help and support for others - most notably charities that raise funds in various ways
in terms of providing goods and services this includes
pubic services e.g nhs /polic / fire services
developing a good idea is also known as
enterprise
charities raise funds in various ways to help and support
the lives of others
mission statement aka
vsion statment
what is missiona statemnt
broad qualitative descripion about the organisation so stkh understand its intent
give example of nike mission statement
bring inspiration and innovation to overy athelete in the world
why do we have mission satemt
2 things
bring focus and meaning to business
act as a guide when making critical descisons that may affect direction of a business
when looking at objectives of a business its important to rember they are quite
complex and will vary according to circumnstances and type of organisaton
state the 5 common business objectives
profit
growht
survival
cashflow
social/ethical objectives
over recent years global nature of business and intense competition in many markets mean 2 other obj become increasingly importtant what are these
customer service
CSR
each functional area set objectives that should
conrtibute to the business achieving its overall objectives
what are corp obj/corporate iams
goals that help a business achieve its mission
corp obj drive what objectives
functional obj
what are functional obj
objectives of eahc department , more detailed and specific to eahc dpt
why do we have all these obj
can be a measure of success - success in mkting dpt needs a functional obj and cant get this from geenric mission statement
allows coord between managment and employees therfore giveing focus and direction to employees and maangers to help broader def of mission statemtn
mission statement outlines bigger picture nd generally establishes teh
core values and principles that help guide and conduct action of staff
how do objectives differ from mission statement
theyre actionable and measurable
without missio statemtn objectives have no
direction
but without objectives the mission statement is
unachievable
in addition to being actionable and measurable objectives hould have what charactersitics
smart characteristics
outline SMART ojective
Specific
Measurable
Achievable
Relasitic
Time bound
what does Specific mean
objective must be clear precise and well defined
what does Measurable mean
must be possible to know when an objective has been completed
what does Achievable mean
objectives must be within capabialities and have sufficient resources
what does realistic mean
an objective must be challenign but possible o achieve given capabilities and resources
what does time based mean
must be a dealdine to work to
give an exmaple of smart objective for coffe shop and say why smart
increase mkt share by 2.5% a year for the next 5 years
got clearly defined and measurable goal
business objectives arent all about making
profit
business objectives are lieklt to
change over time
the relative importance of different objectives is likely to
vary over time depending on circumntances
the relaive importance of diff objectives e.g in difficult economic times what is liekly to be more important
survival tha profit or enviro targets
relative impoartace of diff objectives i in booming economt what objective will be more important
profit
growth
why do business set obj reason 1 - the fact theyre measurable ….
the fact theyre measurable and time based means they can be used to evaluate performace
- if good business can reward them
*if bad implement training or diff methods of approaching task
why do bs set objectives reason2 - if theyre realistic and achievable …
if theyre realistic and achievable they can provide motivation for those responsible which will lead to increased productivity
why do bs set objectives reason 3 objectives should be specific ….
should be specific and as a result will give meaning to plannign and ensure that a busines remains focused on its mission
link - mission and objectives of a business can be a driver of decision making and strategy but importance is likely to
vary according o the opportunities and threats the business faces
profit
Money remaining once all costs deducted from revenue
profit canbe thought of as reward
owners/sh of a business recieve for taking risk of investing in business
as profit is a reward it provides an incentive for
setting up in business
revenue
moeny recieed from sales
revenue
selling price x quanity sold
variable costs
costs that vary directly with output
what are fixed costs
costs that dont vary as a result of changes in level of output
fixed costs dont chang ein teh
short term
total costs
fixed costs and variable costs
total costs represent the
total costs of production in a given time period
profit
TR-TC
Why is profit imprortant 4
reward for taking on risks
motivate employees
sign of financial stability
indicator of sucess
shareholders
explain profti importance in terms of reward for taking risks
owner takes risk as an entrepreneur and look for reward for profit which provides an incentive to set up business
in terms of sh they take risk which helps with expansino and D2D
explain profit importanc in terms of motivating employees
you can profit share
this can increase motivation , productivity and output and herfore sales which shoudl lead to more profit
have to be profitable to pay dividend and bs needs o grow in future and one of best sources of finance is retained profit as cheap
but takes a long time to build up
depedns on dividedns shareholders expecting and how st as opposed to lt they are
explain retined profits in terms of shareholders
and some it depends and eval points
have to be profitable to pay dividend and bs needs o grow in future and one of best sources of finance is retained profit as cheap
but takes a long time to build up
depedns on dividedns shareholders expecting and how st as opposed to lt they are
explain importance of profit as a sign of financial stability
if got profit and lots
suppleirs are more likely to trust the bs
and therfore extends trade credit
this improves cashflow and working capital
furthermore banks re more liekly to five loan
explain profit importance in terms of indicator of success
if its primary objective it shows the bs is achievinvg it
