Unit 1 - What is Business Flashcards
Business definition
A business is an organisation that exists to provide goods and services on a commercial basis to customers.
What is a good
A tangible product - physical
What is a service
An intangible product
What is B2C
When a Business sells straight to a Consumer
What is B2B
When a Business sells their product to other Businesses
What is B2G
When a Business sells to Government
What are the 4 reasons Businesses exist
- Create employment - 30.61M in employment in September 2014
- Create wealth - pay workers and corporation tax
- Create new products and services - e.g medicines and environmental goods
- Can enhance a countries reputation - Uk music industry
Transformation process definition
The conversion of a firm’s inputs into outputs that reach the consumer and adds value.
Added value formula
selling price - the cost of bought in materials, components and services.
Mission statement definition
A statement that sets out what they are trying to achieve (main purpose)
corporate aims definition
The long-term statement of what the business intends to achieve
Objectives definition
More precise goals that must be achieved in order to achieve the aims and mission statement.
Example of an objective
To increase revenue by 15% by the end of 2023
What does the acronym SMART mean when writing an effective objective
Specific
Measurable
Agreed
Realistic
Time specific
What does S mean in SMART
Specific - the objective must be defined and clear what they are measuring (sales or profits)
What does M mean in SMART
Measurable - The objective must include a quantifiable target - e.g 10% increase
What does A mean in SMART
Agreed - Must be disgusted and mutually agreed so that more people are willing to commit
What does R mean in SMART
Realistic - People have to be motivated through attainable targets
What does T mean in SMART
Time specific - The objective must have a deadline
What are 6 common business objectives
- Social and ethical objectives
- Cash flow
- Diversification
- Survival
- growth
- profits and profit maximization
Why set objectives
-gives firms clear direction and focus
-motivate staff attainable goals giving a sense achievement and satisfaction
-Measure success
Revenue
money received from sales of goods and services
total revenue formula
total revenue = selling price x number of items sold
Fixed costs definition
Costs that do not change directly with the level of output
Variable costs
Costs that change directly with output
total costs formula
total costs = total fixed costs + total variable costs
Profit definition
The difference between total revenue and total costs - money that is left from sales once all costs have been deducted
profit formula
profit = total revenue - total costs
Why are profits important
- useful measure of progress and success
- motivate and encourage investment
- to be reinvested into the firm
What do mission statements contain
- The organisations values
- Non-financial goals it may pursue
- The benefits of the business to the community
- How consumers are able to be satisfied
What are the benefits of a mission statement
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What are the negatives of a mission statement
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