Unit 3.1 Flashcards
Business Objectives
Aim that business wants to achieve - usually SMART
SMART
Specific, Measurable, Achievable, Realistic, Timely
Mission statement
Formal phrase that sets out aim of business
Mission objectives
-Mission Statement
-Corporate strategy
-Business objectives
-Functional objectives
Why set Objectives?
Show the business is progressing in the right direction
Fixed costs
Do not vary depending on output
Variable costs
Do vary depending on output
Business forms
Legal structure in the UK. Most businesses in the UK are private limited companies, but not all
Limited Liability
owner of the business has no personal liability for business debts - Owner has a separate legal identity from the business and is NOT liable for payment of debts etc.
Unlimited liability
The owner has personal liability for business debts - if there is no money int he business then the owner would need to pay off debts from personal finances
Sole trader
Business owned by the owner - have full control over the business’s decision making. - mainly small businesses - have the disadvantage of unlimited liability
Private Limited Company (Ltd)
can expand by selling more shares - fiends and family can buy shares - shares cannot be bought by the public - Ltd owners have full control over who can buy shares. - Have benefit of limited liability.
Public limited companies (PLC)
Share are mad available on the stock market - needs to issue a prospectus where potential investors are invited to purchase shares before flotation (called an IPO)
Public sector organisations
owned by the UK government - Taxes go towards paying for these businesses - 5.2 million people are employed in the public sector
Social enterprise
non-for-profit organisations - businesses with with primarily social objectives who excess profit is reinvested for that objective instead of being put back into the business
Influences on business forms
objectives of the business
How the business is financed
what products and services are being offered
Ordinary share capital
provides investors with voting rights (one vote per share ) and represent proportionate ownership of a company - receive dividend payments depending on a company’s performance.
Market Capitalisation
Total value of the company or the total value of the shares in the company
Dividends
Investors expect to be paid dividends after a company makes a profit
Role of shareholders
owners of the company and provide financial backing in return for potential dividends
Why shareholders invest
In hope of return on investment which is better than a bank’s savings account’s, this is there capital gain
Influences on share price
Supply and demand in the market
Interest rates
Political climate
Management of the company
Market conditions
Situation of a particular market at a particular point in time
Interest rates
Cost of borrowing
Demographic rates
Any factors relating to the structure of a population
Fair trade
made between businesses in developed countries and developing countries in which fair prices are paid to the producers
Social enterprises - Key facts
Over 100,000 in the UK
contribute £60billion annually to the economy
Employ 2million people
Social enterprises, What?
a business that pledges to donate 50% of it’s profits - aim is still to make profit but to also spend some capital om a cause of their choice.
Social Value act
passed in 2012 - requires all commissioners who produce a service to consider social, economic and enviromental benefits
Social enterprises - Examples
Tarem Services limited - aims to make sure cleaners are cared for at work - 2006, they gave their employees 6 monthly dividends
PESTLE - Political
impact that government decisions have on a business - e.g. corporation tax
PESTLE-Social Impacts
refers to trends which change over time. e.g. = increased migrant workers in UK means = lower wages = lower costs and lower prices.
PESTLE-Economics
economic growth = growing consumer confidence = more spending.
Also includes inflation, interest rates, and exchange rates.
PESTLE-Technological
changes in technology give consumers more ways to buy = e.g. more goods from china. Can also include Robotics, E-commerce and automation.
PESTLE-Legal
laws that effect businesses - categories = consumer laws, employment, laws and environmental laws.
External environment
anything outside of the business that may have an impact on the way it operates
Factors affecting cost and demand: Competition
many competitors and high demand = lower prices to attract customers
Factors affecting cost and demand: Market conditions
type of market a business is going into - includes number of competitors, rivalry and market growth rate
Factors affecting cost and demand: Incomes
higher incomes mean higher wages = higher costs for the business - however customers will also have more disposable income
Factors affecting cost and demand: Interest rates
high rates = customers cant borrow money = demand will drop
Factors affecting cost and demand: Demographic factors
UK now has an older population which leads to an increased demand for mobility products. Culture etc also affect the types of products being sold in an area
Factors affecting cost and demand: Enviromental issues
being environmentally friendly can lead to higher costs but also higher demand
Factors affecting cost and demand: Fair Trade
requires companies to pay prices no lower than the market price - customers are willing to pay higher prices for fairtrade products.
