unit 3.1 - what is business Flashcards
what is a business
an organisation that exists to provide goods x services to satisfy the needs + wants of in order to make a profit
goods
physical/ tangible products e.g. cars, electronics
services
intangible products e.g. insurance, hair dressers, taxi, cleaning
corporate objectives
objectives set for the whole business e.g. increasing profit
functional objectives
functional areas are departments within a business :
- marketing, HR, finance, operations, legal, IT, sales
these objectives must fit with the corporate objectives
mission statement
a statement of an organisations general purpose or reason for existence
- identifies a company’s aims x visions x what it wants to achieve in the long term etc but tends to be more general and qualitative
why businesses set objectives
- gives clear sense of direction x purpose (motivation)
- a focus for decision making
- targets for individual + group achievement (motivation)
- a means of measuring performance
SMART
specific
measurable
achievable/ agreed
realistic
time bound
why might a start up prioritise survival rather than growth
- focus on survival = generating sales x revenue in order to cover costs which may be difficult as a new business
- may struggle with cashflow after launching their new product
- threat of rivals
why might a large PLC need to generate high profits
= need to pay dividends when the business makes a profit as they may sell shares on the stock market
- maximise profit to maximise shareholder value + keep share price high in order to reduce risk of hostile takeover
why is profit important
= reward for taking risk
- motivator
- measure of success
- guide for future investments
- source of finance
- attractive to stakeholders e.g. shareholders
why does achieving revenue not instantly bring cash into the business
= credit
- may not receive cash straight away based on credit terms e.g. buy now pay later where suppliers may give longer time for a business to pay
sole trader
public sector & private sector & voluntary sector
public = anything owned by the government
private = owned and run by any private individual/organisation & generally have main objective of maximising sales x profit
voluntary = charities
private limited companies ltd
