What is a Business? Flashcards
what is a business?
an organisation that transforms
inputs (resources) into outputs
(products/services) that are
purchased by their customers.
Why do businesses exist?
- to create goods and services.
- provide employment opportunities
- fill a gap in the market
- help the community (social enterprise)
- improve existing products
- provide a source of revenue for government (tax)
- creating wealth for country
what is a mission statement?
the means of communicating to stakeholders what the organisation is doing and what it ought to be doing.
What are the benefits of a good mission statement?
- motivates staff and those interested in business
- attracts investors and resources
- good public relations tool
- clarifies purpose and focus
what are some characteristics of a good mission statement?
- defines the markets or business in which the firm wants to operate
- relevant to all major stakeholders
- excites, inspires, motivates and guides
- contains a formulation of objectives that enables progress towards them being measured
- differentiates the business form its competitors.
what are some criticisms of mission statements?
- too vague and general
- views as a public relations exercise
- not supported full by senior management
- not always supported by actions of the business.
what are corporate aims?
the long term targets and plans to fulfil the mission statement
what are corporate objectives?
medium to long term quantifiable targets to fulfil the mission statement
what is a corporate strategy?
the actions to be taken by the business to achieve its objectives
give examples and explain some business objectives
ethical - change packaging, cut down on plastic
profit - increase profit margins, maximise profits
growth - gain market share and increase number of outlets
survival - achieve minimum level of sales and sales revenue to ensure costs are met and market share is retained.
cash flow - increase inflows, reduce outflows
social - support solutions, enhance brand images and reputations.
why do businesses set objective?
- clear statement of what needs to be achieved
- focus on all activities on business (marketing, operations, finance)
- provides targets for individuals and group achievement
- provides criteria for evaluating performance
- mean for measuring performance
how do you calculate profit?
revenue - total costs = profit
what are total costs?
the sum of expenses a company needs to manufacture a specific level of output
importance of profit (motivator)
- sole traders can keep all profit
- ltds owned by people running the business
- profit sharing schemes in which staff are given incentives to work effectively
importance of profit (further investment)
- guide to see where it is easier to make profits
- where profits are high and low
