what is a business ( unit 1 )

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  • Created by: ManuSB
  • Created on: 06-03-24 15:16
Why businesses exist
Key business objectives:
- To make money
- To provide a service
- Provide employment opportunities
- Fill a gap in the market
- Help the community (social enterprise)
- Be environmentally friendly
- Improve existing products
- Survive
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define Mission Statement
this provides the overriding goal of a business and the reason for its existence; and a strategic
perspective for the business and a vision for the future
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Benefits of a good mission statement:
- Clarifies purpose and focus
- Motivates staff and those interested in the business
- Attracts people (such as investors) and resources
- A good public relations tool
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Characteristics of a good mission statement:
- Contains a formulation of objectives that enables progress towards them to be measured
- Differentiates the business from its competitors
- Defines the markets or business in which the firm wants to operate
- Is relevant to all major stakeholders – not
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Criticisms of mission statements:
- Not always supported by actions of the business
- Often too vague and general
- Views as a public relations exercise
- Sometimes regarded cynically by employees
- Not supported wholeheartedly by senior management
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Corporate aims and objectives:
- Mission statement – the overall reason for the business’ existence
- Corporate aims – the long term targets and plans to fulfil the mission statement
- Corporate objectives – the medium to long term quantifiable targets to fulfil the mission statement
-
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Types of business objectives:
- Ethical(e.g. completely cruelty free;
- Profit (e.g. increase profit margins;
-Growth (e.g. number of shares
-Survival (e.g. achieve minimum level of sales
- Cash flow (e.g. reduce outflows;
- Social enhance brand images and reputation)
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Main functions of objectives:
- A clear statement of what needs to be achieved
- Focus’ on all activities of the business
- Provides targets for individual and group achievements
- A means of measuring performance
- Provides a clear focus for decision making and a target to aim for
-
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Profit formula
revenue – total costs
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Total Costs formula
fixed cost + variable cost
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Importance of profit:
- Motivator(Profit sharing schemes in which staff are given incentives to work effectively)
- Further investment
- Finance(Avoiding paying interest)
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Unlimited Liability
owners are personally responsible for the debts of the business. This means their personal
possessions such as their cars etc would pay for debts should the business go bankrupt
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Limited Liability
the business has its own legal identity
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define sole trader
a self-employed person who owns and runs their business as an individual.
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Strengths of a sole trader
- Don’t need to register anywhere (only have to tell HMRC)
- Owner keeps all of the profits
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Weaknesses of a sole trader
Unlimited liability – can take personal possessions if the business goes into debt

Can’t sell shares so no extra money
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public limited companies(PLC)
this refers to all the businesses and organisations which are owned and run by the government
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Strengths of a public limited company
Limited liability – can only take assets that belong to the business to pay off debts

Can use all types to raise finance
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Weaknesses of a public limited company
Profit must be shared with the shareholders in the form of dividends

Corporation tax
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Private limited companies (LTD)
part of the economy that is not state controlled, and is run by individuals and companies, usually for profit

eg sole trader , partnership
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Strengths of a private limited company
Limited liability – can only take assets that belong to the business to pay off debts

Can use lots of ways to raise finance
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Weaknesses of a private limited company
Profits must be shared with the shareholders in the
form of dividends


Have to pay to register the business
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define non profit organisation
a business that aims to do something other than to make profit for the owners, such as providing a public service or helping people.
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define Shareholders
they are the owners of a limited company and they gain their financial reward from share ownership
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shareholders
- A share of the profits earned by the company – paid out as a dividend
- Growth in the value of their shareholding (compared with the cost of buying the shares) – which is "realised" when the shareholder sells the shares to someone else
- Shareholders pl
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Market Capitalisation
this represents the total market value of the issued share capital of the company.
(When demand for shares increases, the share prices increase too)
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Market Capitalisation
the current share value x the number of shares issued
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Factors that affect share price:
- Number of shares available – the more shares that are available, the more people will want to invest in them
- Business expansion – shareholders will receive more dividends due to an increase in profit margins
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Mission and Objectives – depending on business form:
- Sole trader – achieve a work life balance
- PLC – pressure to maximise shareholder’ return
- NGO – focused on achieving social actions
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The different areas of the external environment that affect a business:
PESTLE C
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The external business environment and how it affects it:
- Current and changing conditions within the external environment have an impact upon a business
- It can have a direct impact on their mission statement, aims, and objectives
- The external environment helps us to understand choices that a business has m
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Factors that affect demand:
- Price
- Income
- Substitutions
- Supply
- Market trends
- Complimentary goods
- Marketing and advertising
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what is a demographic factors
they are related to changes in the characteristics of the population of a country .
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demographics and its impact on demand for goods and services
- the fact that pop has increased in recent years has led to an increase in overall demand of goods and services
- changes in size and significance of difference demographics groups are having a significant impact on the pattern of demand of goods and s
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Other cards in this set

Card 2

Front

define Mission Statement

Back

this provides the overriding goal of a business and the reason for its existence; and a strategic
perspective for the business and a vision for the future

Card 3

Front

Benefits of a good mission statement:

Back

Preview of the front of card 3

Card 4

Front

Characteristics of a good mission statement:

Back

Preview of the front of card 4

Card 5

Front

Criticisms of mission statements:

Back

Preview of the front of card 5
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