3.1 AQA A LEVEL BUSINESS CHECKLIST

identify reasons why businesses exist? Such reasons should be financial and non-financial.

- to earn return for business owners = profit.

Play key role in wider society:

- creating create + sustain employment + develop skills of people

- drive innovation through R&D

- contribute to infrastructure of then country

- pay taxed on profits earned + collect taxes on behalf of government

- create wealth by providing returns on investment

distinguish between financial and non-financial objectives? Recognising

how they may inspire to set-up and run a business?

Financial objectives focus on monetary gains, such as profit maximization and revenue growth,

Non-financial objectives emphasize social responsibility and employee satisfaction.

Both types of objectives drive business strategy and decision-making.

Can you define what total revenue is? (turnover)

total amount of money a business earns from its sales of goods or services before any costs or expenses are deducted.

number of units sold X the price per unit.

Can you distinguish between a variable and fixed cost?

Variable costs change with production volume,

fixed costs remain constant regardless of output.

Variable costs

• change as output varies

• staff wages, raw materials

• total units produced X variable cost per unit

Fixed costs

• do not change when output varies

• rent, salaries, insurance

total cost

• fixed cost + variable cost

mission statement

• overriding purpose of business

• reason for existence

• for all stakeholders

• + = easy to understand, inspires + motivates

• - = not always supported by business, can be too vague, everyone has to agree

analyse the relationship between a mission and objectives?

• hierarchical strategic chain

• mission provides overriding goal of business, purpose of the existence of existence

• objectives provide SMART targets that operationalise + archive overall mission

private + public sector differences

• private = operated + owned by prove individuals, run for profit + earn returns for business owners

• public = operated + owned on behalf of public by funding from government, exist to provide g+s for public using public funds

analyse how objectives may differ between public and private sector

companies?

• private = aim for profit maximisation

• public = aim to provide/become essential services for public

sole trader

• individual owning business on own

• unlimited liability

• + = quick + easy to set up,

• - = unlimited liability, harder to raise finance

limited vs unlimited liability

• limited = shareholders not responsible for debt of business, protected

• unlimited = panders personally responsible for debts + liabilities, adds risk to operating

private vs public limited company

• private = incorporated business, privately owned, shares not traded on stock market publicly, shareholders normally family + friends (have to be invited)

• public = shares traded on stock market publicly, lots of shareholders, costly to administer

analyse reasons why a business would go public?

• often to gown business to access/raise share capital from existing + new investors

analyse reasons why a business would de-list from the stock market?

• converting back into ltd

• significant costs to comply with with regulatory requirements + high administrative costs

• protect against takeovers

Can you describe what an IPO is?

• initial public offering = going public

• process which ltd offers shares to public for first time on stock exchange to become plc

market capitalisation

• total market value of share capital

• share price X number of shares

• fluctuates daily based on share demand + supply

• demand outpaces supply = share price rises = increasing market capitalisation

  • low demand/high supply = prices + market capitalisation falls

describe what a dividend is and the role it plays in attracting investment?

• payment made to shareholders by company from earned profit

• amount paid per share

• not required to pay but expected

• attractive = providing direct return on investment, signaling financial health + stability

analyse the role and objectives of shareholders?

• owners of ltd or plc who hold share capital

• providing capital = invest finds needed for business expansion, operations + growth

• have right to vote = influence directors to run company to align with their objectives

• objectives = maximising returns, dividends, capital growth, ethical stance

charity or non-profit organisation

• operates to achieve social, environmental focused goals instead of trying to maximise profit for shareholders

• provide public benefit + support causes

• funding from donations, grands

effects of ownership or change in ownership on the mission of

a business?

• shifting priories form owner centric goals to shareholder value, increasing pressure for short term profits

analyse the effects of ownership or change in ownership on the objectives

of a business?

• shift from personal goals to profit maximisation + growth as ownership transfers from individuals to shareholders

effects of ownership or change in ownership on the decision-

making of a business? And performance of a business?

• directly affects performance regarding growth rates, risk tolerance + stakeholder satisfaction

social enterprise

• business that trades in open market to produce g&s but its primary purpose is to achieve social, environmental or community goals rather than maximising profit for shareholders

• why = achieving social change, stronger brand image as more ethical, access to alternative funding + support,

non-profit organisation

• business entity that operates to serve social, environmental or community causes rather than to generate profit for shareholders

• why = improve lives, protect environment, aim to generate surplus but then reinvested into business, founders motivated by a desire to provide a public service to support charitable cause

external environment

• PESTLE

• factors outside business control that influence its costs, demand, operations, strategic decisions

• creating opportunities & threats

demand

• amount of a product or service that customers are willing to & able to pat for at a given time

substitute good

• product or service that consumers perceive as similar to another

• allowing them to be used interchangeable to satisfy the same need or want

describe how substitute goods can impact upon competition?

• PED = high number of substitutes allows consumers to easily switch if price rises = produced is highly price elastic

• price wars = high number of substitutes leads to intense competition = often lowering prices to attract consumers

how competition influences demand?

• limits a firms pricing power, increasing consumer choice, reduces brand loyalty

• PED

• need for differentiation

what is meant by market conditions and how market conditions

may change, such as technology disrupting and making markets redundant?

• relates to the attractiveness of overall market in which a business operates

• affect all businesses in industry

• indicated of market conditions = economic growth GDP, market demand

• fast growing markets = encourage new entrants

• slow growing/declining market = makes market conditions harder for competitors fighting for their share of weak demand

real income

• amount of disposable income available to consumers

• factors impacting real income:

  • price inflation

  • wage growth

  • employment levels

  • interest rates

  • government tax policy

analyse how changes in average income may influence demand for

goods/services?

• YED = demand changes based on nature of the product

• normal goods 0<1 = demand grows as income rises = Heinz ketchup

• inferior goods < 0= demand falls as income rises = Tesco own brand ketchup

• luxury goods >1 = when demand grows proportionally faster than income = Rolex

analyse how inflation may influence wage demands and the impact on the

cost to businesses?

• eroding purchasing power of employees = higher operational costs

• trade union power = may have more power to negotiate higher wages during inflationary periods

interest rates

• cost of borrowing money or reward for saving money = %

• set by Bank of England through base rate

• rising IR = borrowing is more expensive = spending decreases = demand falls

• rising IR = saving becomes more attractive = rather save than spend = real income used for consumption decreases = demand falls

• rising IR = business borrow less = less investment + hiring = lower incomes + job insecurity = demand decreases

• falling IR = borrowing becomes cheaper = consumers take loans = spending increases = demand rises

• falling IR = saving becomes less rewarding = more disposable income is spent instead = demand increases

• falling IR = business borrow more = more investment + job creation = higher employment + incomes = demand increases

demographics

• statistical characteristics of a population that businesses use to understand + segment market

• factors:

  • age

  • gender

  • income levels

  • location

• changes influence demand + market conditions:

  • changes in consumer needs + preferences

  • businesses must adapt products + marketing

  • firms that fail to adapt may lose customers = demand shifts between industries

• impact on market conditions:

  • growing segment = market growth = increased competition

  • reshape entire markets

• influence costs for business:

  • labour costs for training, HR, employment

• need to have ability for adapt

business ethics

• doing what is right/fair + responsible = not just what is profitable

• considering impacts of actions on:

  • customers

  • employees

  • suppliers

  • environment

  • wider society

pressure groups

• group that seeks to change policies or business practices by applying pressure through campaigns or public influence

• aim to:

  • change laws/regulations

  • influence business behaviour

  • raise public awareness of issues

fair trade

• paying produces a fair stable price + ensuring ethical working conditions

• features:

  • safe working conditions

  • fair wages

  • no exploitation

• results in higher costs of supply + higher prices for customers = BUT ethical sourcing improves brand image + attracts ethically conscious consumers = increase demand + customer loyalty

analyse how environmental issues can influence the change in costs for

businesses?

• increase cost structure of business

• compliant with environmental regulations = stricter environmental laws = invest in cleaner technology + process = higher fixed costs = reduced profit margins

• switch to eco-friendly/sustainable inputs = more expensive = production costs increase

• shift towards renewable energy = short term costs rise = BUT long term cost saving

• failure to meet environmental standards = fines = increasing business costs

how environmental issues can influence customer behaviour

regarding demand?

• increase demand for eco-friendly products = prefer sustainable + ethical products = demand increases for sustainable goofs = increase sales for ethical business

• some customers willing to pay premium for environmentally friendly products = demand less price sensitive = more inelastic

• businesses with string environmental policies = gain positive reputation = attract more customers = demand increases

Can you analyse how businesses can consider ethics in decision-making?

• suppliers = may involve higher costs = BUT improves brand image + reputation = customer trust + loyalty = increase demand = ethical treatment of employees = higher Labour costs BUT improved motivation + productivity = reduced recruitment costs

Can you analyse the influence of pressure groups on business decision-making?

• through campaigns + public influence

• negative publicity from campaigns = damages brand image + fall in demand = business needs to change policies = increase costs BUT protects reputation

Can you analyse how fair trade would influence demand?

• fair-trade seen as ethical + responsible = attract ethically conscious consumers = demand increases = builds brand differentiation = competitive advantage = higher sales

• HOWEVER have higher prices = some consumers will not pay = demand may be limited

Can you analyse how fair trade may impact upon costs for a business?

• businesses pay higher prices to suppliers = increase costs of sales

• meeting fair-trade standards = administrative costs increase

• may need to change suppliers = potential inefficiencies

• Improves brand image = higher demand = ECOS = reduce average costs overtime

• can be a source of competitive advantage but only if consumers value it