1. What is business

Inputs:​

• Land ​

• People​

• Finance/ capital​

• Components/ materials​

• Natural resources

Outputs:

• ​Services​

• Goods​

• Waste​

Why do business exist?​

• Create jobs​

• Creating wealth for the country ​

• New innovative products for society = enhancing a countries reputation

What is the cycle of business?

1. Create goods and services

2. To meet needs of customers

3. Revenue generated

4. If higher than costs, profit made

5. Reinvest for growth or paid to owner as reward

6. Repeat

What are the three sectors and what do they do?​

• Primary- extracting raw materials​

• Secondary- manufacturing​

• Tertiary- providing a service

What is a mission statement?

A document communicating the purpose of a business and why it exists

Where does a mission statement come from:​

• Values of the founder​

• Culture of the business​

• Society's views​

• The industry it operates in

What are objectives?

Medium to long term plans to coordinate business functions and act as a target

What are the main objectives of a business?​

• Profit= sr- tc​

• Growth​

• Survival​

• Cash flow​

• Social and ethical​

• Diversification

What are some influences on objectives?

• How competitive the market is

• Ownership structure

• Size of business

• Sector

What are corporate objectives based on?​

• Innovation​

• Growth​

• Shareholder value​

• Social responsibility

What are functional objectives?

Objectives that are made at the department level to help meet the corporate objectives

Why set objectives?​

• Provide steps to achieve aims​

• Measure success against targets​

• To motivate and reward staff

Objectives should be “SMART”. What does this stand for?

Specific- real numbers/ deadlines​

Measurable- make the goal trackable​

Attainable- challenging but possible​

Relevant- be honest with capability​

Time based- include a deadline

Business

An organisation that transforms inputs into outputs that are purchased by their customers.

GDP

The value of all the goods and services produced in a country.

Unlimited liability

The owner and the business are the same entity.

Limited liability

The business and owner are separate.

Flotation

The process of converting a private company into a public company by issuing shares available for the public to purchase.

Market capitalisation

The total value of the issued shares of a PLC.

Public sector

Companies owned by the government and funded by them too.

Private sector

Businesses and companies owned by people. Main aim is to make profit.

Third sector

Charities such as Oxfam, not for profit.

Company

An organisation that has its own legal identity (incorporation)

Dividends

Share of profit that are distributed to shareholders.

Social enterprise

Businesses that trade for a social or environmental purpose.

Fairtrade

A social movement that exists to promote improved trading terms and living conditions for producers of products in less developed countries.

Sustainable production

Occurs when the supply of a product doesn't impose costs on future generations by, for example, depleting non-renewable resources.​

What is the role of a shareholder?​

• Own a % stake in a company​

• Benefit from increases in share price​

• Benefit from dividend payments every 3-6 months

What factors influence share price?

​

• Speculation​

• A company announcing it's profit​

• Announcing job losses​

• About to be taken over by another business​

• Economy- recession

What are some demographic factors?

​

• Uk population growing = increased demand​

• Migration to Uk = increased labour force​

• Longer life expectancy= changing demand for goods​

• Increasing amount of working parents= increased demand for childcare services​

• Diverse communities= demand for non-traditional foods

Market capitalisation calculation

Market capitalisation= number of shares issued x current market price​

Flotation- pros

Able to raise finance through stock market flotation​

Limited liability​

Considered more reliable to lenders​

More public awareness​

Flotation- cons

Risk of being taken over​

Financial accounts published​

More public scrutiny​

Shareholders have more influences on how business is run​

What things should a business consider during competition?

​

• The growth rate of their market​

• The typical profit margins in the industry​

• Number and size of competitors​

• Pace of innovation​

• Bargaining power of suppliers and customers

Internal factors affecting decline

• Lower quality​

• Closing stores​

• Short term couponing ​

• Product range is too wide

External factors affecting decline

Being a environmentally friendly business- pros

Avoid negative publicity ​

Differentiates from others​

Avoid fines and penalties​

Being a environmentally friendly business- cons

Increased cost of raw materials​

Waste disposal costs​

Lower profit margin on fair trade goods​

What are some factors affecting competitiveness of a business?

​

• Number and size of competitors​

• Bargaining power of suppliers​

• Extent of which products can be differentiated​

• Knowledge of buyers and sellers​

• The amount of regulation

When share prices rise, does demand for shares increase or decrease?

What does this mean for the business?

​​

• Positive publicity​​

• Shareholders feel more confident to spend​​

• Managers may receive a bonus​​

• Easier to raise capital​

When share price falls, does demand for shares increase or decrease?

What does this mean for the business?

​​

• Indicates poor performance​​

• Vulnerable to a takeover​​

• Harder to raise capital ​​

• Shareholders less confident to spend

Small businesses in competition, have:

• Less competition

• Easier for them to build relationships

• Less economies of scale

• Low barriers to enter the market- more likely for more businesses to enter the market

Large businesses in competition, have:

• More potential customers

• More regulation

• More international competition

Anagram to remember whether the pound is weakening or strengthening

Strong​​

Pound​​

Imports​​

Cheap​​

Exports​​

Dear 

Positive impacts of competition

Increased innovation​

Pushed to create a wider product range​

Negative impacts of competition

Have to lower prices​

Increase in promotional costs​

May lead to unethical behaviour​