Business objective 1.5

define a business

an organisation that exists to provide goods or services to achieve an objective

5 key features of a business

-purpose

-resources

-ownership

-profit/non-profit goals

-risk + reward

explain purpose

meet key customer demands

explain resources

use resources such as people, equipment, raw materials and tech to produce goods or deliver services

explain ownership

businesses can be owned and operated by individuals, groups or the government

explain profit/non-profit goals

many business operate to generate profit, others focus on social or charitable objectives

explain risk + reward

starting and running a business involves risks such as investing with the expectation of rewards such as profit, growth or personal satisfaction

5 reasons you should start a business:

-to become wealthy

-to help others

-monetise fame

-independence

-challenge

describe what a mission is

a general direction which the business is heading- its purpose or reason for being

describe a mission statement

the purpose of the business is shared to staff in form of mission statement- explaining business aims and helps guide decision making

describe aims

long term goals which business seek to achieve- often general and aspirational (open a new store, gain more profit)

describe objectives

short term goals which need to be met in order to meets its overall aims and succeed in achieving its mission

list SMART objectives

Specific- clear, precise

Measurable- include a way to track progress

Achievable- should be challenging

Relevant- should align with overall mission

Timely- should have a deadline

when are the 3 points of survival in a business

-when a business first starts

-when a new competitor joins the market

-when trading conditions become difficult

explain when a business first starts

-low revenue (no customers)

-high costs (stock, advertising, premises)

-low profit

explain when a new competitor joins the market

-competitor has cheaper, newer, better product

-low revenue-cant cover costs

explain when trading becomes difficult (e.g. BA in march 2020)

-people cut back on spending (cost of living, job loss)

-low revenue

-increase in costs (oil)

-low profit

define profit

financial reward for the risk taken by entrepreneurs in starting a business

define profit maximalisation

when owners/shareholders prioritise making the most profit as possible

when would a business pursue profit maximalisation

-before the creation of something (product, branch, globally)

-businesses will aim to keep costs as low as possible and raise prices as high as possible before damaging customer loyalty

define price skimming

-starting with an initial but high price to take advantage of people who will pay the high price then slowly lowering over time

define profit satisfice

occurs when a business aims to earn just enough profit to keep its stakeholders happy rather than pushing to maximise profits

3 reasons why a firm should profit satisfice before pursuing other objectives

-to cover cost business gains

-to satisfy financial needs of business owners/shareholders

-to at least cover opportunity cost of starting business

define sales maximisation

-the max no. of sales, used before sale of business

strengths and weaknesses of sales maximisation

-most businesses can raise profit by selling more output

-can win a larger market share

-reduced profits

-unsustainable growth

define prioritising market share

seek to have the largest market share

strengths and weakness of prioritising market share

-brand recognition

-increased revenue/higher profit to dominate market and lower costs

-cost of advertising

-unsustainable

define cost efficiency

minimising average cost of production

strengths and weaknesses of cost efficiency

-competitive advantage by lowering price

-lower quality

-employee dissatisfaction

-short term focus

-negative brand image

define employee welfare

act of placing staff at central business objective

strengths and weaknesses of employee welfare

-reduces staff turnover

-improves motivation

-easier recruitment

-higher cost

how could employee welfare be improved

-making work environment cleaner, less noisy and less crowded

-ensure staff are given breaks

-maintaining high levels of respect between staff

strengths and weaknesses of customer satisfaction

-increased revenue

-improved reputation

-returning customers

-higher cost

-relies on all staff

define social objectives

wider local and global community objectives

strengths and weaknesses of social objectives

-improves reputation and brand image

-reduces potential for confrontation

-higher costs

-distract from financial goals

-poor brand image if objective not met