business activity & influences on businesses

stakeholder definition

an individual or a group of people with an interest in a business

entrepreneur definition

person who takes risks to set up a business

business objectives definition

short-term specific goals that a business wants to achieve

business aims definition

long-term outcomes a business wants to achieve

importance of clear objectives

motivating employees

assess the performance of the business

helps with decision making

financial objectives

profit

sales

survival

market share

financial security

non-financial objectives

personal satisfaction

independence and control

challenge

social

financial objectives : survival

keeping the business operating for a certain amount of time

financial objectives : profit

some businesses will try to reach profit maximization in a given amount of time

financial objectives : sales

high sales benefit businesses by

lower costs

larger market share

high public profile

financial objectives : market share

total sales a business controls in an industry

financial objectives : financial security

aim to make enough profit to satisfy and secure the owner

non-financial objectives : social

designed to improve human and environmental well-being

non-financial objectives : personal satisfaction

owners enjoy taking risks and seeing their ideas succeed

non-financial objectives : challenge

business owners need to be committed, hard-working and multi-skilled

non-financial objectives : independence and control

entrepreneurs are driven by the desire to be independent and take control of their futures

why do business objectives change

market conditions

legislation

technology

why do business objectives change : legislation

laws make businesses become more socially responsible

why do business objectives change : market conditions

changes in the market that the business needs to adapt to

why do business objectives change : technology

as technology advances so will the business’ goals

products

tangible

sole trader definition

a business owned and controlled by one individual

unlimited liability

owners of the business is personally responsible for all business debts

advantages of sole traders

owner keeps all profit

simple to set up - no legal requirements

owner has complete control

disadvantages of sole traders

unlimited liability

may struggle to raise capital and finance

too small to exploit economies of scale

partnership definition

a business owned and controlled by 2 - 20 individuals

advantages of a partnership

more capital is raised

easy to set up

workload is shared

disadvantages of a partnership

unlimited liability

profit is shared

decision-making is shared

franchise definition

a franchisor gives a franchisee a license to operate the business in a different location

advantages of a franchisee

less risk - business is already established

set-up costs are predictable

back-up support is given

disadvantages of a franchisee

profit is shared with franchisor

lack of independence

expensive way to start up a business

advantages of a franchisor

fast and cheap method of growth

franchisee takes some of risk

disadvantages of a franchisor

poor franchises ruin reputation of brand

high cost of support

potential profit is shared with franchisee

social enterprise definition

business that aims to improve human and environmental well-being

features of a social enterprise

have a clear social and/or environmental mission

are accountable and transparent

generates more income from trade or donations

deed of partnership definition

binding legal document that states formal rights of partners

limited liability partnership definition

also known as a sleeping partner

one provides capital without taking part in running the business

how do public sector businesses (the government) get revenue

through taxes and exports

private limited companies definition

small to medium businesses that transfer their shares privately

advantages of private limited companies

shareholders have limited liability

more capital can be raised

control cannot be lost to outsiders

disadvantages of private limited companies

financial information must be published

profit has to be shared among shareholders

cannot raise huge amounts of money

public limited company definition

large businesses that sells shares to members of the public in a stock market

advantages of public limited companies

shareholders have limited liability

can exploit economies of scale

can raise huge amounts of capital

disadvantages of public limited companies

set-up costs are expensive

control can be lost to outsiders

financial information must be published

multinational companies definition

large businesses with significant production and serve operations in more than two countries

features of a multinational company

can invest to up-to-date technology

can invest in powerful marketing campaigns

how are multinational companies developed

economies of scale

marketing

technical and financial superiority

dividends definition

a sum of money paid annually to shareholders / investors

advantages to a business for being multinational

larger market base

lower costs

high profile

advantages to an economy for being a multinational

increase in income and employment

increase in tax revenue

increase in exports

disadvantages to an economy for being a multinational

environmental damage

exploitation of less developed countries

lack of accountability

public corporation definition

a business owned and controlled by the government

features of public corporations

incorporated

state-owned

state-funded

advantages of the public ownership of businesses

avoids wasteful duplication

saves jobs

fills gaps made by the private sector

disadvantages of the public ownership of businesses

inefficiency

difficult to control

cost to government

privatization definition

the transfer of public sector resources to private sector resources

deregulation definition

removal of government controls over a particular industry or sector

natural monopoly definition

market where it is more efficient to have just one organization meeting total market demand

primary sector definition

production involving extracting raw materials from the earth

examples of primary sector resources

forestry

fishing

agriculture

mining

secondary sector definition

production involving the conversion of raw materials into finished and semi-finished products

tertiary sector definition

production of services in an economy

interdependence definition

all sectors rely on each other

de-industrialization definition

decline in manufactoring

what does decision of location depend on

proximity of market

proximity of labour

proximity of competition

proximity of market

why is proximity to raw materials important

some businesses require large portions of land for cheaper rates

choosing to locate the business near materials lowers transport costs

why is proximity to market important

keeps transport costs down

needs to be close to consumers to sell the product

why is proximity to competitors important

businesses usually choose to locate their premises where competition is less concentrated

to retain customers which leads to a larger brand image in the area

shows that the business is reliable

why is proximity to labour important

may need large workforce in areas where labour is cheap

locate in areas where skilled labour is present

globalization definition

growing integration of the world’s economies

reasons for globalization

tourism

development in technology

improvement of international transport networks

how does globalization depend on trade barriers

people cannot work in countries where the borders are closed

opportunities of globalization

access to larger markets

access to labour

lower costs

how do lower costs occur due to globalization

companies can exploit economies of scale

how does access of larger markets occur due to globalization

global markets are bigger than domestic ones

provides more growth opportunities

resulting in higher sales revenue

how does access to larger labor occur due to globalization

people are free to find employment elsewhere

threats of globalization to businesses

increases risk of external shock

competition

international takeover

how does competition provide a threat to businesses due to globalization

businesses will have their survival threatened because there are more businesses competing in the global market

how does international takeover provide a threat to businesses due to globalization

there are a larger number of predator businesses

so one business in a country can take over a business in another

how does increased risk of external shock provide a threat to businesses due to globalization

events in one economy will affect other economies, and will affect businesses in both economies

exchange rates definition

value of one currency in terms of another

imports definition

goods and services bought from overseas

exports definition

goods and services sold overseas

visible trade definition

trade in physical goods

invisible trade definition

trade in services

balance of trade definition

difference between visible exports and invisible imports

impact of fall in exchange rates (ICED)

imports are more cheaper because demand of good rises

exports are more dearer because demand of good falls

impact of rise in exchange rates (IDEC)

imports are more dearer because demand of good falls

exports are more cheaper because demand of good rises

how do governments affect business activity

change in law

change levels in taxation and government expenditure

trade policies like tariffs

monetary policy definition

uses changes in interest rates and money supply to manage the economy

fiscal policy definition

using taxation and government expenditure to manage the economy

types of legislations of businesses

consumer protection

competition policy

environmental legislation

consumer issues covered by legislation

consumer rights

price

safety of products

promotion of products

external factors definition

impacts on businesses outside their control

nature of external factors (PEST)

political

environmental

social

technological

how do political factors affect the activities of businesses

businesses need to be conscious when developing interests in politically unstable countries

the activities of pressure groups (trying to influences opinions of ordinary people to the government) influences stances of businesses

how do environmental factors affect the activities of businesses

businesses need to become more environmentally aware about

global warming

sustainable development

resource depletion

how do social factors affect the activities of businesses

businesses have to adapt to changes in society like

increased consumer awareness

urbanization

increased number of women at work

urbanization definition

process of constructing more buildings on rural land

how do technological factors affect the activities of businesses

new technology results in new products

which means new market opportunities

production becomes more capital intensive and less costly