Business activity and influences on business

Financial aims

survival, profit, sales, market share, financial security

Non Financial aims

social objectives, personal satisfaction, challenge, independence and control.

Why business aims and objectives change as businesses evolve

in response to market conditions, technology, performance, legislation, internal reasons.

Soletrader

business owned by a single person

Partnership

Business owned by 2 to 20 people

Private limited company

Business where shares can only be transferred ‘privately’ (from one individual to another)

Public limited company

Business where shares can be sold to anyone

Multinational

Large business with significant production in at least two different countries

Franchise

A business allows another operator to trade under their name

Social enterprise

Business that aims to improve human or environmental wellbeing.

Primary sector

extracting raw materials from the earth

Secondary sector

converting raw materials into finished or semi-finished goods

Tertiary sector

provision of a wide variety of services.

Proximity to

market, labour, materials and competitors

Globalisation

Growning interrogation of the world’s economics

Opportunities for globalisation

Lower costs

Access to labour

Reduced taxation

Threats to globalisation

Competition

International takeovers

benefits to economy where a multinational company is located

Increase in tax revenue

Increase in exports

Increase in employment

Transfer of technology

Benefits of multinational

Larger customer base

Lower costs

Higher profile in business

Lower taxes

possible drawbacks to a country where a multinational company is located

Enviromental damage

Explotation of less developed countries

Exchange rate

Value of one currency in terms of another

Fall in exchange rate

Price of imports falls

Demand of imports rises

Rise in exchange rate

Price of exports Rises

Demand of exports fall

Government spending

• to provide public service

• taxation and constraints on public spending

How governments can affect business activity

• infrastructure provision

• legislation

• trade policy - membership of trading blocs, tariffs.

Interest rates

Price of borrowed money

The effect of interest rate of business

The interest rate rises:

The purchase of capital goods funded by borrowing is discouraged because its more expensive

Higher interest rates usually mean that demand in the economy falls

The external factors affecting business decision

Political:

Some parts of the world are politically unstable. Businesses need to be cautious if they develop interests in such countries with low development and bad political state.

Environmental:

Global warming

Habitat destruction

Resource depletion

Sustainable development

Social:

Increased number of women at work

More part time workers

Urbanisation

Technological:

Use of machines

Online businesses

Tractors instead of using hands to build things

The introduction of robots

Measuring success in business

• revenue

• market share

• customer satisfaction

• profit

• growth

• owner/shareholder satisfaction

• employee satisfaction.

Reasons for business failure:

• cash flow problems/lack of finance

• not competitive

• failure to adapt to changes in the market.