3.1 what is business?

Advantages to owning a business

-Profit/financial rewards

-be their own boss

-job in area of interest

Public sector

Government owned

Private sector

Privately owned

Aims of a business

-to offer the highest quality goods and services possible

-to give excellent customer service

-to have a great image and reputation

-to offer a diverse range of goods or services

Stakeholder

People who have an interest in a business

Mission statement

Tell you about a Business’ intentions (a written description of the aims of a business)

Corporate objectives

The goals of a business as a whole, will depend upon the size of a business

Functional objectives

The objectives of each department, more detailed than corporate and are specific to each department.

SMART acronym

Specific

Measurable

Agreed

Realistic

Timely

6 different types of objectives

• Profit

• Growth

• Survival

• Cash Flow

• Social

• Ethical

Revenue

The value of sales - it’s sometimes just called sales and can also be called a turnover, it’s affected by both sales volume and price.

Revenue equation

selling price per unit x quantity of units sold

Fixed costs

Don’t change with output e.g rent or cost of new machinery

Variable costs

Rise and fall as output changes e.g hourly wages, raw material costs and packaging costs

Total costs equation

fixed costs + variable costs

Profit equation

total revenue - total costs

Market conditions

A term that describes a wide range of factors affecting the market. These factors influence cost faced by businesses and demand for their products

4 factors affecting the market

-Political

-labour supply

-incomes and economic factors

-seasonal demand and supply

Disposable income

Your earnings after tax, national insurance and pension payment have been deducted

Political factors

1) if demand in the economy is too low, governments try to increase it. They cut taxes so ppl have more to spend and increase their spending in the economy.

2) try reduce demand if it’s too high, they raise taxes so ppl have less money to spend

3) gov influence demand for particular products by using taxes

Perfect competition

Where all firms compete on an equal basis - products are pretty much identical , all charged similar price. Need to keep costs low but remain a high quality.

Oligopoly

Small number of large firms dominate the market and charge similar prices. To get ahead, they’ll focus on market + brand image to increase demand, so marketing costs will be high

Monopoly

Where one business has complete control over its market, no competition. Can increase prices without much concern if demand decreasing, able to keep marketing costs low.

3 different types of competition between businesses

- Perfect competition

-Oligopoly

-Monopoly