Section A: Business Purpose, Stakeholders and Strategy

Consumers

are the people or organizations that actually use a product.

Customers

are the people or organizations that buy the product.

Entrepreneurs

are the people who manage, organize and plan the resources needed for business activity in pursuit of organizational objectives. They are risk takers who exploit business opportunities in return for profits

Entrepreneurship

refers to the collective knowledge, skills and experiences of entrepreneurs.

Goods

are physical products produced and sold to customers, such as laptops, books, contact lenses, perfumes and children's toys.

Needs

are the basic necessities that a person must have to survive, including food, water, warmth, shelter and clothing.

Primary sector

refers to businesses involved in the cultivation or extraction of natural resources, such as farming, mining, quarrying, fishing, oil exploration and forestry.

Production

is the process of creating goods and/or services, adding value in the process.

Quaternary sector

is a sub-category of the tertiary sector, where businesses are involved in intellectual and knowledge-based activities that generate and share information, such as research organizations.

Secondary sector

refers to businesses concerned with the construction and manufacturing of products.

Services

are intangible products sold to customers, such as the services provided by airlines, restaurants, cinemas, banks, health and beauty spas, schools and hospitals.

Tertiary sector

refers to businesses involved with the provision of services to customers.

Wants

are people's desires, i.e. the things they would like to have, such as new clothes, smartphones, overseas holidays and jewellery.

Business plan

the document that sets out a business idea or proposition, including the objectives, resources (marketing, operations, personnel and finance) and corporate strategies.

Executive summary

a synopsis or abstract of the information provided in the main section of a business plan, highlighting the key points and conclusions.

Customers

are the clients of a business. As a key external stakeholder group, customers seek to have value for money, such as competitive prices and good quality products.

Directors

are senior executives who have been elected by the company's shareholders to address business activities on behalf of their owners.

Employees

are the staff of an organization. They have a stake (an interest and involvement) in the organization they work for.

External stakeholders

are individuals and organizations not part of the business but have a direct interest in its activities and performance. Examples include customers, suppliers and the government.

Financiers

are the financial institutions and individual investors who provide sources of finance for an organization. They are interested in the organization's ability to generate profits and to repay debts.

Government

refers to the ruling authority within a state or country. As an external stakeholder group, the government is interested in businesses complying with the law with regards to the conduct of business activities.

Internal stakeholders

of a business are members of the organization, namely the employees, managers, directors and shareholders (owners) of the business.

The local community

refers to the general public and local businesses that have a direct interest in the activities of an organization, namely to create jobs and to conduct business activities in a socially responsible way.

Managers

are an internal group of stakeholder responsibly for overseeing the daily operations of the business.

Pressure groups

consist of individuals with a common concern (such as environmental protection) who seek to place demands on organizations to act in a particular way or to influence a change in their behaviour.

Stakeholder conflict

refers to differences in the varying needs and priorities of the various stakeholder groups of a business.

Stakeholder mapping

is a model that assesses the relative interest of stakeholders and their relative influence for power) on an organization.

Shareholders (or stockholders)

are the owners of a limited liability company. Shares in a company can be held by individuals and other organizations.

Stakeholders

are individuals or organizations with a direct interest (known as a stake) in the activities and performance of a business, such as shareholders, employees, customers and suppliers.

Suppliers

are an external stakeholder group that provide a business with stocks of raw materials, component parts and finished goods needed for production. They can also provide commercial services, such as maintenance and technical support.

Corporate social responsibility (CSR)

is the conscientious consideration of ethical and environmental practice related to business activity. A business that adopts CSR acts morally towards all of its various stakeholder groups and the well-being of society as a whole.

An ethical code of practice

is the documented beliefs and philosophies of an organization, so that people know what is considered acceptable or not acceptable within the organization.

Ethical objectives

are organizational goals based on moral guidelines, determined by the business and/or society, which direct and determine decision-making.

Ethics

are the moral principles that guide decision-making and business strategy. Morals are concerned with what is considered to be right or wrong, from society's point of view.

A mission statement

refers to the declaration of an organization's overall purpose. It forms the foundation for setting the objectives of a business.

Objectives

specify what an organization strives to achieve. They are the goals of an organization, such as growth, profit, protecting shareholder value and ethical objectives.

Strategic objectives

are the longer-term goals of a business, such as profit maximization, growth, market standing and increased market share.

Strategies

are the various plans of action that businesses use to achieve their targets. They are the long-term plans of the organization as a whole.

Tactical objectives

are short-term goals that affect a unit of the organization. They are specific goals that guide the daily functioning of certain departments or operations.

Tactics

are the short-term plans of action that businesses use to achieve their objectives.

A vision statement

is an organization's long-term aspirations, i.e. where the business ultimately wants to be.

Strengths

external possibilities (prospects) for future development.

Opportunities

internal factors that are favourable compared with competitors.

SWOT analysis

a situational tool used to assess the internal strengths and weaknesses and the external opportunities and threats of a business.

Threats

external factors that hinder the prospects for an organization.

Weaknesses

internal factors that are unfavourable when compared to rivals.

Business cycle

fluctuations in the level of business activity over time. Economies tend to move through the cycle of booms, recessions, slumps, recovery and growth.

Economic environment

key economic objectives of the nation, namely, to control inflation, to reduce unemployment, to achieve economic growth and to achieve a healthy international trade balance.

Environmental factors

ecological influences that have a direct impact on the operations of an organization, such as climate change and green technologies.

Ethical environment

moral values and judgements (of what is right) that society believes businesses need to adhere to in their decision-making.

External environment

factors that are beyond the control of any individual organization, but which affect all businesses and their operations.

Legal environment

framework of rules, regulations and laws as part of the country's legislative framework that govern business activity.

Political environment

the role that governments play in business operations, such as rules or restrictions on trade.

Social factors

the influences on businesses related to people in society, their lifestyles and their beliefs (or values).

STEEPLE analysis

an analytical framework used to examine the opportunities and threats of the social, technological, economic, environmental, political, legal and ethical factors that affect business activities.

Technological environment

scientific knowledge and application to the external environment that presents constant threats and opportunities, such as Internet technologies.