What is a Business question and answer flashcards

Why do Businesses Exist?

Businesses provide goods and services for the market.

Supplier of goods and services

• Businesses supply goods and services to consumers and businesses.

• Goods are tangible products which can be physically held.

• Services are intangible products.

Impact on the country and its residents

• Businesses provide employment which allows individuals to earn an income and purchase goods and services.

  • E.g. In 2019, Tesco employed around 300,000 staff.

• Businesses create new goods and services which can enhance the lives of consumers.

  • E.g. pharmaceutical businesses like Pfizer have developed new medicines that cure illnesses and improve people’s quality of life.

• Businesses can allow a country to improve and develop the country's reputation.

  • E.g. many financial service businesses in the UK provide their products to many countries around the world and this improves the UK’s reputation.

The transformation process

• Businesses convert inputs (for example, raw materials) into outputs (finished goods) to satisfy the needs, and wants of other consumers and businesses.

• This is called the transformation process and businesses will add value to their goods and services throughout this process.

B2C

• Some businesses sell their goods and services directly to consumers and these businesses are known as business to consumer (or B2C) organisations.

  • For example, Spotify provides music streaming services and sells these to consumers. Spotify is, therefore, an example of a business to consumer organisation.

B2B

• Other businesses sell their goods and services to other businesses and these are known as business to business (or B2B) organisations.

  • For example, Hootsuite sells social media management services to other businesses such as Virgin. Hootsuite is, therefore, an example of a business to business organisation.

Sectors

• Businesses can also be categorised according to the type of product they supply:

  • Primary sector businesses extract or grow raw materials including fishing, mining, and forestry.

  • Secondary businesses manufacture goods using raw materials such as clothing and mobile phones.

  • Tertiary businesses provide services such as hotels and cinemas.

Business Mission Statements

Businesses have a mission statement which sets out the business’s beliefs and values.

Mission statements and corporate aims

• A business will use its mission statement to create corporate aims which are the long-term goals of the entire business.

• These corporate aims will allow the business to work towards its overall mission.

Corporate aims and corporate objectives

• Corporate aims are stated. Then, corporate objectives that contain the specific tasks and activities a business must accomplish in order to satisfy its corporate aims are written down.

• Corporate objectives can be broken down further into functional (departmental), team and individual objectives.

Business Objectives

Business objectives are needed for a business to achieve its corporate aims and fulfil its mission.

SMART

When setting objectives, a business should apply the SMART acronym:

• Objectives must be Specific so that employees know exactly what they are working towards.

• Objectives must be Measurable so that employees can actually work out whether they have met their objective.

• Objectives must be Attainable or achievable so that employees are committed to achieving them.

• Objectives must be Realistic otherwise employees may feel demotivated and overwhelmed.

• Objectives must be Timely so that employees know when they must achieve them by.

Profit maximisation

• Profit maximisation is a business objective that requires a business (and its management) to achieve the highest amount of profit for shareholders.

• Satisficing would mean making enough or some minimum required level of profits.

Survival

• Survival is a business objective which requires a business to continue trading despite challenges in the external environment.

Growth

• Growth is a business objective which requires the growth of stores or locations, sales value, sales volume or product range.

Social objectives

• Social, ethical and environmental objectives require a business to focus on supporting society through initiatives including sustainability and fair trade.

Benefits of setting objectives

• Business objectives provide direction and can support planning and operations.

• Business objectives allow a business to co-ordinate resources and ensure that all employees are working towards the same overall aim.