Nsture And Purpose Of Business Flashcards
(27 cards)
Why do businesses exist?
Businesses exist to provide goods and services, create employment, satisfy consumer needs, generate profit, and contribute to economic growth.
What is the primary purpose of a business?
To meet customer needs by producing and supplying goods or services, usually with the aim of making a profit.
What is the difference between a good and a service?
Goods are tangible products (e.g. phones), while services are intangible activities (e.g. insurance, haircuts).
What is added value?
Added value is the difference between the selling price of a product and the cost of inputs. It reflects the value a business adds through processes or branding.
What is the role of profit in business?
Profit rewards risk-taking, funds reinvestment, attracts investors, and measures business success. It is essential for long-term sustainability.
How do businesses contribute to the economy?
They provide employment, pay taxes, support innovation, generate exports, and contribute to GDP and infrastructure development.
What is a mission statement?
A mission statement outlines a business’s core purpose and aims. It guides strategy, aligns stakeholders, and defines values.
What is a vision statement?
A vision statement expresses a long-term goal or aspiration for the future of the business. It is inspirational and strategic.
What factors influence a business’s objectives?
Ownership type, size, age, competitive environment, stakeholder expectations, and financial performance all affect business objectives.
What is the role of objectives in a business?
Objectives give direction, help measure progress, motivate employees, and inform decision-making.
Evaluate the importance of a clear mission statement to a growing business.
A mission statement helps align staff, attract investors, and communicate purpose. However, if it’s too vague or ignored in practice, it may offer little strategic value.
To what extent should profit be the main objective of a business?
Profit is essential for survival and investment, but focusing solely on profit may ignore stakeholder needs, ethics, or sustainability. Balanced objectives often lead to long-term success.
How does the size of a business influence its objectives?
Small firms may focus on survival or customer loyalty, while larger firms aim for growth, market share, or CSR. Resources and scale affect what objectives are realistic and strategic.
How does stakeholder pressure influence business purpose?
Owners seek returns, employees value job security, and customers want quality. Balancing these interests shapes purpose, especially for ethical or customer-focused brands.
Why might a business change its objectives over time?
As a business grows or market conditions shift, priorities change. For example, a start-up may switch from survival to expansion, or shift focus due to ethical concerns or new leadership.
What is the strategic value of having a vision statement?
A vision provides long-term direction and inspires innovation and strategic alignment. It motivates stakeholders but may be ineffective if unrealistic or disconnected from daily operations.
To what extent does added value drive competitive advantage?
High added value enables premium pricing and brand loyalty, strengthening competitive position. However, value must be recognised by customers and supported by marketing and quality.
How do social enterprises differ from profit-driven businesses?
Social enterprises prioritise social or environmental missions over profit maximisation. Profits are reinvested into the cause, not distributed to shareholders. However, they still need financial sustainability.
What is the role of ethics in defining a business’s purpose?
Ethical businesses aim to act responsibly toward stakeholders and the environment. This can strengthen brand loyalty and attract ethical consumers, but may raise costs and limit profit in the short term.
How can a business balance short-term objectives with long-term purpose?
By aligning short-term goals (e.g. revenue targets) with broader visions (e.g. sustainability), businesses can ensure consistent decision-making. Trade-offs may occur, requiring strategic prioritisation.
Why might a business prioritise customer satisfaction over profit?
High customer satisfaction builds loyalty, repeat purchases, and positive reputation, which supports long-term profitability. However, this may reduce short-term margins or increase service costs.
How can a business measure whether it’s fulfilling its mission?
By tracking KPIs related to its mission (e.g. social impact, customer retention, innovation rate), surveying stakeholders, and comparing outcomes to stated goals in the mission statement.
How does market type (niche vs mass) affect business objectives?
Niche businesses may focus on customer loyalty, quality, or personal service. Mass-market firms often aim for economies of scale, brand awareness, and cost leadership. Objectives align with scale and market reach.
What is the relationship between business activity and opportunity cost?
Every business decision involves opportunity cost—the benefit lost from the next best alternative. Recognising this helps firms allocate resources more efficiently and align with strategic goals.
