Flashcards in What Is Business? Deck (23)
Why do businesses exist?
Primarily for making profit but some may exist to provide a service such as the NHS, some to develop an idea (enterprise) or provide support to others such as a charity
What is a mission statement?
A mission statement defines what a business is, why it exists and it's core purpose e.g bring inspiration to every athlete in the world (Nike), Mission statements help to guide decision making.
What is an objective?
A small goal to help the business achieve its mission statement
Three key business objectives are?
Survival, Growth and profit although due to intense competition they are becoming increasingly focused on customer service and social responsibility.
What is corporate social responsibility?
Commitment of a business to behave ethically towards their workforce, the local community and society in general but most importantly environmental effects, this improves the company reputation and hence sales
What is the relationship between mission and objective?
The mission statement outlines the bigger picture and core values , objectives however help to achieve the mission through smaller goals, objectives are different to mission statements as they are measurable and actionable, Without a mission statement objectives have no direction, without objectives the mission statement is unachievable, putting both these together means that the perfect balance is provided which helps to shape the business through decision making.
What is a SMART objective?
S, Specific, Must be clear and well defined, M, Measurable, It must be possible to know whether the objective has been achieved or not, A, Achievable, Objectives must be within the capabilities of the business resources and capabilities, R, Realistic, Must be challenging but also achievable, T, Time based, there must be a deadline to work for.
'Increase market share by 2% over a year' or 'Increase growth' be a Smart objective
Increase market share by 2% would be as it is well defined, measurable and has a deadline
Is a business more likely to have a CSR objective in boom or bust times?
Boom as in bust times objectives are dominated by survival and growth
Why do business set objectives?
Because they are measurable and time based means they can be used to evaluate performance, They can also provide motivation if they are realistic and achievable and objectives ensure that a business keeps focused on its mission
What is Profit?
The amount of money remaining once all costs have been deducted from the revenue
What is revenue?
The money received from sales, multiply the units sold by sales price
What are variable costs?
Are costs that vary directly as a result of level of input, e.g Materials becoming cheaper with bulk orders
What is a fixed cost?
Are costs that do not change as a result of output such as rent
What is total costs?
Fixed costs - variable costs = Total cost
Profit = Revenue - Total cost
What is a private sector business?
A part of the economy made up of private enterprises and are owned by private individuals
What are the two types of corporate business?
Private limited companies and Public limited companies
What Are The two types of non-corporate business?
Sole-Traders or partnerships
What do corporate companies benefit from?
Limited liability, eliminates the financial liability of the shareholders as the business is a separate entity.
What makes a Private limited company?
Usually much smaller, Share capital must not exceed £50,000 and ltd must be added after the companies name, shares cannot be bought or sold on the stock exchange or at all without consent of all shareholders, usually family companies.
What makes a public limited company?
Their shares can be traded on the stock exchange and bought by any person or individual, must have plc after name, must have share capital higher than £50,000 and they have to publish more details of financial affairs that privates
What two documents do you need to register a company?
Memorandum of association, set out trading name and address and Articles of association, Details internal arrangements of company including frequency of shareholder meetings