AS Business revision cards 1

Main aim of most businesses is to make a profit by selling either a service or a product.

Alternative aims:

• Invest in community or social projects
• Excel in customer service
• Offer the highest of quality products
• Offer a diverse range of products
• Advance the market with new technology/ beat competitiors
• Become fully sustainable and have minimal impact on the planet

S - Specific: Vague objectives are difficult to achieve e.g. Improve Quality is vague compared to reduce the amount of items produced with a defect X%

M - Measurable: Objectives need to be measurable so it can be achieved e.g. increase profit by 5% next year is measurable whereas improve profit is not

A - Agreed: All parties involved need to agree towards a target and all know about this target e.g. if the objective is to increase sales, both the sales manager and salesmen need to know the objective

R - Realistic: setting targets that are too ambitious and unachievable are demotivating 

T -Timely: Objectives need a timeframe in which the objective needs to be achieved, this means that staff have deadlines so make the objective a priority rather than not seeing a timeframe, this motivates staff to work harder to meet the target.    

Profit objectives - business' that may be currently making a loss will most likely aim to become profitable. Businesses may then set functional objecties such as to minimise costs, then all departments will aim to reduce costs while the sales department aims to make more profit to achieve the company goal. 

Growth objectives - usually based on increasing revenue, market share, or expanding the business.

Survival objectives - main objective for new or small businesses, also for large businesses that are new to a market through diversification.

Cash Flow objectives - to improve cash flow as it gives the business more chance of sjurvival. 

Social objectives - benefitting society or people in need.

Ethical objectives - based on moral principle , treat enviroment and people e.g. fair trade

Non Profits set targets that are social and ethical based along with survival.Large businesses may set social/ethical objectives as it is a current social trend to purchase from companies that not only make profit but re -invest in the enviroment and the needy.

Profit is important as it can motivate people, a good source of finance and can be used to attract investors. 

revenue = selling price per unit x quantity of units sold

total costs = fixed costs = variable costs

total variable costs = variable cost per unit x number of units sold

semi variable costs are those such as telephone lines as a business pays a fixed cost for the line and a variable cost based on the amount of calls mad.

Large - scale production keeps costs low

The more a business produces the lower the cost per unit. 

Profit = number of sales x price - costs 

Public sector - run by government, provide services to public rather than make a profit. (NHS) Funded by Tax.

Private sector - owned by private individuals. (John Lewis) most aim to make profit but charities and non profits are also part of private sector. 

Charities - red cross use donations and profit to fund projects

Social Enterprises - like a normal business but profit is used to fund social projects e.g. One water uses profit to fund clean water projects in villages in Africa. 

Mutual organisations - (building societies) offer customers the best possible value on products and services. Profits are re invested into business to further reduce prices.

Limited Liability - the owner and business are seperate entities, shareholders only lose money they have put in. Owners are not personally responsible for debts.

Unlimited liability - sole traders , the owner and business are one, all debts are in the responsibility of the owner not the business. 

Sole trader has full responsibility for the financial control of his own business and for meeting running costs and capital requirments. A sole trader can run a business under their name with minimal legal formalities but if they want to run it under a business name they have to comply with the Business Names Act (1985).

Advantages:   Freedom - Own boss and fully in control Profit - entitled to all profit.  Simplicity - less form- filling, bookkeeping is less complex Savings on fees - no legal costs for ownership agreements 

Disadvantages: Risk - no one to share responsibilityies with Time - often work long hours to meet deadlines

Expertise - may have limited skills in certain areas e.g. finance Finance - limited to owners money or can borrow (no investors)

Vunerability - no cover if trader is ill Unlimited liability - responsible for all debts

Privated Limited Companies and Public Limited Companies are owned by shareholders and run. by directors. 

The value of the company is divided into shares

Private Limited companies

Can't sell shares to the public. Do not appear on stock exchange. Often small family businesses. No minimum share capital requirement. End in Limited or LTD.

Public Limited companies Can sell shares to the public. Share price is shown on stock exchange. Shares are freely transerable and can be bought via stockbrokers, banks and share shops. Start as private companies and then become public later to raise more capital. Must have at least £50,000 of share capital before being listed on stock exchange and this must be publicly available. Always end in PLC.

Companies act (2006) states that several important documents must be drawn up before a company starts trading which include articles of association sent to companies house. 

Once running the company must produce annual financial reports. 

Shares in a PLC can be owned by anyone. The people that own the company do not necessarily run the company, the board of directors are in control, this is called the 'divorce of ownership and control'

1. To achieve Capital Gain,  buying shares when the value is low to re sell them once the share price rises. 

2. Dividends, the more shares you own the more dividends you get. 

3. Running the business, investors may want to run a business or become the majority stakeholder so they decide the direction of the business.

4. Objectives, some investors may want a business to succeed because they believe in the companies aims/objectives e.g. social/ethical/enviromental objectives.

5. PLC, invest in a private limited company to help it survive/grow.

6. Venture capitalists, invest in a business as they see potential and can be financially rewarding.

1. Performance, a company that is making large profits will have a higher share price.

2. Speculation, new product launches, cost saving initiates a change in the company which could make the company more successful may tempt investors.

3. Current Share Price, if share price is low then investors will look to purchase and than make a profit once the shares rise again (larger companies)

4. Interest rates, when low people saving money in banks may look for an alternative that may create more of a financial reward e.g. shares

5. Economy, when economy is strong people have more money to invest and confidence which increases demand and share price. In weak economies companies may offer more shares to try and raise capital, increasing supply.

Political factors - New legislation, if economy is low then governments boost benefits and cut taxes to encourage spending, if demand is high government will raise taxes and cut government spending,  central banks increase interest rates, government can influence public by taxing certain products/ services e.g. sugar tax 2018

Labour supply - when unemployment is high = good supply of labour and cheaper wages and workers will be more productive to secure their job. Low rate = employees may lack the skills needed so will need training which increases cost.

Incomes and Economic factors - a recession leads to greater costs for businesses which lead to redundancies and wage cuts, lower incomes mean less spending money so demand decreases. During a boom wages rise and more are employed which raise costs, higher incomes mean more spending money increasing demand for products which leads to increased production costs ( can be lower due to larger businesses become more efficient)

Seasonal demand and supply - seasonality, weather and holidays make demand fluctuate. Christmas creates higher demand for toys , sun creates more demand for suncream and swimming trunks, january sales occur as demand drops afetr christmas so excess stock needs to be sold at a cheaper price. Food producers add preservatives to cope with seasonality. 

When a competitor launches a new product or enters a new market, demand for rival products decreases. In response the rival may increase spending on marketing or improving/ diversifying.

Perfect competition is where all firms compete on an equal basis, products are similar and they charge the same. Costs need to be kept low or the demand will reduce as well as keeping a high quality product.

Oligopoly - a small number of large firms dominate the market and charfe similar prices. Focus will be on marketing and branding.

Monopoly - where one business has complete control of a market. no competition , can increase prices without much concern can spend little on marketing.

Different demographics tend to buy different things so businesses need to adapt the amount and type of products they are producing. 

UK has an ageing population so businesses have started to target the growing elderley market e.g. banks have special rates on retirement accounts. Software companies are making brain training games directed at older people.

working parents has increased which has grown the need for childcare services. 

Uk population more ethnically diverse from immigrants, introduction of international aisle in supermarkets as well as chinese supermarkets in China town. 

Men have been using cosmetics and grooming products more and more recently - consumer trend. introduction of new products for men such as beard products.