What is business? 1.1


Business Objectives


Profit- to achieve sales revenue higher than total costs

(Profit=Sales Revenue - Total Costs)

Growth- to inc in size by value/volume of sales, may be organically (from within) e.g. opening new stores, launching new products or externally e.g. buying other businesses

Survival- continue to exist, primary objective of a start-up business/difficult trading conditions

Cash Flow- flow of cash into/out of business over period of time, ensure sufficient cash available to meet daily expenses

Social- behave beneficially to society e.g. create employment, support community

Ethical- behave in a morally correct way, e.g. reducing -ve impacts on environ, equal treatment

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Mission Statements

  • brief written statement, purpose of organisation, overall goal, and guides decision making for all levels of management

Mission Statement: overall reason for business' existence

Corporate Aims: Long term targets + plans to fulfil mission statement

Corporate Objectives: medium to long term objectives to fulfil mission statement

Corporate Strategy: actions to be taken by business to achieve objectives

Business Tactics: actions taken daily to support strategy

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Objectives and Profit

Why businesses set objectives?

  • sense of purpose
  • motivates employees
  • creates reward system
  • measure/review performance
  • inform decisions to improve

Measurement/importance of Profit

Profit: Revenue - Total Costs

Revenue: money coming in from sale of goods/services

Total Costs: money going out to provide for + generate those sales

Relationship between costs & revenue will determine if business makes profit/loss

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Measurement + importance of profit

Revenue= selling price x quantity sold e.g. if a business sold 20,000 units at a selling price of £15, Revenue= £15 x 20,000 units= £300,000 

Revenue inc w/ amount of units sold & starts at 0 and slopes upwards when shown on graph

Fixed costs (independent of production) stay same regardless of output e.g. rent, manager's salaries, shown as horizontal line on graph

Variable costs change to n of items prod e.g. raw materials, start at zero & slope upwards

Total costs= fixed costs + variable costs, TC start at fixed cost point on Y axis & slope upwards parallel to variable cost line.

Objectives need to be:

Specific Measurable (levels of sales calc) Achievable (realistic) Repeatable Time (limit)

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