Business Studies Unit 3 topic 1

Business Studies Revision ‘Booklet’ GCE WBS03 papers.

Topic 1.

Mission Statement -  a statement of purpose of existence of a business; why it exists?

Could consist of:

a.) Purpose - reason why business exists

b.) Values - what company believes in

c.) Standards & Behaviours -  standards set by managers to show how staff is to be treated or interact with each other

d.) Strategy - medium-long term plans to make firms’ missions achievable

Arguments: Against

• Only used for public relations to show the firm in a positive light
• Doesn't last forever; can depend on change in market conditions
• Too general; say little about the business

Arguments: For

• Gives a business a sense of direction
• Tells stakeholders what business exists for; tells customers what business does and therefore more possible business to the company
• Helps to motivate employees
• Helps firms to align the activists with their overall goals

Corporate objective - short term target that helps the firm to achieve its long term aims or missions.

SMART objectives:

• Specific - what exactly should be achieved
• Measurable - should be set in a way to assess whether the target is achieved or not
• Achievable - objectives should be easy to achieve
• Realistic - should be set considering availability of resources such as machinery, skills etc.
• Time - bound - should have a deadline

Business Objectives:

1. Profit Maximisation -  aims to achieve highest profit possible; may sacrifice its market growth
2. Growth - expanding business internally and externally (long-term). Firm lowers prices to increase market share over short period of time
3. Maximising Shareholders Value - increasing dividends and high share price to attract more investments 
4. Survival - work hard and break-even to stay in business
5. Market Share - increasing the number of customers business serves to dominate the market 

Stakeholders:

• Internal - within the business: employees, managers, shareholders/owners etc.
• External - outside the business: customers, government, pressure groups, community, suppliers etc.

Conflict of Objectives

• Shareholders might want good dividends but workers may want high wages which will increase costs and lower profit for owners
• Customers want lower prices but this may reduce profits
• If short- term objective is survival then risks should be avoided. If long term objective is growth then risks must be taken
• If a firm goes after market share it might have to reduce prices to undermine competition and hence profit maximisation won’t be possible over short period of time

Solutions to conflicts 

• Writing policies - outline social and ethical stances 
• Promoting the business - as being ethical and socially responsible through media

Corporate Social Responsibility (CSR) - responsibility of a company to all stakeholders, managing business that has a positive impact of society

CSR is about:

• Conducting business ethically and in a moral way e.g. no use of child labour
• Balancing interests of all stakeholders
• Acting as a good citizen by obeying laws
• CSR is about taking an action before required to do so by the law (self regulation)

Arguments for:

• Acting morally and ethically reduces risks of having…