3.1.1

• What is a business?


  an organisation that exists to provide goods/services on a commercial basis to customers
• what is a good?


  a product or something TANGIBLE you can purchase from a business (e.g beauty product)
• what are services?


  an INTANGIBLE action carried out to fulfil a need in return for a payment
• Why do businesses exist?


  1. create employment
  2. create economic growth
  3. new products and services
  4. enhance a country’s reputation
• what do entrepreneurs do?


  spot business OPPORTUNITIES

  take CALCULATED RISKS to gain future returns

  catalysts for creation and growth of new businesses
• who pay income tax?


  employees (so purchase more goods and services to increase economic growth)
• who pay corporation tax?


  public and private limited companies
• give an example of private sector businesses?

  amazon, harrogate candle company
• give an example of a public sector business?

  NHS
• what do businesses do?

  production: resources are converted to products to satisfy requirements of potential customers

  (Output of production may be a service (haircut)or finished good (toy))

  Transformation process: convert firms input to output reaching customer and ADDING VALUE (could be BRANDING)
• What is adding value?


  the process of increasing worth of resources by MODIFYING THEM
• what is the formula for adding value?


  sales revenue- cost of bought in goods and services
• how do you work out added value PER UNIT?


  selling price- cost of bought in goods and services
• Branding and customer service is a way firms can add….?

  value to a good
• What is a USP?


  a feature of a product or service that allows it to be differentiated from other products
• what are the factors of production? (CELL)


  capital-goods made to produce other goods (e.g machinery)

  enterprise-bringing factors of production together to create goods/services, decision making and providing the finance

  land- natural resources for production (e.g coal)

  labour- physical and mental effort in production
• what does PESTLEC stand for?


  Political

  Economic

  Social

  Technological

  Legal

  Environmental

  Competition
• what are the different types of business?

  primary- extraction of raw materials from earth(e.g. fishing, mining, farming)

  secondary- transforming raw materials (manufacturing,construction)

  tertiary- service industry (retail, hotels, education)
• what are businesses called who bulk buy?

  economies of scale
• give an example of a business to business business?


  large scale farm

  oil rigs
• give an example of a business to customer business?


  local farm

  cafes

  supermarket
• what order is the hierarchy of objectives in business?


  mission

  corporate

  functional

  team

  individual
• at the top of the hierarchy of objectives is increasingly….?

  strategic (long-term)
• towards the bottom of the hierarchy of objectives is increasingly….?

  tactical (shorter-term)
• give some examples of tactical business objectives?


  short term focused

  set by LINE managers

  low risk

  limited resource invested

  achievable and realistic

  easy to change at minor financial cost
• give some examples of strategic business objectives?


  long-term focused

  set by BOARD OF DIRECTORS

  high risk

  significant investment

  challenging
• what is a mission statement?


  a QUALITATIVE statement of an organisations AIMS which describes the GENERAL PURPOSE OF THE ORGANISATION
• What is a corporate vision?


  what the company ASPIRES to be
• what are objectives?


  precise and detailed goals that must be achieved in order to meet the corporate aims and mission
• CORPORATE is the long-term….?


  statement of what the business intends to achieve
• what are SMART objectives?


  Specific

  Measurable

  Achievable

  Realistic

  Time-based
• what are some common business objectives? (try remember 7)


  1. survive
  2. break even
  3. sales growth and maximisation
  4. profit growth and maximisation
  5. growth and expansion
  6. reducing risk
  7. diversification
  8. improving cash flow and liquidity
  9. increase market share and shareholder value
  10. maximise customer satisfaction
• what is break even?


  all costs covered by the firm’s revenue
• what is liquidity?


  the ability to pay short term debts
• Who make the strategic decision?


  those higher up the hierarchy objectives
• give some examples of corporate objectives?


  increase sales

  reduce costs

  increase cash flows

  improve sutomer satisfaction
• why do businesses set objectives?


  provide a clear set of guidelines

  motivate workers and departments

  co-ordinate business activity and actions

  help ensure workers make decisions in line with what owners want
• what is the formula for revenue/turnover?


  selling price of product X no. units sold
• how do we work out total cost?


  total fixed costs + total variable cost
• what is revenue?


  the money received from sales of goods or services