Topic 1 chains of analysis

• . The Purpose of Business Activity

  A business exists to produce goods or services→ which satisfies customer needs or wants→ creating value for customers→ enabling the business to generate revenue→ which can lead to profit if costs are controlled.
• Mission and Objectives

  A business sets a mission statement

  → to give a sense of direction and purpose

  → which guides strategic decisions and behaviour

  → helping align departments and motivate employees

  → improving coordination and long-term success.
• 3. Business Objectives (e.g. profit maximisation)

  A business may aim to maximise profit→ by increasing revenue or cutting costs→ which can provide funds for reinvestment or shareholder returns→ leading to business growth and competitive advantage.
• Revenue, Costs, and Profit

  If a business increases its sales revenue→ and controls its costs effectively→ its profit margin increases→ allowing reinvestment or higher dividends→ which may attract investors and support expansion.
• The Role of the Entrepreneur

  Entrepreneurs take risks to start businesses→ which creates jobs and drives innovation→ contributing to economic growth→ and responding to changing consumer needs→ which can create a loyal customer base.
• 6. Private vs Public Sector

  A private sector business aims to generate profit for owners

  → which may lead to efficiency and innovation

  → as competition drives performance

  → benefiting consumers through better prices or quality.
• 7. Stakeholders and Business Decisions

  Businesses must consider stakeholder interests

  → e.g. treating employees fairly improves motivation

  → leading to higher productivity

  → which lowers unit costs

  → and enhances profitability in the long run.
• Business Sectors

  • Primary: Extracting raw materials (e.g. farming, mining).
  • Secondary: Manufacturing (e.g. factories).
  • Tertiary: Services (e.g. retail, banking).
• Mission, Corporate Objectives & StrategyMission, Corporate Objectives & Strategy

  • Mission: Broad, long-term purpose of the business.
  • Objectives: Specific targets (e.g. increase revenue by 10%).
  • Strategy: Plan to achieve objectives.
• Revenue, Costs, and Profit

  • Revenue = Price × Quantity sold
  • Total Costs = Fixed Costs + Variable Costs
  • Profit = Total Revenue – Total Costs
  • Businesses aim to increase revenue and control costs to maximise profit.
• . Forms of Business

  Sole trader: One owner, unlimited liability.

  Partnership: Two or more owners, shared liability.

  Private limited company (Ltd): Limited liability, shares not sold publicly.

  Public limited company (Plc): Shares sold on stock market.

  Not-for-profit organisations: Reinvest surplus to meet social/ethical goals.
• The Role of Shareholders

  • Shareholders invest capital in exchange for returns (dividends).
  • They influence decisions, especially in Plcs (voting rights).
  • Share price influenced by performance, economy, and confidence.
• 7. Influences on Business

  • External factors: Competition, market conditions, economic climate, interest rates, demographics, environmental factors.
  • Internal factors: Business objectives, leadership style, company resources.
• Stakeholders

  • Internal: Owners, employees, managers.
  • External: Customers, suppliers, government, community.
  • Businesses may face conflicting stakeholder interests.