3.1

• Mission Statement


  a statement of the organization's purpose and what it wants to accomplish

  for: employees, customers, investors
• Mission Statement evaluation


  strengths:

  - ensures everyone is focussed on the same target

  -gives customers an understanding on the businesses ethics

  weaknesses:

  -it is not always supported by the businesses actions, this can lead to negative publicity

  -might be vague
• Why do businesses exist?

  to provide goods or services to customers
• aim


  a long term overarching target
• objective


  a specific target that helps a business achieve its aim
• SMART


  Objectives need to be SMART

  S- specific

  M- measurable

  A- agreed

  R- reliable

  T- timebound
• Why are objectives set?


  -to motivate employees

  -to measure and review performance

  -to ensure everyone has the same purpose
• Business objectives


  1- survival: a business will want to survive

  2-profit: achieving revenue that is higher than total costs

  3-Growth: can be organic or external

  4-cash flow: the flow of cash in and out of a business- needs to have sufficient cash to meet expenses

  5-social: needs to benefit society e.g provide jobs

  6-ethics: have good morals
• limit on objectives


  internal:

  -limited finance

  -poor communication

  -limited workforce skills

  
  

  external:

  -changing legislation

  -increasing competitors
• revenue aka turnover


  the amount of money earned throughselling goods and services

  amount sold x selling price
• Costs


  An expense to the business

  Fixed or variable
• Fixed costs


  Costs that don't vary with business output

  E.g rent, salary
• Variable costs


  Costs that vary directly with business output

  E.g raw materials, wages
• Total costs


  fixed costs + variable costs
• Profit


  revenue - cost
• Private sector


  Organisations owned by individuals

  - main objective is to make a profit
• Public sector


  Organisations owned by the government e.g NHS
• Forms of business


  Sole trader

  Partnership

  PLC

  LTD

  Non-for profit
• Sole trader


  A business owned by one person

  + easy to set up, own boss, flexible

  - unlimited liability, limited finance
• unlimited liability


  The owner is personally and fully responsible for all losses and debts of the business
• Private Limited Company (Ltd)


  Company owned by shareholders, but shares only sold privately, not on the stock exchange

  + limited liability,access to capital

  - published accounts, less control
• public limited company (plc)


  A company who's shares are floated on the stock market

  + limited liability, sell shares to raise finance

  - published accounts, risk of takeover, shareholder say
• non-for-profit organization


  an organization that operates for purposes other than making a profit

  E.g mutuals, charities
• Charities


  organizations for helping those in need, aim to collect money for a specific cause

  - volunteers, donations
• Mutuals


  Companies that have no shareholders, the clients are its members and profits are theoretically owned by the members

  E.g the coop
• Issues with forms of business


  - unlimited liability - owners possessions at risk

  - share capital- shares remove control

  - dividends- shareholders expect payment

  - market capitalisation- how much business is worth
• Market capitalisation


  Number of issued shares x current share price
• Influences on share price


  - economic climate

  - investor confidence

  - company performance
• Importance of share price


  - maintaining a strong price attracts investment

  - falling price increases the risk of takeover

  - affects ability to raise finance

  - influences stakeholders
• Shareholders


  Investors who purchase shares of stock in a corporation

  - receive dividends

  Invest because:

  - short term gain (dividend)

  - Long term gain ( share price increase)
• The external environment


  Factors which affect cost and demand
• Competition


  - the number of firms in a market

  Cost- many competitors increases supplier power so they can push costs up

  Competition attracts new businesses- push cost down

  Demand- compete on price- lower prices which increases demand
• Market conditions


  The features of a market s.g sales, growth

  Costs- market decline- prices lowered to maintain sales

  Short supply- suppliers increase cost

  Demand- market growing= demand growing

  Decline= decline
• Income


  The earning of customers

  Costs- higher wages- cost a business more

  Demand- incomes rise- demand rises as more disposable income
• Interest rates


  Cost of borrowing and the reward for saving

  Cost- IR increase, loan repayments increase so higher fixed costs

  Suppliers pass on higher cost in form of high price

  Demand- IR increase, discourage spending so demand falls
• Demographic factors


  The populations characteristics

  Cost- large population- average wage decrease so lower business cost

  Increased costs to healthcare and education

  Demand- migration- increased demand as more people
• Environmental issues and fair trade


  Concern for the environment

  Cost- fair trade- increases cost as fair price is payed

  Increase cost due to environment (new equipment, exp packaging)

  Demand- concern for environment creates USP so demand increases

  If costs of product increases demand may fall