unit 1.2 why do businesses exist why do businesses exist? to provide a public service for charitable...
TRANSCRIPT
Unit 1.2
Why do Businesses Exist
Why do businesses exist?
To Provide a Public
Service
For Charitable Reasons
To make a Profit
To Develop a Good Idea - ENTERPRISE
EnterpriseFeatures: to turn a good idea into a business success; seeing a chance - taking it - making a
success of it; seeing a new or better way of doing
something. People who are willing to take risks to
develop a business idea are called entrepreneurs
Richard Branson (Virgin) and Anita Roddick (Body Shop) are famous entrepreneurs
What decisions need to be made when coming up with a business idea?
Do I have the skills?
What will the business supply/produce?
Where will the finances come from to start up the business?
What are the aims/objectives of the business?
Where will the business locate?
What are the costs involved?
What if I fail?
What Are The Aims Of Businesses?
An aim (or objective) is something that an organisation(or person) sets out to achieve.
The aims of business are complex and depend on many factors, for example, the type of business activity, the personality of the owner/manager, the sector of industry which the business is in, the level of competition.
AimsA business must decide on its own aims
which might include: does it want to make a profit? does it want to be recognised for
providing a quality service? does it want to expand internationally? does it want to become more
environmentally friendly? does it want to improve conditions for its
workforce?
Most businesses aim to achieve some of the following
Survival - to make sure that the organisation/business does not fail or go out of business
Growth - to increase the size of the business, for example more customers, more shops etc
Maximise Profits - to make as much profit as possible
Increase Market Share - to beat competitors and gain more customers, more profits
Most businesses aim to achieve some of the following (cont)
Improve Conditions - to have charitable aims to help others
Efficiency - to make sure that things are done in the best possible way
Lead the Field - to make their company/organisation the number one in the field (a trailblazer!)
Quality - to produce quality products/services
Private Sector Aims
survival – break-even maximise profits increase returns to shareholders/owners expand the product/service range expand the business – more outlets improve the quality of products/services
Public Sector Aims
help people improve the quality of service offered cut costs raise revenue
Voluntary Sector Aims
help people maximise collections for cash offer a service to the community recruit more helpers open more branches/charity shops widen the scope of assistance to find a cure for diseases
A STAKEHOLDER is “a person or group of people who have an interest in a business and the way it is run or managed”.
Who can STAKEHOLDERS be and why are they interested in the running of a business?
Managers – want to ensure the business is running efficiently
Inland Revenue – wish to make sure that tax rules are applied
Employees – have an interest in the activity of a business
Suppliers – wish to know if they will be paid
Consumers – they buy their goods/services from the business and are therefore affected by price variations
Shareholders - wish to see how a business performs in the hope that their investment increases
Stakeholders
Conflict between stakeholdersEach stakeholder in an organisation will have a different reason for wanting it to succeed. Some of these aims compete with one another.
Eg The owners and managers of a business will want HIGH PROFITS which may not be wholly compatible with the wishes of the customer who want LOW PRICES.
What Impact can Opening A Business have on A Community?
A new business in a town/city or region will provide new jobs, opportunities and hope. A business closing in area will of course provide the opposite – often despair.
Many different factors must be taken into consideration when deciding where to locate a New Business. There are many COSTS and BENEFITS both the business and the local community must consider.
Can create EMPLOYMENT
May create COMPETITION LOWERING PRICES for consumers
May create more POLLUTION
May BOOST
the local HOUSING MARKET
What impact
can opening
up a Business have on
the communit
y?
May create COMPETITION causing other firms to CLOSE
DOWN
What can a New Business offer the local community?
The costs and benefits a New Business can bring to a Community fall into two categories
Social Benefits & Costs
• Economic Benefits & Costs
Social benefits are the positive things the New Business brings to the Community as a whole. These include:
Social Benefits
• Improved Road Networks. (Infrastructure)
• New Housing
• New Schools
Social Costs
Social Costs are the negative effects a New Business can bring to the Community as a whole. These include:
• Traffic Congestion
• Traffic Pollution = poor air quality• Noise Pollution
• Health Problems
Economic BenefitsEconomic Benefits are concerned with the positive effects a New Business brings to the local market. These include:
• More jobs = More people employed
• More money available to spend in local businesses
• Improved standard of living
• Businesses in local market grow
Economic Costs
Economic Costs are the negative effects a New Business may bring to the local market. These include :
• The Council may spend money on premises and roads for the New Business rather than other things.
•Increased expenditure on infrastructure
• Increase in Council taxation
•Rates
•Council Tax
•Water Rates
The New Business may also face some economic costs by choosing to set up in a particular local community.
This is called an OPPORTUNITY COST and refers to the benefit lost from the next best alternative when making your choice. In other words if you buy a magazine, the opportunity cost is the benefit you could have had by buying an ice cream.
Businesses are constantly faced with decisions where making a choice is required. To make the best decision they have to understand the opportunity they are giving up.
Opportunity Costs