1.1 Understanding the nature and purposes of
businesses
What is a business?
Definition: organisation that provides goods or services in exchange for money
Why do businesses exist?
– to satisfy the needs and wants of individuals and firms by selling
goods and/or services
– to earn profit
– to satisfy a demand profitably
– to fill an opportunity
– to help others
Goods and services
Goods: physical items
Services: actions performed by other people to aid the customer :)
Business to Business v.s. Business to Consumers
B2C (consumer goods)
– sells to consumers for direct usage or consumption
B2B (capital goods):
– sells to other businesses to run the business, or to make another
product, carry out another service (capital goods)
– supplier to the business
Difference between local and global businesses
Local businesses:
– smaller scale
– local consumers
– less employees —> flat structure
– usually owner involved
Global businesses
– large-scale
– more potential customers (from international delivery)
– more employees —> hierarchal structure —> more administration
What is an entrepreneur?
Definition: someone that sets up a business
Reasons people might start up a business
– Independence
– Passion (pursue an interest)
– Financial gain
, – Dissatisfaction with previous job
– Flexible working
– Spotted a gap in the market
Qualities that entrepreneurs have
– Risk-takers
– Innovative
– Hard-working
Calculations
Revenue: money generated from sales
Profit: Revenue - costs
Variable costs: costs that vary as output changes
Fixed costs: costs that do not vary as output changes
– e.g. rent, utility bills, wages, etc.
Total costs: variable costs + fixed costs
Mission statements and objectives
Definition of mission statements: vision of the business
Advantages
– helps decision making because everyone understands the direction
– can be motivational
Disadvantages
– can be meaningless unless thoroughly understood or clearly
expressed
Objectives
Survival
– their revenue would cover their costs
– break-even
Profit
– Revenue - costs
Customer satisfaction
– how to measure: returning customers, surveys
Shareholder value
– Definition of shareholder: person who owns part of the business by
buying shares
– Objective: increase share price / dividend payment
○ to keep them investing, maintain investors
Growth
– getting bigger, expansion
○ e.g. getting into new markets
Ethical objectives
businesses
What is a business?
Definition: organisation that provides goods or services in exchange for money
Why do businesses exist?
– to satisfy the needs and wants of individuals and firms by selling
goods and/or services
– to earn profit
– to satisfy a demand profitably
– to fill an opportunity
– to help others
Goods and services
Goods: physical items
Services: actions performed by other people to aid the customer :)
Business to Business v.s. Business to Consumers
B2C (consumer goods)
– sells to consumers for direct usage or consumption
B2B (capital goods):
– sells to other businesses to run the business, or to make another
product, carry out another service (capital goods)
– supplier to the business
Difference between local and global businesses
Local businesses:
– smaller scale
– local consumers
– less employees —> flat structure
– usually owner involved
Global businesses
– large-scale
– more potential customers (from international delivery)
– more employees —> hierarchal structure —> more administration
What is an entrepreneur?
Definition: someone that sets up a business
Reasons people might start up a business
– Independence
– Passion (pursue an interest)
– Financial gain
, – Dissatisfaction with previous job
– Flexible working
– Spotted a gap in the market
Qualities that entrepreneurs have
– Risk-takers
– Innovative
– Hard-working
Calculations
Revenue: money generated from sales
Profit: Revenue - costs
Variable costs: costs that vary as output changes
Fixed costs: costs that do not vary as output changes
– e.g. rent, utility bills, wages, etc.
Total costs: variable costs + fixed costs
Mission statements and objectives
Definition of mission statements: vision of the business
Advantages
– helps decision making because everyone understands the direction
– can be motivational
Disadvantages
– can be meaningless unless thoroughly understood or clearly
expressed
Objectives
Survival
– their revenue would cover their costs
– break-even
Profit
– Revenue - costs
Customer satisfaction
– how to measure: returning customers, surveys
Shareholder value
– Definition of shareholder: person who owns part of the business by
buying shares
– Objective: increase share price / dividend payment
○ to keep them investing, maintain investors
Growth
– getting bigger, expansion
○ e.g. getting into new markets
Ethical objectives
