Why businesses exist
- Businesses add value by transforming inputs into outputs customers will pay more for; they meet needs/wants and aim to make a profit (or achieve social aims).
- Sectors: primary (extraction), secondary (manufacturing), tertiary (services). Enterprise and the role of the entrepreneur (risk-taking, innovation, organising factors of production).
Objectives and mission
- Mission (the overarching purpose) informs corporate objectives (SMART - specific, measurable, achievable, realistic, time-bound), which cascade into functional objectives.
- Common objectives: survival, profit maximisation, growth, market share, shareholder value, ethical/social aims. Objectives change with size, ownership and the economic climate.
Ownership and stakeholders
- Sole traders, partnerships, private (Ltd) and public (plc) limited companies; unlimited vs limited liability; the divorce of ownership from control.
- Stakeholders (owners, employees, customers, suppliers, government, community) have different interests; stakeholder vs shareholder approaches and managing conflict.
The external environment
- PESTLE factors (political, economic, social, technological, legal, environmental) create opportunities and threats businesses must respond to.
Tie every answer back to the business's objectives and context, and use stakeholder analysis to evaluate decisions.
Diagram
Core idea
Key details
Worked example
Exam application
Definition
Evidence
Explanation
Conclusion