Business Summary Notes Putting a Business idea into practice
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Course
Humanities
Institution
GCSE
GCSE Business Summary Notes on the topic Putting a Business idea into practice, specifically designed for the Edexcel Exam Board but applicable to any study of business.
Aims are the broad targets that a business wishes to achieve.
These are long term goals.
e.g. Aston Martin, aims to broaden its product range to younger and female customers.
The aim does not say how this will be achieved in any detail.
Objectives
Objectives give the business a clearly defined target.
Plans can then be made to achieve these targets.
They are short term and help to achieve aims.
The most effective business objectives meet the following criteria.
SMART
Specific – objectives are aimed at what the business actually does.
Measurable – the business can put a value to the objective (numerical).
Agreed – should be agreed by all people connected.
Realistic – should be challenging but reachable.
Time Bound – a time limit when the objective should be achieved.
SMART objectives help all parts of the business have a clear idea of what they want to
achieve e.g. the staff and the manager.
They will provide a clear focus.
This in turn can be motivational, with everyone working towards the same objective.
They also help senior managers with decision making.
e.g. Costa announced in 2015 it wanted to open an extra 600 coffee shops in China by
2020.
This clear target helps to provide a focal point for staff actively and in decision making.
Differing Aims and Objectives
Aims and objectives differ because business owners want different things from their
business.
e.g. to make money, to make a product no one offers, to offer a service, to be the best.
e.g. James Dyson started in business to make a bagless vacuum cleaner and The Body
Shop was set up to create environmentally friendly cosmetics.
Financial Objectives
Profit – making enough money to pay bills or satisfy customers.
Sales – gaining as many customer purchases as possible, a common approach amongst
online businesses such as Facebook.
, Market Share – claiming as many loyal customers as possible, giving a business power in a
market, e.g. iPhone captured 48% of the UK mobile market this means shops want to stock
it as they are guaranteed to sell.
Financial Security – having enough money to ensure the long-term success of a business,
e.g. profit that is kept to invest in future products or expansions.
Survival – the most important thing for a new business is survival. Out of new businesses in
2016, 91% survive a year. Only 40% are still trading after 5 years. Just to keep trading is very
important.
Non – Financial Objectives
Some entrepreneurs are motivated by social objectives.
Making huge profits are not important to them.
Achieving social goals and putting something back into society is becoming much more
important to people.
However, they do this using normal business methods.
A traditional example is Oxfam – a charity run like any other business but their objective
is to support developing nations.
e.g. One bottled water business’s objective is to use their profit to help bring clean water
to Africa with over 500,000 benefiting from their help.
Revenue
Revenue is another name for all the money that a business receives from selling goods
or services.
It’s also known as turnover.
Revenue = Price Per Item Sold x Quantity of Items Sold
R=PxQ
Costs
Costs are outgoings associated with a business.
There are two main types of costs involved in running a business.
Variable costs are costs which change directly with the output of a business e.g. increase
when you make more products and decrease when you make fewer products.
Fixed costs are costs which do not change in relation to the output of a business. These
costs stay the same regardless of how much is produced or sold.
Fixed Costs Variable Costs
Rent Gas Bill
Loan Payments Water Bill
Salaries of Permanent Workers Wages of Casual Workers
Insurance Stock
Advertising Electricity
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