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Complete Business Revision Notes A LEVEL AQA
Business Studies (High School - Great Brittain)
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]A Level Business Studies
3.1 What is business?
3.1.1 Understanding the nature and purpose of business
Why businesses exist
Key business objectives:
- To make money
- To provide a service
- Provide employment opportunities
- Fill a gap in the market
- Help the community (social enterprise)
- Be environmentally friendly
- Improve existing products
- Survive
The relationship between mission and objectives
Mission Statement = this provides the overriding goal of a business and the reason for its existence; and a strategic
perspective for the business and a vision for the future
Benefits of a good mission statement:
- Clarifies purpose and focus
- Motivates staff and those interested in the business
- Attracts people (such as investors) and resources
- A good public relations tool
Characteristics of a good mission statement:
- Contains a formulation of objectives that enables progress towards them to be measured
- Differentiates the business from its competitors
- Defines the markets or business in which the firm wants to operate
- Is relevant to all major stakeholders – not just shareholders and managers
- Excites, inspires, motivates, and guides – particularly important for employees
Criticisms of mission statements:
- Not always supported by actions of the business
- Often too vague and general
- Views as a public relations exercise
- Sometimes regarded cynically by employees
- Not supported wholeheartedly by senior management
Corporate aims and objectives:
- Mission statement – the overall reason for the business’ existence
- Corporate aims – the long term targets and plans to fulfil the mission statement
- Corporate objectives – the medium to long term quantifiable targets to fulfil the mission statement
- Corporate strategy – the actions to be taken by the business to achieve its objectives
Common business objectives
Types of business objectives:
- Ethical – (e.g. completely cruelty free; change packaging to cut down on plastic use; no harmful chemicals
used throughout production; reduce waste; environmentally friendly)
- Profit (e.g. increase profit margins; maximise profit)
- Growth (e.g. number of shares (quantifiable) – volume; gain market share; increase number of outlets)
- Survival (e.g. achieve minimum level of sales and sales revenue to ensure costs are met and market share is
retained; maintain levels of stock)
- Cash flow (e.g. reduce outflows; increase inflows)
- Social (e.g. support and solutions; enhance brand images and reputation)
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Why businesses set objectives
Main functions of objectives:
- A clear statement of what needs to be achieved
- Focus’ on all activities of the business (marketing, operations, finance, human resources)
- Provides targets for individual and group achievements
- A means of measuring performance (business, departments, individual employees)
- Provides a clear focus for decision making and a target to aim for
- Provides criteria for evaluating performance
The measurement and importance of profit
Profit = revenue – total costs
Total Costs = fixed costs (stay the same regardless of output eg rent) + variable costs (change in relation to the
number of items produced)
Importance of profit:
- Motivator
Sole traders can keep all the profit
Ltds owned by people running the business
Profit sharing schemes in which staff are given incentives to work effectively
- Further investment
Guide to see where it is easier to make profits
Where profits are high and low
- Stakeholders
Reliable customers
Purchase goods
Easier to establish links and work with others businesses
- Finance
Avoiding paying interest
Fund expansion plans and capital investment
- Success
Compare profits to competitors
Before this though, have to look at competitor business objectives
- Reward
Many business owners take risks with money
Every 6 months, plcs pay dividends to shareholders
Retain profit to buy more resources to make more profit in the future
3.1.2 Understanding different business forms
Reasons for choosing different forms of business and for changing business form
Private = part of the economy that is not state controlled, and is run by individuals and companies, usually for profit
Public = this refers to all the businesses and organisations which are owned and run by the government
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Factors affecting choosing business forms:
- Finances (including sources of)
- Size
- Taxes
- Profit (who shared with)
- Risks
- Ownership and control
- Registrations and payment
- Liability (limited and unlimited)
Unlimited Liability = owners are personally responsible for the debts of the business. This means their personal
possessions such as their cars etc would pay for debts should the business go bankrupt
Limited Liability = the business has its own legal identity
Strengths of a sole trader Weaknesses of a sole trader
Don’t need to register anywhere (only have to tell Unlimited liability – can take personal possessions if the
HMRC) business goes into debt
Owner keeps all of the profits Completely control (no other option)
Can’t sell shares so have complete control Can’t sell shares so so extra money
Are their own boss – no arguments Little start up capital to being with
Strengths of a private limited company Weaknesses of a private limited company
Limited liability – can only take assets that belong to the Profits must be shared with the shareholders in the
business to pay off debts form of dividends
Own legal structure Corporation tax
Can use lots of ways to raise finance Have to pay to register the business
Strengths of a public limited company Weaknesses of a public limited company
Limited liability – can only take assets that belong to the Profit must be shared with the shareholders in the form
business to pay off debts of dividends
Own legal structure £50,000 raised money to register with the Companies’
House
Can use all types to raise finance Corporation tax
ADD IN TABLE ON THE DIFFERENT BUSINESS FORMS
Downloaded by Neel Parekh ()
Complete Business Revision Notes A LEVEL AQA
Business Studies (High School - Great Brittain)
Scan to open on Studocu
Studocu is not sponsored or endorsed by any college or university
Downloaded by Neel Parekh ()
, lOMoARcPSD|41572021
]A Level Business Studies
3.1 What is business?
3.1.1 Understanding the nature and purpose of business
Why businesses exist
Key business objectives:
- To make money
- To provide a service
- Provide employment opportunities
- Fill a gap in the market
- Help the community (social enterprise)
- Be environmentally friendly
- Improve existing products
- Survive
The relationship between mission and objectives
Mission Statement = this provides the overriding goal of a business and the reason for its existence; and a strategic
perspective for the business and a vision for the future
Benefits of a good mission statement:
- Clarifies purpose and focus
- Motivates staff and those interested in the business
- Attracts people (such as investors) and resources
- A good public relations tool
Characteristics of a good mission statement:
- Contains a formulation of objectives that enables progress towards them to be measured
- Differentiates the business from its competitors
- Defines the markets or business in which the firm wants to operate
- Is relevant to all major stakeholders – not just shareholders and managers
- Excites, inspires, motivates, and guides – particularly important for employees
Criticisms of mission statements:
- Not always supported by actions of the business
- Often too vague and general
- Views as a public relations exercise
- Sometimes regarded cynically by employees
- Not supported wholeheartedly by senior management
Corporate aims and objectives:
- Mission statement – the overall reason for the business’ existence
- Corporate aims – the long term targets and plans to fulfil the mission statement
- Corporate objectives – the medium to long term quantifiable targets to fulfil the mission statement
- Corporate strategy – the actions to be taken by the business to achieve its objectives
Common business objectives
Types of business objectives:
- Ethical – (e.g. completely cruelty free; change packaging to cut down on plastic use; no harmful chemicals
used throughout production; reduce waste; environmentally friendly)
- Profit (e.g. increase profit margins; maximise profit)
- Growth (e.g. number of shares (quantifiable) – volume; gain market share; increase number of outlets)
- Survival (e.g. achieve minimum level of sales and sales revenue to ensure costs are met and market share is
retained; maintain levels of stock)
- Cash flow (e.g. reduce outflows; increase inflows)
- Social (e.g. support and solutions; enhance brand images and reputation)
Downloaded by Neel Parekh ()
, lOMoARcPSD|41572021
Why businesses set objectives
Main functions of objectives:
- A clear statement of what needs to be achieved
- Focus’ on all activities of the business (marketing, operations, finance, human resources)
- Provides targets for individual and group achievements
- A means of measuring performance (business, departments, individual employees)
- Provides a clear focus for decision making and a target to aim for
- Provides criteria for evaluating performance
The measurement and importance of profit
Profit = revenue – total costs
Total Costs = fixed costs (stay the same regardless of output eg rent) + variable costs (change in relation to the
number of items produced)
Importance of profit:
- Motivator
Sole traders can keep all the profit
Ltds owned by people running the business
Profit sharing schemes in which staff are given incentives to work effectively
- Further investment
Guide to see where it is easier to make profits
Where profits are high and low
- Stakeholders
Reliable customers
Purchase goods
Easier to establish links and work with others businesses
- Finance
Avoiding paying interest
Fund expansion plans and capital investment
- Success
Compare profits to competitors
Before this though, have to look at competitor business objectives
- Reward
Many business owners take risks with money
Every 6 months, plcs pay dividends to shareholders
Retain profit to buy more resources to make more profit in the future
3.1.2 Understanding different business forms
Reasons for choosing different forms of business and for changing business form
Private = part of the economy that is not state controlled, and is run by individuals and companies, usually for profit
Public = this refers to all the businesses and organisations which are owned and run by the government
Downloaded by Neel Parekh ()
, lOMoARcPSD|41572021
Factors affecting choosing business forms:
- Finances (including sources of)
- Size
- Taxes
- Profit (who shared with)
- Risks
- Ownership and control
- Registrations and payment
- Liability (limited and unlimited)
Unlimited Liability = owners are personally responsible for the debts of the business. This means their personal
possessions such as their cars etc would pay for debts should the business go bankrupt
Limited Liability = the business has its own legal identity
Strengths of a sole trader Weaknesses of a sole trader
Don’t need to register anywhere (only have to tell Unlimited liability – can take personal possessions if the
HMRC) business goes into debt
Owner keeps all of the profits Completely control (no other option)
Can’t sell shares so have complete control Can’t sell shares so so extra money
Are their own boss – no arguments Little start up capital to being with
Strengths of a private limited company Weaknesses of a private limited company
Limited liability – can only take assets that belong to the Profits must be shared with the shareholders in the
business to pay off debts form of dividends
Own legal structure Corporation tax
Can use lots of ways to raise finance Have to pay to register the business
Strengths of a public limited company Weaknesses of a public limited company
Limited liability – can only take assets that belong to the Profit must be shared with the shareholders in the form
business to pay off debts of dividends
Own legal structure £50,000 raised money to register with the Companies’
House
Can use all types to raise finance Corporation tax
ADD IN TABLE ON THE DIFFERENT BUSINESS FORMS
Downloaded by Neel Parekh ()
