Edexcel Business A Level Revision

Growth - A common corporate objective which means expanding the sales revenue of a business, probably in the hope that profits will increase too. Increasing profitability and providing a better return for investors and shareholders are particularly important for companies quoted on the stock exchange as shareholders may have purchased shares with an expectation that they will receive a certain annual return on their shares, known as dividends. This is normally achieved by increasing revenue and lowering cost per unit, resulting in increased profit margins. A benefit of increasing profits as a growth objective is that besides the fact the business is making more money, it is more likely to encourage further investors and insulate the business from competition from current or new rivals However, increasing profits may not be possible for a number of reasons, including an already saturated market and fierce competition from rivals who have either better products or a better br...

Shareholder and Stakeholder objectives can clearly be in conflict, as when wages rise at the expense of lower profits and dividends, organisational growth is at the expense of short-term profits, and expansion of production may cause disruption to the local community. Additionally, conflict can occur between stakeholders and for a business this can be a hard task to meet all of the needs of the stakeholders. This occurs when the actions or objectives of one group of stakeholders may weaken the power of another. Examples below.  However, stakeholder needs may also overlap in which case they can join together to increase their power, for example the community may support the employees when taking industrial action in order to strengthen their voice.

Stakeholder - a person, group or organisation that has interest or concern in the activities or decision making of a business. Shareholders - defined as any person, company or other institution that owns at least one of a company's shares. They're often one of the source of finance for the business; their financial risk is limited to the value of their shareholding. STAKEHOLDER INFLUENCES The stakeholder concept suggests that a business' responsibilities are towards all of its stakeholders. Therefore the business must consider all of its stakeholders in it decisions and objectives, for example consult with stakeholders before making strategic decisions. They must also treat stakeholders fairly e.g. prompt payment to suppliers, fair pay and conditions for employees, as well as addressing the business' impact on the wider community such as environment footprint. Stakeholder influences should be seen as a genuine concern and not just a PR exercise.  Stakeholders ...

Stakeholder - is any individual or group with an interest in the actions and decision making of the business. A SHAREHOLDER IS A STAKEHOLDER INTERNAL STAKEHOLDER EXTERNAL STAKEHOLDER Employees Customers Managers Suppliers Owners Shareholders Shareholders Government Local community Society Creditors (owes money to a business) STAKEHOLDER MAIN INTERESTS Shareholders/owners Return on investment and profits and dividends Success and growth of the business Proper running of the business Managers/employees Rewards, including basic pay and other financial incentives Job security and working conditions Promotion opportunities and job satisfaction and status – motivation, roles and responsibilities Customers Value for money Product quality and customer service Suppliers Continued, profitable trade with th...

Short-termism - where a business prioritises its short term reward rather than long term rewards such as investment in research and development, staff or technology. Long-termism -  where a business is focused on sustained growth through building long term relationships with suppliers and other external stakeholders, significant investment in research and development, perhaps at the expense of shareholder returns/dividends in the short term, and meeting customer needs despite short term needs. SHORT-TERMISM Management who can be described as "SHORT-TERMIST" tend to emphasise certain performance measures, such as: Share price Revenue growth Gross & operating profit Unit costs & productivity Return on capital employed As a possible consequence, other more longer-term measures of business performance might become less important, such as: Market share Quality Innovation Brand reputation Development of employee skills & experience Social responsi...

Private limited company - (Incorporated) A business that is owned by its shareholders known to the company, often family and friends, run by directors and where the liability of shareholders for the debts of the company is limited. Shares cannot be sold openly on the stock exchange, only to other shareholders, or people known to the business. This means that shares are often sold at a discount to the real value of the shares because the shareholders are "locked in" and either sell at the price that they are offered, or do not sell at all. ADVANTAGES Limited liability Separate legal identity More flexible than a Plc Financial records remain relatively private More capital can be raised through the sale of shares DISADVANTAGES More complex to set up due to increased legal requirements Some loss of control as shareholders have voting rights Unable to sell shares to the public

Unincorporated - A business that does not possess a separate legal identity from its owner(s). The owner(s) bear full liability for any action or inaction of the business : they may sue and be sued for business activity or inactivity. The owner is the business. Most unincorporated businesses operate as sole traders. Incorporated - means owners have their own legal identity and have limited liability. Most incorporated businesses operate as Ltd. Unlimited Liability - business owners are personally liable for all business debts if the business can't pay its liabilities . Only unincorporated businesses have unlimited liability. If the unincorporated business fails, the owners are liable for the amounts owed.   Limited Liability - the condition by which shareholders are not liable for any debts owed by the company. They only lose the money that they have invested in the business in the form of shares. Can own things itself (assets), can sue and be sued. Companies are owned ...