1. Aims & Objectives Section

2. Personal aims and objectives We all have aims – your aim might be to pass your exams, save money or get fit. How might objectives help businesses to achieve their aims? In order to achieve your aims you must set yourself objectives; for example, do your homework on time, save £5 per week or exercise daily. Setting objectives (targets) will help you to achieve your aims.

3. SMART objectives Organizations set themselves objectives to help them to achieve their aims. Many set SMART objectives: Measurable Specific Achievable Realistic Timed 1. Specific means particular, not vague 2. Can be measured numerically 3. Can be achieved 4. Are realistic for the organization 5. Have a deadline.

4. Business Aims and objectives They should be agreed by the people who have to achieve them to improve the chances of success. Creating objectives can help an organization to measure its performance – to make sure that it is achieving its aims. Aim: make a profit Objective: increase sales by 10% in the next six months Here is an example of an aim with its SMART objective:

5. Purposes of businesses Every business exists for a purpose. It may sell goods or services. Mobile phone company Vodafone sells network coverage (services) and mobile phones (goods). Therefore, all businesses must have aims and objectives that identify what they wish to achieve. Businesses must make a profit to exist. They need to know what they want to do and how they want to do it in order to attract and keep customers.

6. Business Aims and objectives Aims are what the business wants to achieve, e.g. make a profit, be the best, attract new customers, etc. Objectives are the targets that businesses set themselves to help them to achieve their aims.

7. Aims of a business create a profit or surplus funds sell or provide goods or services survive expand maximize sales improve product quality beat the competition provide voluntary services be kind to the environment. The aims of an organization often include to:

8. Business Formats Section

9. Sole Trader Business owned (and usually operated) by one person Simplest form of business ownership Most popular form of business organization – 72.2% of all Most common in: – Retailing – Service – Agriculture

10. Sole Trader -- Advantages Ease of Startup – Little legal documentation – No co-owners to consult Least expensive to start Pride of Ownership Retention of profits Flexibility No Business Income Tax

11. Sole Trader -- Disadvantages Unlimited Liability Limited Life – Business ends when owner leaves the business Limited Access to Start-up Capital Limited Access to Credit Limited Management Expertise Difficulty in Hiring Employees

12. Partnerships Two or more owners Least numerous form – 7.7% of all businesses Partnership Agreement – Specifies rights and obligations of partners – If written, called the Articles of Partnership (Articles of Co-partnership)

13. Partnership -- Advantages Greater Access to Capital Greater Access to Credit Retention of Profits More Management Expertise No Business Income Tax

14. Partnership -- Disadvantages Shared Profits Unlimited Liability for “General Partners” Each partner has “Agency” power Limited Life – Business ends when any partner withdraws Management Disagreements

15. Franchising Franchise – License to operate an individually owned business as though it were part of a chain of outlets or stores – The business itself Franchising – Actual granting of a franchise

16. Franchising Franchisor – Supplies a known & advertised business name – Supplies management skills – Supplies training & materials – Supplies method of doing business Franchisee: – Supplies labor & capital – Operates the franchised business – Agrees to abide by the franchise agreement

17. Franchising Advantages Franchisor – Fast, Selective Distribution – Motivated Franchisee Franchisee – Opportunity to start a business – Business Experience of others – Nationally recognized name – National promotional campaigns

18. Franchising Disadvantages Mainly from Franchisee’s Viewpoint: – Franchisor’s contract can dictate every aspect of the business – Pay for security – Long hours – Competition from same company

19. Stakeholders Section

20. What are Stakeholders? Stakeholders are groups of people who have an interest in a business organisation They can be seen as being either external to the organisation or internal But some may be both!

21. Types of Stakeholder Owners (I) Shareholders (I) Managers (I) Staff or employees (I) Customers (E) Suppliers (E) Community (E) Government (E) I = Internal E = External

22. Internal and External Stakeholders Internal stakeholders are those who are ‘members’ of the business organisation Owners and shareholders Managers Staff and employees External stakeholders are not part of the firm

23. But…..! Some groups can be both internal and external stakeholders Such as staff or shareholders who are also local residents Can you think of any others?

24. Characteristics of Stakeholders 1. Owners and Shareholders The number of owners and the roles they carry out differ according to the size of the firm In small businesses there may be only one owner (sole trader) or perhaps a small number of partners (partnership) In large firms there are often thousands of shareholders, who each own a small part of the business

25. 2. Managers: organise make decisions plan control are accountable to the owner(s) Characteristics of Stakeholders

26. 3. Employees or Staff: A business needs staff or employees to carry out its activities Employees agree to work a certain number of hours in return for a wage or salary Pay levels vary with skills, qualifications, age, location, types of work and industry and other factors

27. Characteristics of Stakeholders 4. Customers: Customers buy the goods or services produced by firms They may be individuals or other businesses Firms must understand and meet the needs of their customers, otherwise they will fail to make a profit or, indeed, survive

28. Characteristics of Stakeholders 5. Suppliers: Firms get the resources they need to produce goods and services from suppliers Businesses should have effective relationships with their suppliers in order to get quality resources at reasonable prices This is a two-way process, as suppliers depend on the firms they supply

29. 6. Community: Firms and the communities they exist in are also in a two-way relationship The local community may often provide many of the firm’s staff and customers The business often supplies goods and services vital to the local area But at times the community can feel aggrieved by some aspects of what a firm does Characteristics of Stakeholders

30. 7. Government: Economic policies affect firms’ costs (through taxation and interest rates) Legislation regulates what business can do in areas such as the environment and occupational safety and health Successful firms are good for governments as they create wealth and employment Characteristics of Stakeholders

31. Sources of Finance Section

32. MethodExplanationBenefitsDrawbacks Own Funds Money put into the business by the owner No need to pay interest on the money Could have been invested elsewhere, earning a higher profit Owner may not have enough funds to meet the needs of the business Bank Loan An amount of money is borrowed from the bank, then repaid (with interest) over a set period of time Easy and quick to set up Large amounts of money can be borrowed Structured repayment term Interest payable If repayments cannot be kept up, the business risks getting a poor credit rating or being made bankrupt Issuing Shares A share in the business is sold to an individual or another business. This money then used to purchase new things or pay debt off No need to repay the money invested Cheaper than a loan Some businesses can raise large sums of money this way Need to pay the shareholders a share of future profits Ownership also means some influence over how the business is run – the original owners may lose control of the business Risky for the shareholder - the investment may be lost if the business fails Mortgage Long term loan provided by a bank in order to buy property Only method available to buy property Structured repayments over a long term (25 years) Large sums of interest charged Can take a long time to repay debt Government Grants Money given to the business by the government. Used to help finance new projects – especially those that create new jobs No need to repay the grantLimited funds are available May be restrictions on what the money can be used for