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BUSINESS UNIT 1, TERMINOLOGY, TERMINOLOGY, CONTENT, TERMINOLOGY,…
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TERMINOLOGY
AIMS
Thy are the long-term goals of an organization, and is usually mentioned in the mission statement. It is a general statement of the organizations purpose, identity, and focus.
THE ANSOFF MATRIX
It is a tool to determine if an organization is expanding with product development, market development, market penetration, or diversification.
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MISSION STATEMENT
A motivating declaration from an organization about their identity, purpose, and focus
OBJECTIVE
Relatively short-term targets of an organization to meet their aims. They are often expressed as SMART objectives.
SMART OBJECTIVES
Acronym to create smart, measurable, achievable, realistic, and time constrained objectives.
STRATEGIC OBJECTIVES
They are long term targets of an organization, usually to meet the aim.
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SWOT ANALYSIS
A tool used to help organizations determine their strengths, weaknesses, opportunities, and threats.
TACTICAL OBJECTIVES
They are short-term day-day targets to guide the daily functioning of operations or certain departments.
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TERMINOLOGY
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SOLE TRADER
A self-employed person who runs and controls the business and is the sole person held responsible for its success (profits) or failure (unlimited liability)
PARTNERSHIP
Type of private sector business owned by 2-20 people (known as partners). They share responsibility and burdens of running and owning a business.
PUBLIC LIMITED COMPANY
An incorporated business that allows the public to buy and sell shares in the company via a stock exchange. All shareholders enjoy limited liability.
PRIVATE LIMITED COMPANY
A business owned by shareholders with limited liability but whose shares cannot be bought by or sold to the general public.
CO-OPERATIVES
For-profit social enterprises set up, owned and run by their members, who might be employees and/or customers.
MICROFINANCE
Type of financial service aimed at entrepreneurs of small business, especially females and those on low incomes.
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COMPANIES / CORPORATIONS
Refers to a business owned by shareholders. A certification of incorporation gives the company a separate legal identity from its owners.
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INCORPORATION
There is a legal difference between the owners of a company and the business itself. Ensures owners are protected by limited liability.
SILENT PARTNERS
This is an investor in a partnership but does not get involved in the daily running and management of the organization.
DEED OF PARTNERSHIP
Legal contract signed by the owners of a partnership. The formal deeds specify the names and responsibility of each partner and their share of any profits or losses.
UNLIMITED LIABILITY
A feature of sole traders and ordinary partnerships who are legally liable for all money owed to the creditors, even if this means they have to sell their personal possessions to pay for their debts.
CONTENT
Vision Statement
An inspirational or aspirational declaration of what an organization strives to be in the distant future.
This usually includes the organization’s core values. It is intended to act as a clear guide for key stakeholders when planning and implementing corporate strategies.
Mission Statement
It is a motivational declaration of the organizations purpose, identity, and focus. It normally remains unchanged over time.
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Aim
Long-term aspirational goals of an organization.They form the basis of its business plan or strategic plan.
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Objective
They are clearly defined and measurable targets of a business, usually to achieve the aims.
Objectives can be long-term (strategic objectives), medium-term (tactical objectives), or short-term (operational objectives).
Strategic Objectives (Long-Term):
Targets that the whole organization is trying to achieve. It requires a greater investment of human and financial resources. It is what thee owners of the business what to focus on.
Tactical Objectives (Medium-Term):
They are easier to change or reverse than strategic objectives. They are specific targets with a definitive timeline.
Operational Objectives (Short-Term):
They are the day-day targets of a department within an organization.
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Strategies
The actions in which a business plans to reach its long-term organizational aims and corporate-wide objectives.
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Strategies used to achieve the strategic objectives are decided by the senior leadership team or board of directors.
They affect and are affected by thee functions of a business; human resources, finance and accounts, marketing, and operations.
Tactics
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They are used by the workforce to work towards achieving the strategic objectives of the organization
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Ethical Objectives
Advantages
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Improve employee morale, motivation, retention and productivity.
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Disadvantages
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The added level of bureaucracy in following ethical codes of practice can delay decision-making in business organizations.
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CSR Evolving
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Opinions change over time. What may have been considered acceptable in the past may no longer be the case today or in the future.
Societal expectations and the growing popularity of social media have caused CSR to become more integrated into today’s corporate cultures.
SWOT Analysis
SWOT analysis is a strategic analysis tool to allow managers to assess the current situation facing an organization.
It considers both internal factors (strengths and weaknesses) and the external business environment (opportunities and threats).
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The Ansoff Matrix
Market Penetration
This growth strategy focuses on developing existing markets with existing products in order to increase sales revenue and market share.
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Examples:
Charging more competitive prices.
Using customer loyalty schemes.
Broadening channels of distribution.
Product Development
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It focuses on product differentiation in order to remain competitive or to improve its competitiveness.
Typically, products are developed to replace their existing ones (e.g. iPhone 12) or to extend the product range (e.g. iTunes, iPads and Apple Watch) and marketed at current customers.
It is a medium-risk growth strategy because product development can incur substantial investment costs
Market Development
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It also relies on a greater distribution network, such as retailers, to get the product to customers spread around the world.
This strategy carries an element of risk as the organization might not succeed in unexplored markets.
Diversification
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Diversification is a high risk growth strategy as the organization enters a market that it has no experience or expertise in. Existing rivals may already have established themselves with brand recognition and customer loyalty.
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TERMINOLOGY
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INTRAPRENEURSHIP
The act of behaving like and entrepreneur, but as an employee within a larger business.
SECTORAL CHANGE
Refers to a relative shift in the relative share of gross domestic product (or national output) and employment that is attributed to each sector.
INDUSTRIALIZATION
When there is a shift in business activity from the primary sector, thee the secondary and tertiary sectors.
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VISIONARY
A visionary is an entrepreneur who has the foresight and driving force behind an organization’s growth and development.
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BUSINESS PLAN
A document that sets out the business idea, goals, objectives, and other details about how the business will operate.
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CONTENT
The Role of a Business
The role of a business is to combine human, physical, and financial resources to provide goods and services
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Sectors
Primary
The primary sector includes any industry involved in the extraction and production of raw materials, such as farming, logging, hunting, fishing, and mining.
The primary sector tends to make up a larger portion of the economy in developing countries than it does in less economically developed countries (LEDCs)
Businesses operating in the primary sector in more economically developed countries (MEDCs) use mechanisation and automation.
Secondary
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Economically developing countries tend to have a dominant secondary sector of the country’s national output.
Tertiary
Businesses in the tertiary sector specialize in providing services to the general population. For example, retail, finance, transportation
In MEDCs, the tertiary sector tends to be the most substantial sector in terms of both employment and as a percentage of gross domestic product.
Quaternary
A ‘subcategory’ of the tertiary sector, businesses in the quaternary sector are involved in intellectual, knowledge based activities that generate and share information.
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The Production Process
Examples: Raw materials, components, machinery, equipment, and labor
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EXTERNAL STAKEHOLDERS
Customer
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In ever competitive markets, businesses have to increasingly listen to the opinions of customers.
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Suppliers
They provide business with stocks of raw material, component parts, and finished products.
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Business try to establish a good relationship with suppliers to get quality materials on time and at reasonable prices.
Pressure Groups
They consist of individuals with a common interest to place demands on organizations to act and behave in a certain way.
They have increasingly influences the decisions of business directly or by influencing government policy.
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Government
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However, government intervention can also constrain a buisness.
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INTERNAL STAKEHOLDERS
Employees
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They are likely to strive and improve for better benefits, working condition, job security, and career progression.
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Managers and Directors
Managers oversee the daily operations of the business.
Directors are the senior executives elected by the shareholders to to direct business operations on behalf of the owners.
They aim to maximize their own benefits, so, they aim for profit maximizations. They also look to improve the long-term health of the organization.
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PRIVATE SECTOR
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DEFINITION : Organizations in the private sector are owned and controlled by private individuals and business, rather than by the government.
BENEFITS AND CONFLICT
Stakeholder Conflict
Different stakeholder groups have different interests, which can conflict.
Conflict refers to the mutually exclusive and incompatible interests of different stakeholder groups.
If this is not managed, it often leads to disagreements, disputes and arguments in the workplace.
Employees
Demand higher wages, which raises production costs so can reduce the number of profits from which shareholders receive dividend payments.
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Shareholders
May demand regular and higher dividend payments, but this may result in less retained profits available for production and marketing managers to improve their functional roles.
Customers
May want lower prices, but this reduced the firm’s profit margin so can upset the company’s shareholders.
Local Community
May demand businesses operate in a socially responsible way and create jobs in the local area. This can create congestion and noise and air pollution in the local area, thereby upsetting other members of the community.
Employers
May want greater efficiency and productivity gains by investing in new technologies, but this might create job losses for employees.
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CONTENT
Internal Constraints
Finance - Most firms lack sufficient sources of finance which limits their ability to achieve organizational objectives.
People - Poor working relations and ineffective communication systems hinder the performance of a firm.
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STEEPLE Analysis
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Social
- Demographics
- Population Growth
- Age Distribution
- Education
- Cultural Differences
- Lifestyle Trends
Technological
- New Innovation
- Automation
- Skilled Resources
- Technological Growth
Economical
- Economic Growth
- Inflation
- Interest Rates
- Income
- Purchasing Power
Environmental
- Weather
- Climate Change
- Greenhouse Gas Emissions
- Natural Disasters
Legal
- Court System
- Employment Law
- Copyright Law
- Consumer Protection
- Trade Unions
Ethical
- Bribery
- Reputation
- Business Ethics
- Confidentiality
Political
- Taxation
- Political Stability
- Trade Restrictions
When compiling a STEEPLE analysis, make sure you consider the factors under each heading that are most relevant and applicable to the business or organization.
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FUNDING
NGO's
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Commercial businesses, as part of their corporate social responsibility
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PUBLIC SECTOR
DEFINITION : Organizations in the public sector are under ownership and control of the government (state-owned enterprises)
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ETHICAL OBJECTIVES
Carroll’s CSR Pyramid is a business management tool that shows the reasons how and why an organization should set ethical objectives and meet its corporate social responsibilities. The framework can be remembered by the acronym PELE
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