Aiming for Merit
Learning aim A: Explore the features of different businesses and analyse what makes them successful
Most organizations depend on making a profit as they believe that if the profit is higher, the more successful the organization will be. However, keep in mind that not every organization measures its success by the amount of profit it gains.
Additionally, the method a business is prepared to provide its aims and meet the needs of its customers is vital to its success. In this learning aim, I will explore kinds of businesses and what effects success and failure.
Ownership and liability:
Businesses are possessed in one of three ways: private, public and not-for-profit.
Private: Private organizations are those owned by people and therefore they are responsible for all characteristics of the business. Owners of private organizations are to try taking many dangers as they are in organizations to make a profit. Privately owned organizations can be of any size and kept by many partners. An example of this would be Tesco.
Public: Public organizations which are recognised as being in the public sector and public sector are owned by the government. These types of organizations could have been operated by the government or then purchased by the government from the private sector for investment or to save them from financial loss.
Not-for-profit: Charities and non-profit organisations are to try to support a certain cause. Charities will raise money for their cause or to let others know of a matter going on in the world. Charities are operated by a board or group made up of deputies. Deputies are people who give up their time to recommend or run the events for a charity. Charities raise money from community donations, sales from the charities that have local stores. Management can allow lottery funding, as well as more known fundraising from raffles and supported actions such as 10km walks. An example of this would be Oxfam. They have many events such as the Prudential RideLondon-Surrey. This is where people will cycle past London landmarks and through Surrey’s countryside hills. And you will cycle back into London with cheering spectators and have a remarkable surface on The Mall outside Buckingham Palace.
The difference between for profit and not-for-profit businesses: While the task of for-profit business is to gain larger profits and forward these profits to the businesses landlords and shareholders, non-profit businesses intend to provide people’s needs. Non-profit businesses have no owners. Instead of maximizing incomes, which means maximizing revenues while minimizing costs, they are more worried with ensuring the revenue is larger than costs. This makes sure that the non-profit can still provide society’s needs.
Types of ownership Definition Benefits Drawbacks
Sole trader A sole trader describes any business that is owned and controlled by one person -Get all profit
-Easy to setup -Responsible for all debt
-Personal assets are at risk
Partnerships Partnerships are businesses owned by two or more people -Easier to raise capital
-Cover found if absent -Unlimited Liability
-May be disagreements
Private Limited Company A private limited company (ltd) is often a small business such as an independent retailer in a market town -Limited liability
-Increased capital as public can buy shares -Many regulations to comply with
-Accounting procedures may be more costly
Public Limited Company A public limited company is a company that is usually a large and well-known business -Limited liability
-Shares increase in value if company is successful -More regulations to comply with
-Shareholders may sell shares if dividends poor
2711302-765544The table below will show you the different types of business ownerships
00The table below will show you the different types of business ownerships
Privately owned organizations can choose to become limited business at any time. A choice to do so can be made to guarantee that business profits and responsibilities are correctly spread-out based on the amount of ownership by each of its managers. Organizations moneys are kept isolated from personal finances. If the business does not succeed, the owner’s personal assets, such as cars, will not be able to be used to pay off any debt.
Owners of limited businesses will have to pay corporation tax and can draw extras from their businesses. Depending on personal tax responsibilities, it may be helpful to adjust the business structure to a limited company.
Some owners find they can increase their business chances by becoming a limited business as it may give the impression that they are greater or more recognised than they are. Some large organisations will only make agreements with limited companies.
Tesco is the third largest retailer in the world measured by their money income. Tesco has 6,553 stores internationally.
Tesco is a profit-making business; it started off by selling small household items such as groceries however, they now sell a whole mixture of products such as laptops and more.
Tesco started as a one-man business in London’s East End. Tesco was founded by Jack Cohen. He sold groceries in the markets of the East End from 1919.
The purpose of Tesco is to leave every customer satisfied so they will come back for repeat purchase and will build a good relationship between the customer and the business.
Oxfam is an international confederation of 20 organizations working together with partners and local communities in more than 90 countries.
One person in three in the world lives in poverty. Oxfam is determined to change that world by mobilizing the power of people against poverty
The purpose of Oxfam is to find solutions to the unfairness of poverty.
Tesco is a public limited company. Tesco is owned by thousands of people because it is owned by shareholders and they fund the business. Shareholders buy shares in the company and become shareholders. An advantage of being a shareholder is that you will have limited liability. Limited liability is when your business goes into debt but only the money you have invested will be taken and your personal assets are not at risk. Unlimited liability will matter to sole traders and partnerships because they will have their personal assets at risk. The shareholders invest their own money into the business to receive a profit.
Oxfam is a charity organisation of 14 organisations. They are the assistants of the organisation, working in 98 countries internationally to find answers to poverty. All staff working for Oxfam will be paid unless they are voluntary, and a CEO. All decisions are made by a board of trustees, elected by the people who pay e.g. members/donors. They have a responsibility to follow their members/donors wishes, and to do what they set out to do like help people overseas
Liability is to defend the business against the danger of being sued or held legally in control, anyone owning or running a business should protect again such liability.
Unlimited Liability: Businesses can be owned my sole traders or partnerships. If the owners share the business tasks equally, they are in charge not just for the profits but also the losses including debts and claims against the business. This will mean that all owners are in control for any loss of money if the business has insufficient capital. This could mean all investments and personal assets are at risk at being possessed.
Limited liability: A limited business has special rank in the eyes of the law. These types of businesses are incorporated, allowing them to have their own legal individuality and can prosecute or own possessions in their own right. The ownership of a limited business is separated up into equivalent portions called shares. Whoever retains one or more of these are called a shareholder. As limited companies have their own legal identity, their possessors are not personally accountable for the businesses debts. The shareholders have limited liability and this is a big advantage of this type of business legal construction.
Businesses function in different sectors. This will be referred to the nature of their business and the product or service they deliver and offer. These sectors are recognised as primary, secondary, tertiary and quaternary and are the four phases of the trip from obtaining a material to being prepared for the customer.
Primary production: this includes obtaining raw materials. For example, metals and coal have to be extracted, oil drilled from the ground, rubber appointed from trees, food products are grown. This is can also be referred as extractive production.
Secondary production: this is the engineering and assembly procedure. It includes changing raw materials into components. An example of this would be creating plastics from oil. It also involves making the product such as building houses and roads.
Tertiary production: this refers to the profitable services that support the manufacture and distribution process. An example of this would be insurance, transport, advertising and warehousing.
Local: The scope of a business basically shows the area covered by that organisation. A local business is a business which is owned locally and has one or two stores just in the local area. An example of this could be the chip shop named Vikings in Watford.
National: If a business is national, this means they operate in one country but do not own stores in other countries.
International: International businesses do business dealings that take place through national borders and are well known over the world
Tesco will be considered as an international business as they are worldwide and are well known.
Oxfam is considered as national as it is known in all over England and operates in England.
Size Type: Micro Small Medium Large
Number of employees: 1-9 10-49 50-249 250+
Tesco’s size: Tesco is large company. They have more than 10000 employees over their stores.
Oxfam’s size: Oxfam is a large company. They have over 5000 people working for them over their stores. Furthermore, they have 10000 volunteers who work for them.
Profit seeking business
Businesses seeking to make a profit are motivated by many reasons such as getting a bonus to allow them to have extra money and try achieving the life goals such as owning a home, buying a nice car, going out on holiday and other luxury’s. As a business becomes larger and more well-known, they start to get more responsibility. An example of this would be a growing business might employ additional staff, pay for premises and develop products or services to expand on its market share so the business can continue to grow. Managing the profits becomes more complex and specialised.
Non-profit seeking business
The main aim for these organisations is to not make high profits but is to make enough to continue the business. This will mean that they need to keep a very close eye on their funds to make sure that what they purchase does not go over the limit of the income they receive (revenue).
Revenue for non-profit seeking business may not just be made from selling a product or service but could also come from successful raffles, charities and also lottery fund. An example would be Oxfam as they do local activities and earn profit for it.
Aims and objectives:
Every business needs aims and objectives. This will give a business guidance to gain revenue and achieve their aim.
Oxfam aims and objectives
An aim is a long-term goal of a business whereas an objective breaks the aim down into more specific targets.
Oxfam have many aims such as ending unfair trade, getting better health care for people who need it, getting rid of poverty, provide food to the homeless and educate people so they can get a job and live their life.
Tesco’s aims and objectives
Tesco have many aims such as gain a certain number of sales every week, become the first largest retailer in the world, open a certain number of store by end of the year, leave customers satisfied and to supply goods/services at a cheap price.
Innovative products or processes:
Innovative products or imaginative methods to go about a process, can lead to business success. Tesco has been doing Tesco Club card for a long time now. This is innovative and productive as it is differentiating to competitors and helps customers to save money.
Stakeholders and their influence
Every business has stakeholders. Stakeholders are people who have an interest in your business.
There are two types of stakeholders: internal and external.
Internal stakeholders in a business would include current employees. External stakeholders would include people who have an interest outside the business such as customers and competitors.
Internal Stakeholders: Managers, Employees, Owners
External Stakeholders: Suppliers, Competitors, Customers
Internal customers include anyone directly connected to the business: employees of business representatives of the organisation.
Managers: Choice makers and bosses
Employee: Reporting to managers
Owners: General charge for the business
Pressure groups: Societies can take on small and large schemes and put significant pressure on whether a business plan will pass or fail.
Interest groups: These groups involve followers with an interest in a business or specific business who aim for a common cause. They look to affect the business or factors such as policy or supervisors. These include: Trade unions, chambers of commerce.
Suppliers supply raw materials to businesses. An example of this would include, bricks delivered to builders, electricity to light our homes and streets and much more.
Competitors: Anyone who is in competition with a business is also referred to as a stakeholder as they will want to know what the competitor is planning. In order to run a successful organisation, you will need to identify your competitors and assess what they are offering. This will allow a business owner to know what a competitor is offered and to try giving a different product which is better or try giving the same product at a cheaper price.
Customers: Businesses have both internal and external customers. Everybody can relate to being an external customer as they could question about or purchase a product or services such as an item of clothing or ask what ingredients are in a certain product. Furthermore, you are also a customer when you receive a service for which no money changes hands, including a hospital service.
Stakeholder’s effect on Tesco:
Stakeholders have a large effect on businesses including Tesco. Tesco will have an effect because all stakeholders have effects on the businesses revenue, development and working area. As Tesco is aiming to hit its aims and objectives and wants to expand and gain higher profits, Tesco is trying to give a lot of attention to their stakeholders.
Tesco will have to listen to their customers because customers will give the review about their stores and suggest what can be improved: suggestions to brands and production, suggestions to customer service and all other service that business create. This is vital as Tesco want to create a good relationship between the customer and the business as this will lead to the customers to come back to the business for a repeat purchase.
Tesco will have feedback from workers: this happens through online surveys and forums. This is vital to Tesco because Tesco are trying to make improved and safer working environments for their employees. Workers can ask for bonuses if they have put in hard work and the company could say yes. If workers are satisfied of working for the business and are pleased about the working environments, they could treat customers more effectively. This will lead to more satisfied employees and customers.
Tesco must have a good relationship with suppliers because if they have a good relationship with its suppliers, they could get promotion deals and they could get quick service from their suppliers if they are running out of stock; making swift payments for suppliers is also a key factor because if you are making late payments and forgetting to pay the correct amount, your supplier could end up either treating your badly or end up not suppling you.
Tesco must also have a good relationship with investors because they are trying to gain high profits because people who are investing could end up investing additional money in to the business as they know Tesco is known for its success and development.
Overall, all these stakeholders are effective because if you do not treat them in a correct way, Tesco will not gain profit as there will be less investor. Furthermore, Tesco will be low on stock and not have all products as suppliers have let go Tesco as they were treating them badly and Tesco will lose customers because Tesco are not stocked up.
Even though this is a charity company, workers will be paid at minimum wage. Workers can have a say in with their opinions and views of different things; these views can have an influence on the business because they are saying the person suggesting what could be that it can potentially help the business. Volunteers are different to workers as are working for the business but not for profit making purposes, so they will not earn salary. Most people who volunteer are looking to gain work experience. A problem with volunteers of Oxfam could be that they are not happy with the working area and end up leaving the job or causing an argument. This could ruin the business as they will need to sort out the issue and potentially spend more money.
Managers: A manager is an individual who takes lead of group tasks and makes sure that all workers are doing their jobs at the correct standard. Workers can give the manager feedback about how their projects to help the poor ones have been. Managers should be allowed have the chance to be promoted however in Oxfam, it is a rare chance that you will be promoted and sometimes will not be able to make decisions; this causes conflict. This could happen by a manager not feeling like they are a part of the Oxfam team because their views are not being reflected and their orders to workers are not being listened to by other members of staff.
Donors: A donor is someone who donates material or a possession with their own kindness. Most donors donate materials for OXFAM and this is useful as it could be given to someone in need or can be sold. The materials may be clothes, food or money. They will have an interest in Oxfam because the growth of Oxfam will make the business more aware to people and it could maybe one day be known all over the world. If donors stop donating, it could make OXFAM go bankrupt and the people in need will stop being helped; this is why donors are important.
Suppliers: Suppliers are the people that supply services and goods to a business. For a business to gain a good relationship with a business, the business will need to pay the supplier on time and to always be ordering items from them. Suppliers can gain a good relationship with the business by providing the business with high quality products or a good service. Oxfam depend on their suppliers for materials that they could use to help the people in need of them. There could be conflict if Oxfam does not pay the supplier on time or if the supplier is not giving good quality items; the business can either goes to a different supplier or the supplier could let go of Oxfam.
Government: The government are liable for making sure businesses know the rules and regulations that they will need to listen to. The government will need to ensure that businesses are giving the right amount tax from business profits. This could be hard for Oxfam because if a percentage of their profits are taken for tax, they will get less money and could not cover all their costs and could go bankrupt.
The influence of stakeholders on business success
Stakeholders can influence business success. The London Stock Exchange is where public limited companies offer shares in the company. This rises funding for the business by selling off parts of it as shares. Shareholders are looking for value for money; in business terms this is called shareholder value.
As you probably know, the value of these shares can go down as well as up and therefore shareholders are keen to ensure their investment is worthwhile. This can create a tension between those who run the business and those who simply have an interest in it. Shareholders vote on proposals for the way the business is run, which depends on majority votes.
Customers are also stakeholders and should be considered as long-term assets. Customers who feel valued and receive a good service are more likely to remain loyal. Strong customer service, such as that provided by M&S, enables customer retention.
As employees are stakeholders of the business they contribute to the success of the business, whether it is as a direct or indirect result of their actions.
Effective business communications: Without effective business communications, a business is unlikely to succeed. So far in this unit, you have learned about a variety of businesses from different sectors and of different sizes. Since the latter part of the 20th century, people have relied on the introduction and development of digital communications and, as you will explore shortly, these require a different approach towards how to communicate with the diverse audiences with which businesses need to engage.
Importance of communication to aid business success:
Social media can be a great way of promoting a small business and getting it known across a wider community. Regardless of business size, social media is being used more widely each year and those dominating business communications include Facebook, Instagram and Twitter. Government offices also rely on social media. Although there are reservations about using social media, it can reap rewards if it is used responsibly.