Fourth edition a Business For A-level Year 1 and AS John Wolinski Gwen CoatesBusiness (1) Third Edition John Wolinski and Gwen Coates Se DYNAMIC G HODDER VING IN HACHETTE UK COMPANYEp ohne lpi hie ay rey oe ie Yahi UN poy ste pe ha ene eye pas nd ae inn und gnen magia ce os Teng mh ‘nr lee coma po a, £3 Pak Dot Aion, Ose 4 SE "oe sh fe) 0 ent ae © fb We and Gre Canes 209 ne omy il ni Rin pet fn Ferman ring oth ser or ene me Copy nary ey Ud Fs dhcp pn my bet ei Contents Introduction Unit 1. What is business? 1. Understanding the nature and purpose of business 2 Understanding different business forms 3. Understanding that businesses operate within an external environment Unit 2. Managers, leadership and decision making 4 Understanding management, leadership and decision making 5 Understanding management decision making 6 Understanding the role and importance of stakeholders Unit 3. Decision making to improve marketing performance 7 Setting marketing objectives 8 Understanding markets and customers 9 Making marketing decisions: segmentation, targeting, posi 10 Making marketing decisions: using the marketing mix Unit 4 Decision making to improve operational performance 11. Setting operational objectives 12. Analysing operational performance 13. Making operational decisions to improve performance: increasing efficiency and productivity 14 Making operational decisions to improve performance: improving quality 15 Making operational decisions to improve performance: managing inventory and supply chains 1 32 54 6 86 100 118 9 161 216 225 230 261 anUnit 5 16 7 18 9 Unit 6 20 2 22 23 2h Decision making to improve financial performance Setting financial objectives Analysing financial performance Making financial decisions: sources of finance Making financial decisions: improving cash flow and profits Decision making to improve human resource performance Setting HR objectives Analysing HR performance Making HR decisions: improving organisational design and managing the human resource flow Making HR decisions: improving motivation and. engagement Making HR decisions: improving employer-employee relations ‘Acknowledgements Index 295 312 354, 367 381 396, 406 468, 476 489 an ‘This textbook has been written specifically to meet the needs of students studying the AS content of the ‘level Business specification, whether fora free- standing AS qualification o as part oftheir A-level ‘course. It provides thorough coverage ofthe subject content of ths pat of the specification, section by section, ait is nid out inthe AQA specification document. LUpsto-date examples and illustrations from acta Dnisinesses and stuations are used throughout the book inorder to help you to recognise the dynamic and changing nature of business and ks relevance fo society Structure ‘This book follows the onder ofthe AQA.AS business (TBI) specification. (°7131 is the AQA code used to describe the AS award), The AS material represents the first part of the overall A-level award (Coded as 7132) “This par ofthe specification is divided ito six sections, each of which is split nto farther parts— shown by the individual chapters inthis book. The sections and chapters ae summarised below: (© Unit: What is business? Chapters 1-3 This section examines the purpose of business the diferent forms of business and the external factors that influence business activities, ‘© Unit 2: Managers, leadership and decision making. Chapters 4-6 ‘This section looks at management and leadership, decision making and the roe and importance of stakeholders, {© Unit 3: Decision making to improve marketing performance. Chapters 7-10 ‘© Unit 4 Decision making to improve operational performance. Chapters 11-15 ‘© Unit : Decision making to improve financial performance. Chapters 16-19 {¢ Unit 6: Decision making to improve human ‘resource performance. Chapters 20-24 Sections 3to 6 study the actions ofa business's four main functional areas: marketing, operations ‘management, finance and human resource ‘management. These four sections explain how each ‘ofthese functional areas coniribut to mmpeoving the performance ofa business Special features ‘This hoo contains several special features designed to sid your understanding ofthe eequiremets ofthe AQA. [AS Business curse and the frst part of the AQA A-level Business specication. Key terms ‘These ae dea. concise definitions ofthe main terms needed forthe course. Every term inthe AQA specication i included asa key erm o enable you to dvelop sound understanding ofthe concep that ae sential learning Author advice Both authors have over 30 years experince of teaching and have used this to provide snippets of advice that ‘wll help you to improve your understanding of pics that may provide certain challenges and to help you void potential pitfall.BER etrotuction Fact files Topical examples rom the word business are inchaded at regular intervals hep you develop your ‘indenting and application skis by showing how the busines ideas you have aude can be aptled 0 reat-estuations."The at les wil also inctease your asirenes of curert developments and practices Did you know? ‘These ones ae placed throughout the book hey ore useful insight into the deus and concepts fnveredin the couse anther use in businesses. The ommerts wil help yout improve your understanding ofusines activites. What do you think? (moccasins, facts coments on business actvity axe presented in the form of challenge what do you think? Theres often a ange of possible solutions to business problems or many eilfering consequences tan action, These bone wll gz you thing about Possible alternative salutions or consequences Practice exercises and case studies Inthe 2¢ chapes ofthis ook, there ae 58 diferent acc eres alae provided to help you checks Your undectanding ofthe topics ou have covered in fach chaper. Many ofthe questions these exerises fe geared tad assisting you in revising and testing your knowles and understanding ofthe topics evered, Other quettns wil endl you tot our aplication oils paniculay where caleultions are Involved. Some questions wil so ts higher-level Sl, such as analysts and evaluanon, Inthe book there ae also 50 casestudies to provide Tuvther practice of answering queaions Moa ofthese case ses re based on tea} sneses and provide background information that aiended 10 help yout: deep further your understanding ofthe business world practise and develop your ski, For shrcer chapters the practice exercises and case studies are plced a the end ofthe chapter. This toallow your understanding ofthe chapter conente tobe tesed unmedialy after completng the ops However, some longer chapters cover ageat dal of material and have been divided ino ientifiabl opi seas Consequemly, some ofthe practice execs ana casestudies i these chapters ave ben placed throughout he chapter, atthe point at which 2 pariculr tpi area hasbeen completed. Asa rel you willbe able totes your understanding mmedily ‘Mir cemplting that ope athe than wating wl he cnt othe chapter. Assessment skills Hierarchy of skills Every mark thats avatded on an AS ot Aleve paper iegiven forthe demonsiraion ofa sil. The allvng fours ae tested ‘© Knowledge and understanding -demonsiating lnowtedge and understanding ofthe specited ‘content of the cose, sch a knowing the etntion of business term or stating the advantage (fa pantealar method ‘© Application relating o applying your knowledge fan understanding wa specie opansaton or Stuaton. An example might be advising a business ‘to age a parila segment of ecasumers, based ‘on recognising the mos! relevant consumer otha fonzansaton (6 Anaais~tsing busines theory to develop ane ‘of thoughe in ration tothe solution a business problem. An example might be showing how Frpecwerients nthe qty a provkit may cause casteflow problems in the shar te Du ead to tow sshd customer, ad Ubereine move sles revena, inthe long run, (¢ Evaluation ~ making a judgement by weighing up the evidence provide snd, possibly, recosnising the engi, quay and abil ofthe erence ‘elore mang decison All questions are marked ascording to this hierarchy of Skills wth knowledge beng the eases and evaluation beng the mos dificl. Command words “Tolp you recognise the highest evel ofl required ina question certain command words wil be used Some key command werd (© Calculate; Wonk out the value of something such 8 the pereemage of labour turner ‘¢- Deseribe Set out the characteristics of certain da, sch as rend in sales ve ‘© Explain: set out purposes or reasons, such asthe lato iflueninga devon to expand eae. 4¢ Analyse: Separate information int components ad ‘dentify ther characteris, uch as showing how financial incetves fo sa may allect motivation, fe Evaluate Judge fom avaliable evidence ach aswelghing up the pos abd cons of poticular smarkenngsrategy 1 Justify: Suppore cae with evidence such a stunlying two possible options for busines and Sowing why parce option i beter tha a there option. ¢¢ To what extent By how much oe how many, such sasstudyinga business tha is aiming to increase Drofts ond ascsing the degre to which decison to decrease rie might improve (or woes) the business proftaby Assessment of AQA AS Business ‘The scheme of assessment describes the formato the ‘craination andthe methods of assessment the AS tre is asened 100 pt cont by exaainains. Pot ‘he AS quilifcaon students ake TWO examination papers: Both papers are based on ALL ofthe AS speciation. This means topic fom a specific Chapter might be tested in Paper 1 or Paper ofthe AS Jove. The esta diflrence Between the two papers the syle of asessnent AS Paper I: 90 minutes. Maximum marks: 80. AIL (questioas ae conpulacey AS Paper 1 consists of thre sets: € Section A~Muliplechoie question, 10 questions, Tota 10 marks Seton B—Sher-answerquetins. “Tota approximately 20 marks fection C~ Two data response stm Each worth approximately 25 marks. Teta: approximately 50 marke AS Paper 2: 90 minwtes, Maximum marks: 80, All ‘questions ae compulsory AS Paper 2 consis of appronimatly seven questions based on a single case study The format ofthe ests set may vay. Assessment of AQA A-level Business ‘Te asesmet of evel Busines kes place ot the nd ol to your, The erm othe erations tl the methods of assessment a Aleel are similar othe sige used fer the AS couse, withthe addiiono esa ‘The Aleve is assessed 100 pe cent by examinations. Forthe Atevel qualification students ake THREE examination papers, ach of which mt best atthe fen ofthe couse an each of which \s weighted as one- fhird of the Aleelguaification. All thre papers are based on ALL elements ofthe Aevel specification The een dfleence between the tice paper ithe style of assesment The paper structures te as follows ‘Aclevel Paper I: Mutile-heie,shortanswer ‘questions and essays. 2 hous. Maximum mavks: 100 1 Muahipechoice questions (15 mae: Sorter ‘questions (35 marks) and two esayquesions Go mks) ‘Aclevel Paper 2: Data response questions. 2 hours ‘Maximum mars: 100 fe Three data response questions each worth spproiealely 93 marks and nde up of Ue to our mack questions ‘Aclevel Paper 3: Case Stay: 2 hours. Maximum tmatks: 100 4 One caves followed by appronimatsly sis questions Study advice Keep upto date ‘This book contains many topical examples or you 0 use bur business is constantly changing Although ‘textbook provides you wit the theory reading fewspopers magacines aed fteret aici wil help yu wo keep pace with changes. One thing is uaraneed: the business envircament wil ave ‘hanged between the beginning and the end of your outs, 9 thereto substitute for kesping ancy on the net business news won anpesnatBuild your own business studies dictionary Aa you pores hough hi tal wp your own glossaryictinary of tera. This i may be useful to hod eee your revision and belo ensure that yo an deline terms clearly, Knowing the exit meaning of terms wil a allow yo to wre relevaely on the other, on -eintion questions. Read each chapter thoroughly (On completion of each topic, sm to have read each aoe of the relat section or chapeer ad use the ‘qesins at the end of ach section or chapter o test Your you adap hi ppevac Fx every top the book, your eevison should be jus tha: evi what yo have alread leaned rather than learning Complete the practice exercises and case studies and the silty to use, prepare and interpret business 2 You shoul be abe to understand and app ages he man, mcdan and mode) prepare and interpre tables, gop, hastogrta, bar chars and pe charts and we index eae Focus on the higher-Level skills us tempuingto foes ciety on the fais when you are revising, Remember tat anal and elation er alo knporact. Try o think of ways to apply your Tearing For example, as people become riche he buy more prot, but some firme Ghose making laurie) wil probably beelit more than those providing neces, Read the Chief Examiner's report This report wil alt you tothe strengths and weskesses shown by previous siete and wil help yout fine Jour apcich lang wth previ examination papers Understanding the nature and purpose of business This chaptar provides an understanding ofthe nature and purpose of business tis splitinto two parts, The first part Examines why businesses exist by focusing on Business objectives It explains the terms business mission’ and ‘businees objectives’ and considers the relationship between ‘business's mssion andite objectives. Itaizeusses why studies ne prac erenesand cae sais in atin ches thse ponte vale in PDE businesses formally identity their mission and why they set saya the pase toes ad see Pema rmthe AQR wat reso) See eee ce eee eat Complain of hese enceses and ease studies wil help We wish you wel in your studies and examinations, common business objectives, including profit growth, survival Youto check that you have understood the basic ides aid ape that ys find this bok use, Good ck! cach: low and social and ethical objectives, The second part Inve shapes Ie sh help yu to deel the est : fxamines the measurement and importance of prft In ipprach oanveringbsine cso examining the measurement of profit includes explanations Acknowledgements Situnt nko scrote edn Develop your communication and data~ The authors would ke o expres tei thankst eee handling skills numerous individuals who have contributed othe There iano need to have tied GCSE Dasnes lore Omen of his singe AS oan he AQT has ho oh onde Why businesses exist SSsnesthajou ene peur undandngetine ROR Daineseve sail opin dean sib Most businesses begin i a small way cen being setup by a sing indivi] or a sll group of individ, lncvadals who hae a ‘busines ida thas they develop by siting up a new business and _necaging tt grow ae known as entrepreneurs, The tak the rice and reap the subseqem profits that come with successor bea the losses that come wth fire. The nil motivation or etting up a business varie, Some individuals delde to ex up in busin cae they have salto ill hey wish to use to provide reds and services that they betive wil sll. Others may have sported a gap in the market that they Fel they can ilBEES onies wratis business? ‘Once a business hasbeen established ts owners and managers wll eed to make sare tat the busines fable wo cavers costs and make a reasonable profit itis to survive, However, the owners may wish the business to fh more thas aurvine For example, they eney want the basics to grow Large orto diver into malang of eling different produce aed service They may wish the business o contribs to the commun, lor example by faring local sporting aclities or they may wish to entre the ra ‘materials wes ae fom sustainable sources, This discussion strates theft tha al businesses, no matter ow small or large, ae ly to ave a purpowe ea mission and objectives er gal hey wash to achieve O>-Retationship between mission and objectives The misono snes sts essential purpos or ents. is Key terms Sines sed inensef te mana oras snes The 35s corporate ams, terms miesio statement ithe means of ommuniting to key ‘takebcder Ge, tndivdal or groupe wilh an interest nthe busines such os shareholders, employee, suppliers and cutererd) what the organisation (Song and what cag Mission statement ualtatie i; Siratot oes nga98 | Business 0 formisson, They canbe stat corporat or company-wide) level and a fastens or departmental diisiona level. Corporate ebjctives govern the objectives st by each deparmentor division ofa business tives ae designed o enable a usines to achieve ts aime (Unless otherwise sated, bisines bjctivesin this chapter wl focus Before an ongansron can se ks busines objectives it mus have a ear undersianding of ts ostall parpos, ts mission. This i Because the Mines wil detec the way in which i iitended the business will develop which in tur wll provide a ‘lear focus frm which the business cbectives can Best. The fat ie on Disney an he case study on Whldbread ater nthe caper Uhre th relationship between mission and objectives rust be schsvedin orderto realize the stated aims ofan organisation ‘epartmentoringiiual eam Business objectives erat be mesiam to ong erm. They con be corporat oF functional objectives They are set m order to co-ordinate the actives of, givea sense of direction ta, and guide the action Functlonal objectives Goals ofeach othe functional reas ofa busines (including marketing, finance, Speratiens ané human resources). They are designed to eneure that he business achieves ie corporate ohjecties and thisit overall ems er mission Like corperateabacives, funcional abjectves are set inorder (9co-erdnaa the actives of ge a sense of direction to and quid the actions» division or department. Fact Disney's mision and business objectives Disneys mission is tobe one of the wor leading producers and providers of onlrtainment and Information’ It ans todo tis by using is portoio tl brands lo dlferetiate ts cantenl, services and Consumer produits macimising earnings and ash low and allacating ‘capital tonara growth Inltives thal wil drive long-term shareholder Value” The ilustrates now a broad mission being (ranslate into more spectic business objectives In thie case the objectives indicate how the Business bil ry to hove te haste purgace of mecting he fntertainment needs of ts customers, while athe Same ime generating eareings that wl sllwthe busines io grow and to aliey ts shareholders, =. Fact file Examples ofthe mission of range of ferent businesses Facebook's mission ite ‘evelog the coca intrastructure te give peopl the power to bul lb commanty tel varke forall us Save stam lene Oyen vteratasienesyn, 28 \McOanal's mission t-To he our customers favourite place and way to eat an ink Tors anc Guy's mission sto grow the bet, most proable and most crestvahareressing company fn the pane, here people lve towork and cients ‘Ads mission statement ‘Simply Als, wbich ‘deccribes its aspiration to continually set standards wag nn forteodataiing nd to lorther expand tsmarket Primark’ mission eto supply quality clothing at prices percewee to lfer ret value Why businesses formally identify their business Ita busines is small employing, sy, 50 people al the employes are aly to enor excly what he business does end wil havea Fesonable ten of whats anal ae Ina lange sires employing thousands ce fen tens of thousands of peopl this ts unlikely oe the case lage ‘ational business may make «range of qa diferent prodost and have factories and ofces lated acrosthe UK on the case ofa mult-natonal seuyang jo otodind pur simu Gmpumesepun |BE one watis easiness? ‘Author advice ‘Some butnes tet ugg anallemaie explanation of, SMART, withthe sanding for achientie andthe for relevant on eth conti you~ objectives being scherable {nd relevant essentally mean hatte ae reat ‘Author advice When assessing the eectneness objec os busines tnoys | leylaue the SMART entena Tytothinkabout he Seto! problems 2 business might facet objectives are not SMART. | Key term Strategy The medium 10 ona [erm plone trough ich an ‘organisation intnds fo achieve sobpctves. Did you know? Small businesses ae ntkely torwrite dwn ther business mission andebecties, tren consder tem forma, ‘though they are ly ta be actly understood Even i business msson and objectives arenotwrtten down, ities Inmporant fr omployes to know aha the business i tring to {chive ond te sare the von, ‘business, in cures around the world. There sno reason to expect sage rm a ranalacuring dvi in Scotland share a setae of "ston withthe boudoir, who are bndreds of ile may in the hed ofc in London, or withthe human resource manage ofa ealing division in the USA. So fra large business. a mission statement is useful for defining what he business is ryingto doin away tha al staf cat understand and idensy with, Formally stating the business mission or ‘main ans ofthe business provides a common purpose fr everyone to ni with and work towards, anc a cllective view that helps to bl team spin and enouragecommimcnt Why businesses set objectives Business obese are set none to co-ordinate business acti and ‘ea sense of dreton 1 and guide the actions of the organisation as a ‘whole. They at at a focus oe deision making and ello and asa yank ‘guns which succes or fare em be messed. Appropeiat busines (Batvs encourage a sense of conten purpose ang the workfor ‘This molest nach easier to co-ordinators and to create a ten sii ‘which in urn likely to lead .o improvements in elciency and amore Productive and motivated tal Tobe effective, broadly stated corport busines objectives ned tobe ‘muna imo objectives that canbe sed as cea targets wo achieve Ts is parcualy te case for functional objectives that need to be sein sack ‘ray as to cnet that ach econ of «busines is working iowa the ‘me pols ha the evel corporate ebjecties, ea ind isso ca, ‘beachieved. The use of SMART business jective asst this process, SMART business objectives ae objectives that ae: 1 Specific = cleary and est defined (© Measurable ~ quanilal eg, 1 uncrease mark share rom 15 percent 4 20 percent within the next wo yea) ‘¢-Asreed~ managers and subordinates ae involved in scting the ast (Relate echleble and notin cones wah cer ebjecives (Tire bound ~ hosed onan explict timecale (eg to open 20 new sores within the net yen ing specifi, measurable an ened enables he business ostees the extent to which objectives have been achive ad tense that tal are ‘lear about what ns ey are ring todo and hav a lear sense of Aliection. Being elise means objectives are more likly 10 motivate sal and provide them with an appropriate level of challenge. Being agreed by {he wise wares means objectives are much move ely oe achieved than hey were sep ienpsed by manages Busines objectives nthe bse or scons on strategy. Stee athe red tolong tore pla that wil alow a busness oachiee sce, Such plans ince dais abou Whats be doe ad the Fina, production at prsanel resources eguted te plement ans ‘There ino single busines objective to which every rm should aspire cor that guatantees success. However, as lng as clear objetes are tse with appropine aed well-esoucedssegiea busines suceest fs more iy U Common business objectives usiness objectives vary depending onthe sie ofthe busines and ts egal strucure For example the mai objective of corner shop may simply be ledaevine, whereasu alinatenal Busines may be more concroed with rometng ks corporate age end growing large Some commen business objectives are described below Profit Profi masimiston i often cited asthe mos imprint business objective, turin practice fms are more likly 0am for eve of profit that stses the owns ofthe business. tn order to ahve this overall bgt, appropriate funcional objectives wl be needed for example effective ‘marketing in order to ictease sales; minimising costs in ede to kaprove Frofit margins the diffrence between rvenie anid costs foreach te sold ceive uisaton of pacity ane improving stall productivity by ‘educing al treover andl benz, ‘The measurement andimporance of proitis explained inthe second pat of thie chaptr Business jective elated to pati wil be influenced by ‘many factors, such he level of competition inthe market. the existence ff spare capaci, the efiency ofthe bustess, the state ofthe ecm fn he demand forthe product. Growth Growth may relat inereasing marke shar, sales rumover ihe value of some of sles) ber of utes or umber of busines ares. Growth ‘may be linked o another objective —to Become the market lade terms of sles vale, ales volume or profits. Basness growth canbe achicved by incresing he sce of the exiting bnes oe by taksovers of aed ergs oth other businesses, Im order to achieve the overall obctve of growth, appropriate functional objectives might include inereasing market share, retaining profit inthe Tasinss in ofder o nance growth ncreasingeapacy by expanding the ‘umber of ste, reeruing move ai and improving traning ova Growth is es likely to be an important bjt for sul businesses that sho tet independence Exteral factors, suck asthe size ofthe markt the evel of competition and the state ofthe economy, as well asthe financial health ofa business are Tiel to inte the tsinment of bisiness objectives ela t growth Survival Aough most snesss wish to do mare than simpy survive, survival tsa key obetine for many smal or nee businesses especially they ae ‘operating in highly compete markes Survival is even mote signeant, ddringpeiods ef uncertainty and diel economic condions. When incomes are fling and demand is weak many businesses will aim to survive unt tading conitions improve andthe can focus mere positively tn objectives related to pot ard growth, Funtionalobeetives thar wil’ ‘eset busines’ sure might incade jo orodand pur osmew oq Supusissopun© chievingennimana ees of oles evento ensure cot ane met and tart share i etained to sineinngeppropeiat levels of tc in onde ta met demand but not Diversying might la be a means of achieving grow and incest ‘rl Functional abjetves that wil supports busnes= wishing to Aliersify might inchde the development niche markets, aig ations) FE ower var seusiness? tote money upin gods and materials whose value may be declining tance va apyeoprne aed coat lletine oes, achieving coe savings « muusinngthe required name of weltraned sto mest prodacton where the procases uted by ferent clement ofthe business are a, needs and tobe prepated for when the mathe picks up. Sensing elective communication betwee deen production sts (ears standing thie rght involve being een athe mot innate Cash flow Se progressive enpaniatin, leader in ecology oF the bet eal Abusiness must ensure hati has sufficient ash lowing inthe business itslined to corporate mage and an organstons repatation in onde o cover the amount mus payout in any period, Maintaining Achieving a appropiate corporate age will asst with the 1 hel enh lw i therefore itl forall busines. Even profeable fms canbe vulnerable i they fil 1 manage ther cash ow proper. For example, car rept business may gee costomers thie months to pay their bls Bt ioe given to month lore eu ye ye option Key term [ee matic en ge apne py tegeeeeeeny jase o provide tyes, ich will mean the ca fepnier sana t att fits snes. Thi might happen even thong the snes as plenty of tehisrment of ether objectives, suchas growth and prof, The naire ofthis objective wl vary according the target market For example, Aitlerent corporate image wll benefit the company if the target market requires puts at ae‘chesp and heer than the target matt {nflanoed by an excasve Image and high prices. reeting the needs of eter stakeholders other than social aed ethical secs the objecves mentioned above benefit business owners ce ‘oney lowing nt and ut af fuses overs perodoftme. | Ststomersand the poental to be proftale Shareholders. However businesses also place high ve on meeting the STE Hy needs of her tkeholder groups, such s customers, workers and the Social and ethical objectives Toca commu. which n tur il ence rptaton Social and ethic bjecives ar cent eves in non prof onpstions tuck a char, which ae tet up wil the ale purpote of tcicring partcular sci or ethical objectives. For example, Sheer’ key objective Astor, advice Istogive people he help they need and campaign relentlessly note to thier lee vison ofa sale, secure and allodale hme’ everyone Im practice, many of th arms introduced in his chapter are used intrenangesby Sere companies rslerte tei‘ usion or care purpose” po ae crt ie gape! pa ee hnmamarl ‘or ‘values’ rather than mission; others use the terms ‘aims’ and ‘mission’ sta obese he fo He sd bal Srarhngeay Aga ante mfr aac arin rary ars pecan a is used for narrow, very specifically focused objectives, often atthe level of cil objectives Serainet aor an na Sica camponsin he walt the hepere Iman or boat center gol tthe. stachae on ‘social and ethical objectives. They include becoming ‘ coin retan rasp Tob mate poste’ yA by ung renewaa fr maraung potion sper tance nun resp tery anes eery een a ‘operations, and using 10% reycled or susiainable ee Curraractire tease caeeerae pee aoe Orermilencaapescoordatedspriacte pang actater and Sis Atay cece seco bts ince eng ans ‘Ec thy ent the sigan ace tego supparing a range ol community acties eluding Liter: picking patrols, emai events and ocalfotal, ‘matches. te case ofthe etter hey have or any Sec ped eminence ‘years supported initiatives to encourage young people Practice exercise 1 “Total: 45 marks nt fotball through helping tran coaches ane (abner trl cate 4 plain on etn or nein ei (mark — — 2What does he er ison men fora snes? mark tn alton othe shove common business ajesives, ter business 2 What are basins bce? (4 marty oT aaveeana ‘4 Explain the relationship between mission and objectives. 4 markes) i eoneeee. Epa my pee He eters nor ‘5 When might survival be an important business objective? « al > tosprend isk by reducing its dependency ona singe mavket or product, ‘sr0uyeng yo osodand poe osmeu oui Suiperisepun 6> Weasurement and importance of profit 4 Analyse the reasons why growih isan important objective fora newt established estate seetry operating tc cnapeitive make marks) Revenue and price 17 Analyse why social and chia jective might contnbute to the achievement of rot Seinga pres is dificult ask Typieally a business must seta price and yrowtalated abectives for fashion rete, emesis) i thats high enough to cover the cst of making goods or providing fepeee ee eee eee ee aang Key terms. | seevice and lave a surplus thai profi However «high pic will foes the mnemonic SMART stand for in elation to objectives mars Price The amount pasty tneana smaller ruber of customers ae hkl to buy the produc. The 4 Which othe following objectives s more ely to bea SMART objective? fonsumer ta purchase one unit jysines must ind the keal selling price dhe one that lps to make a To increase sales by 3 per cen over the next 18 merihs: fa praduct. the most prt 1b} To improve marketshare in the near fre ‘Totatrevenve lor turnover o¢ €) “To expund the business to cover mare ares ofthe UK (mar) falesrovenve) Thaincome Total revenue {0 Explain why there ia hierarchy of objectives in most organisations mart) recewedfrom an organisations Total revenue may alo be described bythe flowing terms BEER nies wnatis business? Case study: Whitbread PLC ‘Witoread pt is the UKs largest operator of hotels and restaurants owns the Premier Inn hotel chain ida range of restaurant caine including Beslester and Brewers Fyre remit Inn ie the UKs leading hotel business, with v6" 7,000 raoms mover 805 natal, Whitbreae's mission ito develop its brands by ‘eating strong customer heartbeat that places he {stomers athe heert ef everything does ‘Whitbread Customer Heartbeat model aims to create ‘ole foralits stakeholders. involves. winning leas’ of employees no make aeryaay experiences seca for customers so that they rlurn being @ force for good nthe community y helping everyone, including employes, to ive and work well ensuring ‘overyay efficiency nits operations al of which wil sive the prftable gro ofthe busines. The overall sen ofthe business sto sehove asing long erm profitable growth, Ths is supported by three ‘lear pont [orobactives! Practice questions 1 Anais why a business such 2s Whibread right set social and ethical objectives, (9 marks) 2 Evaluate the baneft oa company of having etal business objectives. (lo marks) Sone sito nemson er nets, Sewveeao yee ‘A. Wntareads Customer Heurtbet mest 1 Expanding its main UK businesses by increasing he rumoeref Premier Inns in arder te provide more ‘han 110,000 roems, 2 Growing internationally, by repeating it UK Premir Inn auecossin Germany, where conditions are fvourable because the German hotel market ls sroming and there arena smitary arg compators 2 Facilitating ite long-term growth by making £220, million of tency eavings over years, improving its digital capabitig, nd being 3 fare or good. Total $5 marks 2 Towhat exten doas the case study illustrate the mportance toa business of ensuring 3 ‘lear relaioneip between mason and objectives? (20 marks) Total revenue» price por unit twantty a units sold : [For example, if rie ineSand | Wants are sald, then teak reverue is £9 10 €90) a A Apresicion ine turnover orsales turnover Total revenve FR) can be caeulted by mulling the average eling price p) by the quantity sold: T=pxq ov example, ifthe price £8 ae 5 items ae sold, R= £4. TR E48 and prce=C4,quamity soldi E48 + 4 = 12 units IETR = £50 and quamity sod is 10 writs, price fs 26 60 + 10) {yo ofthe varales nthe equation TR= pq are know, the thd can becakulaed, Effect of changes in sales volume on total revenue ‘When asked to lok at heel fa change in ales wore on otal revenue, you should atime that the selling price remains unchanged ‘epardes of sales volume, Therefor, sake vlume doubles, total revense sel doable: sls wom als by 10 per ent oa ese wil aly 10 percent. In both eases the selling peice wil ay the same This isan ovesionpicaion of what actully happens in el i, bu is pil to firme because allows ter to make ary acute predictions boat how total revere il change sles vohime changes. In urn, ths ‘villas them in thing opel sins deco. ln Chaper 8 the ‘ection om pice elastic of eran wil provide an insight ex how ttl fever igh change ina fren way a sales volume res. Costs A busines ean increase profs by reducing cots: More elie methods fuck useing down on sal or educing the amount of wnatage on the production line, cam increas prof. However, he business must be carcul that these cot savings do net reduce quality qual i reduced, total reverse may be alec as customers wil bles keto buy the produasTEI nies wnaris business? (A The contol tice rent and Key terms. Fined cote Costs hat do nat ‘ary directy with ouput inthe short runleg ret. Variable costs Coss hat vary tirety wth output nthe short Funfeg-raw materials) | Total costs C1 The sum of ie ots and variable costs, = ‘Author advice Be cautious when using the term fonkson between variable | cous par uitand ttl variable foster commonplace to ure the term vorabls costs ean | alernatve way f sang tla. Sarible costs Honever, i shoud | palbeucedfyauarerelsringte ‘Nanable costs per unt I Costs are therfore a major fctorin determining the over sucess of | fim, as messed by ks prot. Orgaistons need to understand thee sts they ish to improve thes profit Classitying costs Cost te classic as fee, varable and total There ae two pnp reasons for classifying cots To assens the impact of changes in output on the costs of prodvction:s fr cen compare addtional reverse from a increase fn sales volume tose if wexends the extra costs incurred. A fim timing to mea proft shoud inerese sles volume the extra resent exceeds the aitinsl coats of iereasing caput. ‘© Tocaleulate the costs of making a particular produt ina mau product company: care dificult to work cu whether its ‘rome malenga product, tis easy to cleat the sls income fafa pred, but many ets fg, ollie ren, canteen faites) arena spetictoany single prodoct made by firm, Costs and output ‘company can use the link between costs and ons to calla the finan iptatons of changing ts eel of output. Ie ety, is moat to pedi the enact change in each ad every cost, 20 general cleactions of ost are sed to estimate the yt ‘ ctput changes on india cots. To simpli the calculations, cos tre cased a ined, variable and toa cone, there san sein op, assumed tha fied esis donot change 1 vil costs change by the atime percentage the chang in oupa (ine of inthis ese) This isan oxrsimplificatin fra fe, hut it does enable firms to make ressonably accurtepreditons shout how cots wll change 3 pt ‘anges, enabling them o make geal business deisions. Tbe 11 shows hw firms dasify the cots they incur into fed and variable ests. The logic behind these choices thatthe cost often the fist. feluran ae not alleced by small changes in ups. Thee fed cons wil Tamers clrge inthe ong vn flag increases curt ar reqed, For example there were a igicanicteace in output. ew machinery la fixed os) woul ave te instal, The variable costs chown in the second ¢clurn wil change output changes eve if tis cn by asl amount ¥ rable cess costs bj output [ei ‘Author advice De nt worry about tha merit sfinaaual eategores, but ‘hen carrying out calculations raya sh an ten te ‘emonstated trough ponting fut the potential laws mony ‘eneralclasiicaons For example, manyofces ‘wit empl emporry sat 0 coor changesin act levteTheetrenproctce | administration cose sch at | Sirdar, he hated of saristle cots rat nereaing by “lhe same perentana a put canoe nvestigaed With tuk [ burig of raw materia tis ‘ely at orale cot wil se mere slow than output, | Henever as masimum eapacly isapproschea ican bacome “toy to increase output st by hanging arabe factor "Did you know? | an alternative approach for calculating changes in tolat -Nariabl cote (10) eto chang total variable costsby the ame | porcelage change as autut ranges ouput inereeses by 2D parca than TVE inereacee by 20 pe cot f output seerenses by 10 percent hen [ETVC decreases by 10 per cont ‘Note that a dstnetions made heeween wages (paid to operatives who make the predict) ae salaries (pad 0 stall who ae not drety iva tn prdston),Sinvlaty power trie the machinery i a warale ens while fice Iihung and heating ate Med (nt raed to ourpu. Semvariable costs are oss that combine cements of ied and ‘arable coats. A worker may be pal a set wage plus bona foreach em produced. The set woge would be a fined coat aod the bors sail cost. Effect of changes in output on costs, ‘When aed ook athe efecto eange oat on costs, you should assume chat oa variable cows change by te sate percentage 35 ‘output if outpt doubles, total variable costs wil double, ouput alls by 10 pr cent, tl varia costs wl ll y 10 pr cent. In both cass, he fixed coat wl tay these. For eraople, lt ut ase that utp 1,000 units, ied ones 153.000 and total variable costs ate £6,000. Their, total costs ate eS £1,000. The fied costs will ox change if output changes. The variable costs of £6,000 wil inctese, but by how much? To calcul this we need to know the variable oat per uni 1100 unis coat £6,000 varisble tet: his i 6 per unit (5,000 + 1,000 unit) I more units produced, ic wl increase variable costs by £6 o £6,006) 50 more units ae roel arable costs wl crease hy £300 (50465 10 5,30 (1,050 £6), Fel ons wil stay £5,000, 1 What happens to wal cost f output doubles fom 1,000 uns o 22000 unit? 2 What happens ot costs if outpt falls by 10 percent fom 1,000 units 10 900 is? ‘able 1.2 shows the ink beeween monthly costs and curp fora magazine produ. lustaes why the magazine producer vans high month Sales only 20,00 magarines ae sol. the fixed costs ar high a2 pereenge of total costs, However, sles quadruple to 80000 magazines, total cous incense y less thas double (rom £70000 to £130,000) ad the fixed cots area much smaller percentage ofthe total casts Y able 2b cost nt otpt erTEEN ons vers tusinss? Fact fi | Forecasting costs and profts | nplanning business, tis tal that costs are forecast accurately because sudden changes in costs canaffect future deosions and prt | n tho yoarto March 2018, pricas of finshed goods | showed consistent rises The UK rate of inflation ti 2, bul posit price ries varied ror Chemical and pharmaceutical products 6.5) te elothing and ten products 1.19] Because consumers dstke sua price rise businessor | are reluctant to change prices, preferring to Suffer a fallin profit f raw material prices rise Bul Benet rom a ie profi whon rau’ mat prices fal, This pattern canbe seen in Figure 12. The blue line show the Input Producer Pree Index PI ich isequvalent the costs of raw material. Thered line shows the Outpt PP lequialent tothe gece of Tinhed products ean be seen that output ries {are much ess volatile than input prices ‘ver the 15 year arid the index price of iihed producta ha varied baboon abaat 8 and M3, ut Fav materat prices have lictated between 0 and 120 (EF EEE reece Su Deno a its 20 [A Flgere 2inpa PP and ouput PP [2000-200 Key term Profit The tference between theincome ata business and ts =. Author advice Prot on be deserbedin many afforent ways. The section ie ‘erly aninredstien to pr Mere detaed ary of prott ibe provided in ater chapters. “Author advice In questions voting “orking Inthe way, you make mistake, you can decover ‘shh elem our anewer ‘ras ncarect nd so recy Furthermore, cet ven yu show cerect working, evn i the ins ancwer fe nceret Relationship between costs and price Inman indhstrie, nents in cots, uch raw teil ad abou, ste passed on ta he consumer inthe frm of higher prices ARough ‘msiness tary suggests ha higher prices wil kato al nthe quantity ‘eran (nd possi in sales reve), demaral ss My to ‘very busines resins prices. Thists ky to happen hen costs fat incessng because ll ims wil be alfeced ina srl way and they ‘wlll be trying to maintain aprotic margin le diferenceberween the sling pice ofa ter and the cost of making or buying that te. Profit Prot is prime objective of mos firms, Prof = total een ~ tata coss ‘There are rwo ways of improving prot crease sales revenue 1 decrease coms. ‘Acombinaon ofboth the eal way of ahlevng addon pol, Measuring profit ‘Abusiness wil want to choose the mos profitable eel fon and ‘ean fo axes ow changes in outpat a sles ght alles pot. “Table 13 takes the costs ofthe magazine producer in Table 12 and ads dla on revenve and profit Inthe tbl is assumned tat the sling price forthe magasine £2 {Y taote Lanny revenue, iste a pret ora magacine producer * Figures in rackets show alos, “Table 1.3 shows that loss of £10,000 i mace if 4,000 magazines are sod, ‘bua polit of £50,000 tema i 100000 ragazines are ok Importance of profit Proft is important fora umber of reasons. Some key rescons ae olin below (0 Profit isu reward. Basinet one tke arise when using their ey to purchase shares or ake ownership ofa business. To compensate fr the rn that they have ile business owners ave eed tthe polTER nies wnatisbosiness? = Fact fil Retained profit at Rolls-Royce | Decisions to retain pref or iy dhdends ten cepond on Facet history and corporate ‘oan of 52min ul paid. | divaendsotaling E133 milion “Thiswas possible because of | years Hawg drained some the companys ands in 2002, | Sharaholders agreed ta lonor § dividend in 2008 and recived | nocvidendin 2004 when the ‘Company recorded good prof (eve. This approach pid lf ih acerd profits in 2007 and + Inne Since 2009, Roi-Royee ‘ivcends hve been reitvely | Slable despa vide fuctuatons “nt prolite The nature of | industry means that a fow major contracts can have 3 | Boge impact on pol eves, UK Companies are lien accused o! | aking shorter deesons to ail the immediate needs of | Shareholders but Rls Roya Fe shawn at ian plan tog. {erm Despite a eenr one 9) ‘eitnin 201s manaines ts | strategy consistent dens fo shortholders and hae ‘ost fis ecord La Zen prot /n2017 for remvestmentin de company. ubsequenty teen ableto retain ‘na. ln 2002 RallerRoyee made made by the business Every si months, public lined companies ‘sully pay 8 dividend to thetrsharcholders, This dividend pyment represents the share ofthe proftsallocated to shareholders. Some ‘hutcholders depend on the dividend payment a a soutee of income, berculaty red people who rely on uel hanes vo provide a steady Ho of money. These sharcelders may have a greater interes in making sre that a high dvtdend is paid. Wahu thi portunity to earn a Seward nll tha people would invest in busiest. To pct, profits not always given to owners s dividends. Many businesses retain seme of their profits otha they can buy mere resources in erdet tomake more profit im fate years In ths way, owners are sl being rewarded, ut ae wating 10 recete Some of hose rewards «Profit isa motivator For owner of businesses profit sa motivator Soetraers ae enti tal of the profits from their businesses, while many penate med companies will be owned by the people running, the busines. n many compares there are proi-sharing schemes, 18 sshich staf are given incentives o wok fiectvly hy recewing a share of the prait made. The John Lewis Partnership ses hist of nent reward ts employers «Profit isa measure of success. Is posible oases the performance ‘fa business by comparing ts profits to those of other companies paruculaly ts compettos, Howeve, Defoe using pow measure cess iis import co examine the business: objetves, as some businesses give profi lower priority than others ce Pro ina guide ler futne vested, The elicincy of dire setor ofthe economy can be analysed by cheering wher profs ae high and where they ae low Prospective investors ea use change in| prof erases guide to thew markets where ia becoraing caer to fnske poi and these where Issa ue tore Lely. his way aeaoe ‘esoures are costal moved avy rom unprofitable setts towards probable aces, Profit ise souse of innce, In onder io fund expansion plans nd capital invesimert the company directors wil wish o exp some of the protein the business This avoids the ned opayimerest on bertowed money cro sll more shares in order to Hance expansion Retained (or ‘ploughed-bac) profits increase the asses of a business ane should thereore increase the value of the company. Furthermore, ‘elaine pelt should hep the busines to increase efi profit (and tha increase fate dividend) i the UK, thie the mat source ‘expt or established snes, becase ite vry coset nd ‘onwerent doesnot have to he repel a des nt reuire payment ‘fiers tn prac, mst fare wil srk a lance hte paying fividends and etaning profs See te at He on Ralls Raye Profit is attractive to stakeholders For example, workers wil e eager ‘w ppl for jb in a profitable company customers wil be more likey to want 1 purchase products fom a suceesful company. and supplies wl be keen co ova contract witha business that ls making a prot, 2s they will bea reliable customer inthe fue. Practice exercise 2 ‘A tex manufacoue ells 400 shire ta pric of 15 each. Rw teil cous ae 4 pr shit and wages ate £5 5 per shir. The cots of producing the 400 shins ae shown in Table 14 ante 4 cont fr tne mantactrer sierals | 140 [ HentngAigh o Powe 0 [anes Bm 4 leu the profit made from elling 400 shins otal: 20 marks (4 marks) 2 The retailers that buy the shirts have sid that they wil uy 6DO shins ithe pice is eed to L15.Calealte the prof made f the texte manufacturer inereacs output and sles 0 600 shins, withthe selling price a £13 per unit. marks) 2 Using quantitative and qualitative factors advise the manufacturer on whether should charge a paces C13 ee £15. Practice exercise 3 1 Which ofthe along variable coat? a} Advertsing expencinre 2 ce equipment 2 Which of he ellowing ia fixed cos? 4} Duect ubour 1 Power Stationery supplies 2) Wages ()Propeny re 2) ay mater 2 The table ove shows some coats and revenue data tdllrent lve of output 3} What re the ttl Bed cots) 3) Whats the sling price ofthe produc? Wiha are the warble cots pe ut 4) Caing the above sformation, complete the ale by illing i the gop. (40 mars) Total: 14 marks mark) marty (2 marks) (2 marks) (2 marks) (mark) v7 0 eayeu oun SupuesepI 4 ssouteng yo seoTEES nies wratis business? Case study: Gnomes United Gomes Unite isa small arden centre in Colchester The errr Je Tavera has suecesahlyncrensed ales in recent years by wicening te range of products and Serves etfred Severtypereantol he garden cane’ butthe opening ast year ofa nearby superstore lea toa Sales records show that relatively few garden tole {are toughtin tha run-up to Chrismae Crratmas prodvets, suchas decorations, because christmas tres, The restaurant atthe garden centre enjnye a boom tain tha month lore Christmas, Iscustomersirst came tothe garden centre to buy other products ' Jen ie wondering whethor to steck Chrietas res sla, Hehas asked SO customers and they seem 0 be heen co the dea. Tel responses have ea him te cla that he wil sll 200 boxes in December {standard box of Ugh wil sel for £2499 The bghts val ost C16 5D te Buy from the supplier. Te cape with Practice questions 1 Name two other terme that slo mean 2 sims wondering whether to expand te restaurant atthe garden contre This wil lead 1 8,000 mere Customere a year and ineaaee hi revenue by £40,000 per annum However his arabe costs fod cost of £1,000 He estimates tat the space needed will cut i protiton plant sales ',€20,00 por annum, Use calculations te show ie overall level of pret (marks) to increase the number of parttime hours worked byyLnoursin total, at at of £725 par hour. Ths ter Leal garden centres. Total: 35 marks 23 Based onthe figure inthe case study, calculate the Christmas re ght, (marks) tocstimate the effect a stocking Christm toe lights onthe numberof parttime hours need co) 5 Evaluate the other factors that Jim should onder before deciing whether to stock the Christmas tre ght, ‘@omarks) + Understanding different business forms ‘This chapter focuses an diferent business forms. It bagi swith an explanation ofthe ciference between private and public sector organisations. Private sector organisations {are then considered in deta. The important concepis ct Unincorporated and incorporated businesses and of unlimited ‘and limited liability are introduced frst. Then private sector for-profit organisations are considered, including sole traders, partnerships, privat limited companies and publi iit ‘companies. Inrelation to limited companies. considerati ed is given to ordinary share capital, market capitalisation and dividends. The role of shareholders and why they invest ‘considered, andthe influences on share price ané signi: ‘of share price changes are discussed. A summary ofthe Fange of nan-proit erganisations in the private sector, such ‘as charities and mutual societies, i incluged. The chapter ‘concludes with a discussion ofthe elfects of awnership an an ‘organisations mission, objectives, decisions and performance. Different forms of business Forms of busines rang rom very sal ene-an epentions to nulnaional corporations, Some busines ors are st up in ore to make profits for their owners and eters ae established to parse ‘omimmtyorchartable aims. Some business forms operate inthe publi tr governtenal sector and others i he private sector Difleent bus fares ae supported by ellerent egal ructres that inThence how the ‘operate, how they canbe financed. what thei esponsblies are and what thei objectives ae ida. They range rors the smalls sole sd business to huge rukinational businesses. Although most prise sector organisations ai to make prot, large number of panistions in the private sector are now Profit organisations, nciuding chars and mutual soc Publi sector organtsations (also known ssate-vned or government ‘st atonal, regional or lca ve. These organisations many pr by the government, whetherTEE nies wnoris business? Fact fil lection and street lighting, Theirserices are wally proved reat the pont of delivery and are inanced from wxation The mai am of public sector engantstons sto provide Services that woul be dul for nv to provide for themselves, such a sitet lighting or hat are deemed essenal forall and which some people might not be able wo afford to purchase fom private sector ogansations, such as eth eae O>- private sector arganisations In 2017 there were an estimated S7milongrvate sation busineset inthe UK The ‘ajar ofthese (per coe) | ere sle traders 22 per entwore limited companies [and par cent wore erdinary partners, Soc Desert Bt Ina Nv Key terms. | Unincorporated business There ‘ rodistinctionintowr between | Me individual amet andthe ec | nessa The ent of | the Business and the onmer [ston same Such busineseas fro be sole traders or E partnerships. rated business Ths hae oa deny thet is separate fom theinawidual owners As | arsull these oreansaions | Sanown seta one money and ‘eter nt cntrate inthe ow ‘gh Such businesses include | priate limited companies and public timed companies “The range of busines forms (regal structures in the for prot private sectors ilutated in Figure 21. Each ofthese business forms is considered inthis tection and ther lacie advantages und dacrasages are Summarised in Table 21 A range of business lors that eater fr non-profit rive sector ongimistions ae considened ater inthis chapter. Two ses of astfcatons fo understand abot busines forms in the priate sector are whether hey ae unincorporated oIncorprsied businesses and heer they have unimied lay or med hably | (Figs 2.4 Lapa cructre ot bucnes nth fr raft private stor Unincorporated and incorporated businesses ‘The ference beeen unincorperated an incorporated businesses Is explained in th allowing example, where Tesco isan incorporated tastes aed Robingons isa unineeeponied busines. you have a pareste job with Tesco pi, your employe, wth whom yo have contac of employment Tesco and not the shareholders lower) af Tesco If however, you hae a partie jo with Robinsons the eal neisagen, which happens io be tun asa ste ader by the ‘ner, Many Robinson then your employers te ndvidual who owns the busines, Mary Robinson. Sis you hal an acento the premises of Tesco and were advised wo sue, then you would sue Tesco ple, ot the shareholders (owaers) of Tesco. If, howeves, you had an acide fon the premises of Robinson's newsagent you would sue Bly Robinson, the owns Key terms. niimitd ability station in ‘hich he owners of» business he business may neu Limite Uabitty A stuatonin vies the iby of the owners fs business limited he fully pai-upvatueat the share capt, For example, acompany ‘Stes 200 shares eld at 1 fachuahen tis sat up onde four shershelders whoeach own SUshares Each stareeloee has pai nfl foro thee Sdakares the corpary goes buat the mtu ha och the foureharehoders met pay tocowe utetancing bis 20 wife the value ofthe 20 stares they bul have let pei lr Did you know? Insolveney ours hen 2 busine cable to net financial obigatonstecause ‘labittes are grater han its asses, When tis happens, ts Ukely hatte business wl 90 ‘Po liguldain T= nates turnings sets ito cash for ‘xara sling he busines, Inerdertopay ts ereitors The terms inselvency and iquidaton ‘reapplied oncorparated {atts For nats an or ‘ninearprated bsinessos wth ‘ntmited Labi (suchas sle leader the etustan whan Ube cant bpd in fl a “Slevbankrupey Key term Sole trader business owned ‘brane person. The owner may operat he ann armay mpley her people Unlimited and limited liability Unimited uabity i characteristic of hsinesses that are unincorporated, meaning that there 1 no distinction inlaw between the ‘owners aa the business fhe debts ofthe business are grestr than the personal assets ofthe owners, they may be fored int bankrupt. ‘Themainypes of business with united labliy ae soe ade and parinetships Limited abit isa feature of incorporated businesses, where the entity the owners andthe busines ae separate in La, Ua business with limited iblitygpes io liquidation because it cannot pa ts debs, he shareholders (owners have no responsiity fr futher payments slong 1 they ave pail fal or the shares they have purchase their personal tee carol be sed to pay the debs of the bstness Legal, ach a Trsines has‘ died and sos bes "de with it ‘The rain types of bsinese with Hated Tibi ove piace ited companss and publ linted companies. Limiting the amount of Shareholder laity isan imporant acorn encouraging people to invest tense it enttres they know the extent ofthe ik ey fae ‘Author advice Ensure that you are absolutely clear abut tha distinction between concep i Sole trader 2 ele trader usually has il cpl for expansion adi heavily reliant fon the owners personal commitment io make the busines succes Bocas of te unincorporated stat, the business races thre {30 protection Frm ited Habit bese the ances of the business fre inseparable from those ofthe owner. Soe ters ate most commonly found the provision a lal series. for example, newsagents, pers an handresters, As enetrate suo) ssourngyess9jyp Gupuerszopun zTEER nies vnotissusiness2 Feet Se eat | Partnerships | UK's biggest private limited companies roll Busnes Parnes, on ihe ter 15 per | Partnerships are nat included in the AGA specification but they are i | ach year The Sunday Temes publishes Top Track 100, G7 per cent of shares a wy tnaherfr abuoness nthe Uk i | lunge alec orate priate compesen Azam starsinSieargcwred | SERS pct eleteeae pester eee mn aeons Sete cre rea Aparna for buses wich oor mare pn pre waiters emma Dac pk 00 Gre amedbyaerhrle ae ate (tiger cece etree eri oer ene . ae eee reel ferceceomcrcrmneeetaiyeermn oman oie os een ards hi imited a “members of the Issa family, and the other 50 «Assen parncsipparoarsnrmalyhe Ut Snaianaped by senior erecta, oan Usblty A parinrshipagrasmant ts out the rights and Mas el percent are owned by TDR Capa ee ee cee ae eee eee | Poet ere th buses be chara i cerns Eee Dyson space ofr for managing and running the business and has unlimited liability. At | 2 Greenergy —fuel supplier eee ee 7 fel ate at Nee Fence fone Bicester ae Iiiied tees aetna trteeey exe eeed See eae tenes [fcslniel ees rebel oleae soheral 4h Lei arrrsip food and gral eiiae parthershipe,Iallows partners who are setvely valved in the [eeeeriieeneens 42 New Look - fashion retailer eerste lint fr atin A aol tno pts kom a aa i 2 Maan rl retier canted wanbers hve sdterel egal rrpenaniten LPs [inheestetnerseenn tetera en ene aeerels eartee ker aee as Sana 6 PretaManger-sandvehshapeerton |) feanaaletatent a plein pile sted companien mst eee ee eee eer aera i job ocala oe elite etinderandcharmen dhe” 1 we mneratonat- cna cprstr ghar pacar arn sumed eu) 90 hag ona rah ~ otra carves rot Private limited company i See ied on itr A018 Dab ined compas ac oe she wot igh profile business < - vations but the sian of privat companies sould fet igrned Mon copies rice ae Uy conte RR Public Limited company eoxmots othe ecnony fee “esha pb ited ompanig are the Sock Excangs Pear ‘whih enables thes busine lence eel Pee Key term Privat limites company Aksmallto medium-sized business thats usualy run by : : 14 prt med company can keep allie reasonaby private usineze wth Ute Lay, Poet aman HURST |” gndthus the owners can determine their own objectives without the 4 share capital of over £50,000, Iimited companies sometimes change to public limited companies, L ae [rete to echove shorter petit tha iso comron for public Brite Minas twoshareholers two | usually to obtain extea funds for growth. However, Boing pubic has Companies firectors.a quaiies company disadvan seen ant atl ost 1 wk inhen leno contre bse moves ot the «Prot companis are funded by shares that can esl witht theagrement of te oer sare wich mesh er shares canner eed onthe Sock Ect. Une pub tnted company te sare capa of prt companis may be ks than £30000 although many have much higher evs areca Printed compe erally end oe ine in ses hi et Fact fil, UKs bgp private td companss) a prateimted company must ave Ie lier te company name to sera people thts owers hires have ie a “These disuvaniages are such that a number of lage, success private liited companies rest becoming public iniied eoaponis, while ther successful publi mie companies revert o private hmited company Status. The number of UK public med companies sted on the London Stock Exchange has declined fom most 2.00 in 1999 es than 1.000, ‘A Poss Exrarsieonacorganythst jn 2918, well-known companies that hve reverted from public to private hesrareridiam PUCEPINSE ted company sats nelade Arcadia, New Look and Pea Expres. ‘oy seoueng yoy Supueyesopun 2TEM nies vinatis business? “Author advice | Aa ath prt ites ampanies an pic irted Companies are hcorgorated labia sure you ae lear nd do not conse them when you answer questens on this ‘Author advice | Ensure tha yeuunderstand what | the elect of becoming ape th 2 Stock Exchange quotation can Few of the companies that ceased trading as public linited companies did so because of inancal flue. Most chose vo go private for @mumber of easons, including the excessive cost of mecting the regulatory ‘eguitement for public bmied companies, he continual dissection of public imited companies pesformance by market analysts, and the relive pve of he pera ited eotapaty structure, A sharp tise in the amount of captal avilable to private limited companies |Amjor reason forthe decline nthe numberof companies Becoming publi limited companies. Another key advantage of joining the stock ‘market ~ share liquidity ~has alo become ks persuasive and, ded, {evnetimes regarded as unnecessarily risy because predators ean exily ‘snap up shares and put pressure on management so make changes may ot ogre with, Did you know? Institutional investors ae pansion Lunds, insurance companies, banks tnd athe nana erganastne ha sweat huge sure sf money the shares of public tried companies. They invest on behalf others, ferexampa, test the funds employees py nl thet persons. Initial nesters are by far the largest grup frwestors in Ccampany shares ad ineretare nave nugeinfuence on companies Cries suggest that preseue rom msttutional investors seeking tomauima tho lunds ana polite tht frees businesses focus on thatwants te grow performance, Fact file ‘Stock Exchange listings When a pubic lined company wishes to reise nance, it oes this by issuing ang] shares tothe public. Tris Is done ty ar nil pub offering PO, wien she firsteale of shares by a company the pubic IPOs eves by sales younger comparies sacking the apa expand orb Large ornately enn companies ‘uhing te become public brated compares. Once | Shares have been cued this wa, the owners ean Sallthem onthe Stoek Exchange. The Stock Exchange fetharlore a market where second-hand shares he. hares that ave already been issued tothe orignal. ‘tarenlderslo! pie Usted companies canbe | bought and sod. Th public Lite company sels | neliniled sia change rasing, bl records Share onmershp se tal any ddends ue on he Shares are ado new anne’ The Slack Exchange cies companies asin nance becouse people re more kel to buy shares ey canbe easy sald sen requires shor-ermprois brown 3s shar-ermism rather than on long-term ‘A The Londen seek Exchange “Fact file Private equity firms | Prrate equity is share ownership thats not tee | or traded onthe Stock Exchenge Moa ofthe private uty industry is made up of age intitional “Investors such as pension funds an large private ‘equity rms ances by group linwectors Private ‘sult takeovers havo played an important part n UK bsiness. Private equ fms ake over a company nd woreclosely mith the managersto turn he business around. Theisen ito make it proftablean6 [then slit Therefor thy lock or businesses that are undervalued and canbe improved. Private equity [lems len buy pubic imted companias, convert § them nto private limited companies, improve them fd then sl them bach the publ “wen publi limited companies ae ited onthe Stack Exchange, managers often find that ivestors are Y ratte2s hs interested only nshortterm rewards This ean ake iRaticu to nest mlonger term projects or take Flake When areal ony frm takes ever pubic lites company, may empower the managers fun the business hd nae the right deisiona, even if tne are risky or take years to pay ef. may also be ‘loselyinvlee inthe running of th business ana in veloping the ight satay. However. private equity tkeovers ae usally anced by des, they carry a high risk Sore private equty | firms hve ben secused of boing azset strippers = busing compan to squeeze out whatever profit they an get before sling ton. n generat. private eau ISpercenved as rearetenting the short term nlerest af bstiseon tne and five years ~ quite dllerent fer the lngertrm perspective ten by ns ar taed ouyeng wo.) Bupuesiopun iiectatontna beard {nes cotateral support appication fr eansRE nit Wratis business? Key terms. (Ordinary stare capitat Money gen laa eampany by Shareholders in return or Share certiieate that gives tha part ownership af the compan arinary share capita. ‘permanent oa busines ill, fever te required orepay he “alue ofthese shares to ther Dividend A payment dey ‘scorpany oils shareholders Outat pros earned. Dens reallocated ae feed amouots Bershare, with sharehetders ecohinge didend ia proportion tothe sharcholding, ‘nana cempany earns a profit rurplue, tan remvestt Inthe busmess stribute tE toshoreholders,oralocate 3 Dreportion lo remvestment and Proportion as dividenés Key term Market capitalisation The valve leutatanding shares ns public Lites compary. dtstaing shares are he otal of all Grdinary shares inne and fly ail up Maret coptalsation 'Sealeulted by multiplying the tofa outstanding shares by thecurent market pres ofan ‘nual share Note the valve of company’s ordinary share capital is hotthe same ae te market Captalication Ordinary share capital Ordinary share capita sa rms ded in elation to private ani publc Ime corspanes Ordinary shares are als known 3 isk capital of ‘equity capa sharcholde owning 1 percent of company's ordinary slaves tecives 1 percent of any prof given to ordinary shared as dividend and gets 1 percent ofthe ots at the anna general meeting (AGND. There sno guaranzed lve ol dividend and sometimes no Alvin at al sp, This is because cven in profitable yeas, profits ‘uy be ploighed bak into the busines lo face fires iprvements inaead. (Mare deal on ordinary share captl is provided in Chapter 1S Malang financtal decisions sources of finance) Because ordinary shareholders are usually given one vue For eah share, ownership of 51 per cent ofthe ordinary shaves na company guarantees overall contrl of that, company. Orne Tesco's aividend Pre-an pole at Tesco resto £1. in 2018, aie al almost 800 per cent onthe 1m te business reprte in 2017. Pretax pratt have tot excsededClbn since 2014 whan regular ints accounting | | practices were exposed, the Eusiness as lasing customers tthe Sermon counters, Ad end Lid and is coal Bose hd become toa | hh Since 2014, Tesco: ch extetive, Dave Laws, has sgnifeanty ‘estructured ine business by sein of overseas unite ang eutng ‘thousands of maragementjobs,overhavle pricing and amples the {aneovera food wholesaler Booker Folin te announcement of is Fisein profs, Tesco proposed an annual dividend of 3p per share. Th [set imeit pais full ear dhadond wasin 2014, when sharehldors got 2 payout o 1019, Market capitalisation Marke eapitalisation (or markt ca) isthe ttl vic ofthe ese ndinary shares ofa publi lied company Ie called by mauapying tie ‘crtent matt pice ofan individ hare by the ther feed odinaty ‘Shares For examples oman has issued 25 malion erdinary shares fa the current matket pie of ts diay shares £10, the compas markt captalsaton i £250 millon (25,000,000 0 er share). Market ‘option ia inflacced by the umber of shes sted ad thei are, pre Its weed as an indian of veo open of a company's net worth er is ovetal vale ‘Owdinay share cpital uses the pie of shares atthe time they were fis issued, noe he current market price 25 market capitalisation For example ifa company isues 10.000 ordinary shares at £2 each in ay 2018, ts ordinary share capa willbe £200,000. By December 208 its shave price, a quoted om the tok Exchange might be each, “Assuring all shares have been sold and ae ly pld up, ts market ‘aptalistion wil be £500,000 buts share capt etl £200,000 Or Role of shareholders and why they invest Fikey term ‘Shareholder The vmeccl a lite company: any person fompary rather attain ‘Shareholders are the owner of companies. A small private ited ‘company may have stone shareholder ~the founder othe business. A large pub limited company may have many thousands of inteual and instivtionalsharcholders People invest in shares fra varity of enon: (0 To provide nani sponte a busines nd to be iveved inthe runing ofa business. Shareholders of priate mated companies will ‘sual have this motivation, ‘9 To ain conto ofa busines. This can be achieve by buying up 51 per cent of sbres This may happen toa pic mse company nets shares ae raced on the Sock Exchanss. o Toreceved dividends, This is Hy ihe company makes a profiasd decides to distributes porcion of hit shareholders fe To make acaptal gun. This means making a prot when sellinga share because ofthe diference the price at whic a shares bought and the Price at which tie sld at ltr dite | The Channel Tunnel Betink, formeriyknown as Groupe Eurotunnel ie 8 | pub ited cmpan Usted on the Paris and London "Hock exchanges. scare Business ithe operation ‘the Channel Tunnel between England and Franc, Is share capital of €220 milion sade up of 550 | tlio ull up ordinary shares witha noinal ‘aluo of €0.40 ts share price August 2013 was Deprovenaely €591 and in Augus! 201, twas 1.22. Market capitalisation n Rugust 2018 was therfore sgprosenaely€6:226 lon up (rom €2.251 lion a 2013 Dividend per share in 2018 was €0.35, | This data indicates the typeof eter on investnent on erage sharealdee righ gals. An ov tor ying Shares in August 013 an seling them in August 2018 souls have made apt gain ol €541 parshare ie-acapital gan of 91.5 percent on ther orginal inventment - €541 increase share price esa | percentage of he inal share price of 581 Interms bfadend, an investor buying a share in August 2018 HEI a receved x ausond of €038 athe endo the Yea, ging a return of 31 gr cent i.e. te dived 40°35 percentage ofthe sare price pact ena. feud melon eG we ‘wongnigruscon ast ‘A Eure tein a St Pare Slaton Shareholders havea mimber of important fonctions and have certain righ (0 -Te primary Funetion of sharcholdes io provide Hance fo a snes, Issuing shares enales a hasness to aise Runs for expansion o development In return company’ founder ve appar ores ‘ow sharcholders (0 The maori sharelder, Le, the oe that owns a as SL pr cent of toinary shares wil ben a postion to influence the decisions taken by the orginsations management sup seouengyusoyyp Supueyesepun 2TEER nits wnatis business? (Although the msjryof shareholders na public Hite company do Did you know? {pay amar fll runnng ibe compary, they do have igo | era rte ited company ‘owe on resolutions at annual general meetings. These mighe nce | ere!sno tatutoryrequrement | Veer a merger should go through or whether the level (Saha ether a proposed merge shoul go through or whether the level of | meeting Movers sharaldore tay request thal ones ele | Me drectrs may call an anual directors bonuses is appropriate «Note: directors ae alo likely t be shareholders) f Shareholders have the righ to inspect the company’s books ad records Menceaneingidesned Uner © Shareholders have aright tree a potion af any dividends the | Rtermvotthe CompanesAct, | company declares. {the company ges into liquidation they have she 206, public companies must Might to aahate ofthe proteds,Homeve, cedars, oodhwlder id | holéan annua general resting, pelted shneholers have precedence over ordinary hater the event of liquidation <> aiitancesionalare pflenandiine significance of share price changes Key term sare price Tho rie ofa ingle Did you know? Stacks and stockholders ae American terms for shares and hare ma compary: share tharchalers, The word sto isused wisely mother relates rms, prices ere wuallydetermined __ nelaing sockbrokers poeple who oer aves and Buy an sel shares bythe sup and demand for Forelionts), the Stock Exchange an the stock market. ‘The pice at which ordinary shares trade has nthing te do with their original value buts determined by market eres, by supply and emane. If mere people want buy share [derana) han want sl Itlupaly) he peice nereacer Carvers, more people ant tocol 2 share tan want toby there wl Be greater supply tan eran. an the price wl fl In aaion to market ores, the exten owe pices in ganaralinraace vee Ue known a the tion rate wl ilaence ‘sare prices, pariculary over the very long term ‘Many factors ifluence the supply and demand fr shares, nly: 1 state ofthe economy: if conomic conditions are good and are expected to comtind, investors tend to fs confident. Companies treme lily to peer well make larger polis and pey Mg Aiviends, Under such circumstances, demand fr shares fends se and share prices increase. However, economic conditions ate dificu, Investors my fel nervous ane wort that company prfeabliy will decline This wil end ta reduce the demnnd lor shares which ray ‘ete share prices ofl « Performance ofthe company” if company is performing well and is expected 1p continue to do wells sate pce Is key ro nse. When 2 ‘ompany repr good profits, avestrs have more emfience int and {here is more demand forts shares which increase in prise. Convery ‘when company eps lower pols, menos lve confidence ini aed Sellebeir shares hic is key to lead oa fal nthe rice 1 Competition im the market this closely ike the above point ‘because how well a busines responds to the threat of competion inthe ‘marke in which i opertes willie how well petlorms neal sd, in pica, ts pola Did you know? In gonerathe price mavement tf share indents the level sf vestors confdencein Company. However 3 company's berlarmancen terms ol he probit mates Is netrecessanily 2 fellectin ots share pie This 'sbeeause market cantasation, fnindicaton of company's Yalu, is tha care pica multiplied bythe numer of shares sue ‘uring thedetcom bubble 775%0 2000) man nar companies had market capitation: in the billions af pounds wnout fre ving ade any pet A ‘hatimeo wrtng Lune 208, Tesla, Elon Musk elecinc cat manufacturing company. ha 3 ‘Marka eaptateation valuation of [nstunder $60 ation Incentrat ‘prot margin as 1%. Pol ‘imply, the means tha or every Gola eamedin venue afer deducting al fied and variable cess, tmade a loss of $018 oaed takeovers: a takeover is when one company makes an llr to take contrat of another company by buying enough shares to ensure ichas the power to inuence poy, make detsons and elect decor Shuceholdes in che company being tangted fora takeover usually receive an oer to buy their shares (ether for eash or fr shares ofa ommbintion of both rom the company planning the alover. They can ceptor eet the fle. The prospect ofa takeover ean inlaence the pre of shares and wll flct whether investors thnk the takeover bid Islkely 0 succeed (0 Tewestors expectations und their reponse to raniurs: when people sec that others ar selling Cer dates na ptcular company for ‘whatever reason ~ perhaps because they have heard rot hat "Ergin and in danger of gngintahnidaton mone people will want to get on the bardeagon’ and sel thee shares. This will use an increase in supply ofthese shares and wt le demand for ther, the pie of the shares wil all perhaps signin a people are desperate et dof them before her price Ells even ure. similar process inthe ‘opposite direction happened to internet companies the dotcom bubble pened. shares in these companies were remendeusly popular and plenty ‘people wanted to buy thts, bu che nuber ef shares on the market, fet Tied tothe lsu bythe companies inthe fst plce Ln order fe shres, the rice was id up. People saw these share prices rising and feore people waned to cwe them, pushing pies till othe Average share prices show alongerm upward trend but individual share pres ae extra ae and can change rapid. Ths is why, fornia ‘Sve, inestmnt in shaves ould he viewed a langern atv Oo Reasons for choosing different forms of business and for changing business form in the private sector Factors alfectng the cote f business form or lel structure incade the need for finance to expand; the sizeof the business and the ve and type ‘of nvesmint reed: the need for lined ability, the degree of contol {ese bythe orginal ower the natre of the business andi objets the eel of risk involve For eample, a manalacring business reqtring heavy insesert in plant and equipment before anthingcan be sld may eed me liability in oder tosis sfc funds, On the ether and, a busines tat ques mich less iovement ae thereto ery bert wil mole teltively litle nancial rik and so thee may be no ned er med ab. ther cases image ugh be valy importa and the word hd afer narne may {nid stat, and the word ple even mot so. Factors infloncing whether ‘business opcrates asa for-profit or nonprofit organist inthe private Sector cr whether operas inthe pas or public sector ore explained below Non-profit organisations. Nonprofit ergaiations do not haven defined structure and ean the ‘many diferent business forms. These organisations are also known as the third sector (because dey are not part of the for-profit private sector forthe publi secon) This sector ilies voluntary and comity sg yussoyyp Supueyesepun 2HEE nits wratis business? Fact file Co-operative Societies and Community Benefit Secletes The Co-operative and Community Benet Societies {et 201k eoranidate previous leila onthe legal form of nan-pratit eganisatons wo pes sfergansaions- he Co-operaive Society ana the Community Benefit Society now sxck. Not, frgarcations witha epa stuelure previously awn = ndustral and Provident Societies are now known 2s Ragatered Sociates!] Co-operative Societies are run forthe mutual veel tf ther members This bene storms principal from mambees parcpaion the business. Partspaton may consist ef buying frm seing to the sel, wing the services or amelie provided bythe socal supplying services othe soil Ceaperatvesoceven are «popular frm af business inmany diferent sectors, uch 3 farming and foo, ‘Community Bent Societies lala known a societies forthe bel el the community are run primary to ‘ene the broader community. ie. people who are rot members ofthe seciety. These societies wil usualy be chaviable o phiantvapen character Houseg eapcsins are clten corr benell soeaies, Pubs that serve relay lated local areas and that have bean in danger of closing dann have sometimes teen reconstituted a cammurty bene scitea sa ‘hat they con canine to serv he cal communty in the lang tern. This ype of organsation is alse used to preserve and groect valuable hetors bung or Ieee of he coremursty nthe long term These ype a rgoraaion ae corporate bodies withthe own egal personay. They are not Chartns Thelemembers have iste Uap fr the Scie: cobs Members hold shares in he society utube a company ated by hares ie a pve or publi tmied company). hovalue ofthese shares toes at uclute ceverdng tthe performance of the society and shares ae not bought sold. Shares haves ie face value and member vishes Isove te socety they can withdraw laeh nl he share forts engl fae value organisations, charts, social enterprises, pressure groups, tade ~~ tions, cooperatives, mutha scites and tris Although non-pro erganisaios vary, they share common characeristes They are non-governmental organisations. f They have a governing body responsible for managing ther alas. 1 They are se driven ard have set ensironmenta. cman velar cultural ams They are vol extablihed for porpees oie than nancial gin, with, any pros or surplases Being rennet vo further thoi aims 4 Meany we volunteer tall im adton to pid employes 1 they ean operte der a mamber of deren legal tecture, inelading cartes, mutuals, co-petaive soles, comunity bene socks, and companies Lied by guarantee. son peti rguiaton | Key term Mutual societies (or metuats) | Mutat acces exatt provide tual anette fr tee | members. They are owned and | domecraticaly cotrelieaby [tne members Their purpoce | isusualltorase funds rom their mambers or customers, Uahich ate then used te provide | Comenen sereea tothe ‘members. They nelude: building | empenics co-operative and | communty benefit societies, and ‘hase arganisatons ferme | known as industrial and | proudet soci. Apar from te distinguishing farre that non-profit organisations donot ‘rte pois to their omer, many sic ngaistons have maich tmenon with for-profit ngaistons, For example while some non-profit E Key term | ‘harity charity an organaton that has exclusively charitable purposes nich proveling arratonng poverty or advancing the at, Future hertage af sencl andes arte public Benet. ecant make prolitand all money raised must gotomard achieving a stated ams. It anthave oners ar shareholders wha benefit rom t Most hares fe requatedand registered wih the Charity Commission Achar tat alegalsructre and most chartiveacoptone athe lloning egal Structures unincorporated assecaens, chartable rusts, charable incorporated organisations, companies Ute by quran, chantable | ommunity berate ‘xganisatons use only volunteers as employees and as manager ae ‘tector, ny ulcer Large on-po enantio kaye eis 4 permanent sa of aid employes, nchiting highly sled managers and ‘eco, May large non prof organisations wish to accomplsh thelr bjectives inthe sve way a fonproft enterprises so the sme busines ‘aches and management techniques as inthe for prot sector are use mee i eee eee beinvesteg in aehewng the pole the company [ees eee) fndust nal bedstnbuted fo members Bytaking Non-profit argansations canbe unincorporates ot aimed Uti stats, the organsaion lint the incorporated Inthe UK, many non-prafitergansotions apy fs management a frusteesnrerpect of Bre incorporated 35 companies nite by guaratee any linancial losars hat mey sustain, The elors Tather thn ied by shares. The orgnisatons do Gf thearganiention ge a nomnal guarantee lueualy hothave shares or starehoiders, but berei trem El, and are not geronaly lable fran esses bing corporat, which ncudostmited abt for beyond that amount. Examples of compones mites thalrmembers and being able oenter inte contracts by guarantee nude halo, he ehary thal help and purchase property ther own name. The profits homeless people: and AQA, your examine board Ov titects of ownership on mission objectives, decisions and performance ‘We have sen that avr of factor alo the choice of busines form and thas snes ornership, The chose of business ownership. in cor, influences an ongnisaton's isso, objectives, ks decision-making proceses nd tspevormance ‘ui eeaueng usuejypSupuresepun 2 ‘The msl, cbectnes and dedson making of pubbe setor organisations are s¢nerally oased on mextng social neds and providing ese servces Asa res, aces that are nt prfialeo provide, sch as ivares, ae reverts stil ance in some ateas because the local authorities have dg that heeft fered ode ocl population outweigh the cess of Providing ther, ln his example, te local aaons may na have wo etura Inaximum pros to chacheler, bt they do ave to provide good value for money fr ctzes. Asa sult, ust asin he privat ser song leadership plc stor oganstions sess toes lets decom mak, tight ancal management and elcenl-run operations (A puesecarccanstion The tlssion and objectives of nto pivale sector organisations, although net focused on maximising profits for seit mernbers, wll be Tecused on generating slice pol or surphtes a ehvst in theit particular field of interest. As forall organisations, they eed strong [Radership and wellrained sav ensure thelr opetaions ae a3, ‘flees 2s posible o enable them to achieve thet objectives Alough mos for pra prite sco ngaistions im o make axioms Profit their ones ths not heron jae. hey ms ensure they mabe sulin profs to est nthe business at say thar owns they may abo pursue cher objectives such as promt og, term growth or deselopinga tong rept or evitonmeral andor chil standards.