1. Business and the Environment

2. ‘the central purpose of the term business and the environment is to introduce the inter-relationships between business, the world in which they operate and the limits that this would impose on business activity.’

3. Business and the Environment Economic activity and the problem of choice ! We live in a world of scarcity

4. Business and the Environment Economic activity and the problem of choice ! We live in a world of scarcity Poor people cannot obtain all that they need to survive and the rich can not always satisfy their wants. Its obvious that there is insufficient goods to satisfy all of our needs and wants at any one time.

5. Business and the Environment What is the purpose of economic activity ?

6. Business and the Environment What is the purpose of economic activity ? To provide for as many of our wants as possible. But what is the problem with this ?

7. Business and the Environment What is the purpose of economic activity ? To provide for as many of our wants as possible. But what is the problem with this ? The problem is we as humans are inherently greedy and we always want more so we are never satisfied !

8. Business and the Environment So if we cant satisfy all of our wants, what do we need to do ?

9. Business and the Environment So if we cant satisfy all of our wants, what do we need to do ? MAKE A CHOICE !

10. Business and the Environment So if we cant satisfy all of our wants, what do we need to do ? MAKE A CHOICE ! If we are carful and rational and make our decisions properly then what we choose will give us the greatest benefit and will bring us closest to satisfying our wants. Your choice may not always be popular but it be the best thing for you long term.

11. Business and the Environment Also with choice comes opportunity cost. Give an example of opportunity cost to you. An example of opportunity cost to a business Opportunity cost to government

12. Business and the Environment Also with choice comes opportunity cost. Give an example of opportunity cost to you. You have option between buying new ipod or going out with mates to pub. You choose pub. So the opportunity cost is the ipod. An example of opportunity cost to a business The company has to choose between hiring a specialist trainer for a department or outsourcing the training to a specialist company. They choose outsourcing so the opportunity cost to the business is the hiring of a specialist. Opportunity cost to government Whether to invest in 10 new battleships for the military or build 2 new hospitals. They decide to build the hospitals so the opportunity cost is the battleships.

13. Business and the Environment What is business activity ?

14. Business and the Environment What is business activity ? A good business identifies the needs of the consumer and sets about providing them. they do this buy purchasing resources/or factors of production with the main aim of producing a profit !

15. Business and the Environment Useful terms Factors of production Consumer goods Consumer services Capital goods

16. Business and the Environment Useful terms Factors of production Land – not just land itself but all non and renewable resources of nature such as coal, timber etc… Labour – manual and skilled labour make up the workforce of the business Capital – not just finance to set up business but also all the man made resources used in production. Includes computers, machines, factories, offices etc… Enterprise – the driving force provided by risk taking individuals that combines all the other factors. It’s a managing, decision making role.

17. Business and the Environment Consumer goods Physical and tangible goods sold to the general public. Like cars, washing machines, games consoles, ipods etc…. Consumer services These are non tangible products that are sold to the general public and include hotel accommodation, insurance, private med care, train and bus journeys. Capital goods The physical goods that are used by industry to aid in the production of other goods and services, such as machines and commercial vehicles.

18. Business and the Environment Classification of business activity Firms produce a different range of goods and services. We can classify these into different types of activity. Such as….

19. Business and the Environment Classification of business activity Firms produce a different range of goods and services. We can classify these into different types of activity. Such as…. Primary sector -

20. Business and the Environment Classification of business activity Firms produce a different range of goods and services. We can classify these into different types of activity. Such as…. Primary sector - businesses involved with farming, fishing, oil extraction and any other industry that extract natural resources so that hey can be used and processed by other businesses.

21. Business and the Environment Classification of business activity Firms produce a different range of goods and services. We can classify these into different types of activity. Such as…. Primary sector - businesses involved with farming, fishing, oil extraction and any other industry that extract natural resources so that hey can be used and processed by other businesses. Secondary sector –

22. Business and the Environment Classification of business activity Firms produce a different range of goods and services. We can classify these into different types of activity. Such as…. Primary sector - businesses involved with farming, fishing, oil extraction and any other industry that extract natural resources so that hey can be used and processed by other businesses. Secondary sector – businesses that process products from natural resources like brewing, baking, making clothes and construction

23. Business and the Environment Classification of business activity Firms produce a different range of goods and services. We can classify these into different types of activity. Such as…. Primary sector - businesses involved with farming, fishing, oil extraction and any other industry that extract natural resources so that hey can be used and processed by other businesses. Secondary sector – businesses that process products from natural resources like brewing, baking, making clothes and construction Tertiary sector

24. Business and the Environment Classification of business activity Firms produce a different range of goods and services. We can classify these into different types of activity. Such as…. Primary sector - businesses involved with farming, fishing, oil extraction and any other industry that extract natural resources so that hey can be used and processed by other businesses. Secondary sector – businesses that process products from natural resources like brewing, baking, making clothes and construction Tertiary sector – those that provide services to consumers and other businesses, such as retailing, transport, banking, hotels etc…

25. Business and the Environment Changes in business activity The importance of each sector changes over time In developing countries we use the term industrialisation to describe how important the secondary sector is in this country. How do you think we measure the importance of each sector ?

26. Business and the Environment Changes in business activity The importance of each sector changes over time In developing countries we use the term industrialisation to describe how important the secondary sector is in this country. How do you think we measure the importance of each sector ? By employment or output levels as a proportion of the whole economy. In places such as Africa and Asia, the importance of secondary sector activity is getting bigger. But this brings benefits and problems to the table !

27. Business and the Environment Benefits Total national output increases which raises the standard of living. Increasing output of goods can result in lower imports and higher exports of such products. Expanding manufacturing businesses will result in more jobs being created. Government will receive more tax from expanding and profitable businesses Value is added to the countries output of raw materials rather than just exporting these as basic unprocessed products

28. Business and the Environment Problems – make a list of what you think will be the problems of secondary sector becoming so important.

29. Business and the Environment Problems – make a list of what you think will be the problems of secondary sector becoming so important. The chance of there being work available in manufacturing can encourage a huge movement of people from the country to the city which may lead to social problems or housing problems. Imports of raw materials, and components are often needed, which can increase the countries import costs. Much of the growth of manufacturing industry is due to the expansion of multi- national companies. Leaving the smaller business to fold possibly.

30. Business and the Environment So if that’s what happens when countries are developing, what happens in developed countries ?

31. Business and the Environment So if that’s what happens when countries are developing, what happens in developed countries ? A decline in importance of secondary sector activity and incline in tertiary sector How do we measure the importance of a sector ?

32. Business and the Environment So if that’s what happens when countries are developing, what happens in developed countries ? A decline in importance of secondary sector activity and incline in tertiary sector How do we measure the importance of a sector ? Level of employment and output as proportion of economy. UK for example has seen the proportion of total output accounted for by secondary sector business fall from 25% to 15% over last 25 yrs. Why does this happen to a country ?

33. Business and the Environment Income rises that are linked to these better standards of living have led to consumers spending their extra income on services rather than goods. how is this shown ?

34. Business and the Environment Income rises that are linked to these better standards of living have led to consumers spending their extra income on services rather than goods. how is this shown ? With a growth in tourism, hotels, restaurants, financial services etc… As the rest of the world plays ‘catch up’ (industrialises) manufacturing businesses in developed countries face more competition from these new rivals who to tend to use more efficient and cheaper labour force. What is the effect of this ?

35. Business and the Environment Income rises that are linked to these better standards of living have led to consumers spending their extra income on services rather than goods. how is this shown ? With a growth in tourism, hotels, restaurants, financial services etc… As the rest of the world plays ‘catch up’ (industrialises) manufacturing businesses in developed countries face more competition from these new rivals who to tend to use more efficient and cheaper labour force. What is the effect of this ? Rise in imports and taking away business from domestic secondary firms.

36. Business and the Environment There are two other ways in which industry is commonly classified. What are they ?

37. Business and the Environment There are two other ways in which industry is commonly classified. What are they ? Public sector Private sector

38. Business and the Environment Public sector Organisations that are accountable to and controlled by central or local government. What kind of goods or services are public sector and why ?

39. Business and the Environment Public sector Organisations that are accountable to and controlled by central or local government. What kind of goods or services are public sector and why ? Important commodities such as medical care, public law and order, education. Why - because they deemed too important and significant to be totally run privately Some countries, important industries like telecommunications, energy and public transport are state owned but there are trends of privatising these industries.

40. Business and the Environment Private sector Businesses owned and controlled by individuals or groups of individuals In nearly every country, most business activity is in the private sector. Types and sizes of these businesses in private sector can vary. They have legal obligations to adhere to. What are the different types of business ?

41. Business and the Environment Legal structure of business organisations Sole trader This is the most common form of business organisation One person provides the permanent finance and in return has full control and keeps profits. Likely to remain small Have unlimited liability, this means……..

42. Business and the Environment Legal structure of business organisations Sole trader This is the most common form of business organisation One person provides the permanent finance and in return has full control and keeps profits. Likely to remain small because the owner wants to stay in control but also if stay on their own they have limitations in raising capital. However the moment you introduce a partner you are likely to relinquish some control and are no longer a sole trader. Have unlimited liability, this means owners personal possesions and property can be taken to pay off debts of the business.

43. Business and the Environment List all advantages and disadvantages

44. Business and the Environment List all advantages and disadvantages AdvantagesDisadvantages Easy to set up – no legal formalitiesUnlimited liability Owner has complete controlOften face competition from bigger firms Keep all profitsMight not have the skills in certain areas Can establish good relationships with staff and customers Difficult to raise capital The business can be based on your skills or interests Long hours needed in order to help establish yourself Lack of continuity - when you die the business dies with you !

45. Business and the Environment Partnerships Are often put together to get around the problems faced as a sole trader Have 2 or more people The agreement to work together does not create a separate legal unit, a partnership is just a grouping of individuals Important to choose partners properly The errors made by one partner is considered to be the error of everybody so not only will you benefit when one partner does well but also suffer when they do not do well. Generally unlimited liability, however in some countries it is possible to have limited liability partnerships but only if one person is willing to have unlimited liability. Deed of partnership is not a requirement but really, really important !

46. Business and the Environment List advantages and disadvantages !

47. Business and the Environment List advantages and disadvantages ! AdvantagesDisadvantages Partners may specialise in different areasUnlimited liability (with some exceptions) Shared decision makingProfits shared More capital raised with each partnerNo continuity – when partner dies so does business Business losses are sharedAll partners are bound by the decisions of each other Greater privacy and fewer legal formalities than the bigger more corporate businesses Not possible to raise capital through shares

48. Business and the Environment Limited companies

49. Business and the Environment Limited companies Three important and distinct factors between companies and the two we just looked at: Limited liability: Ownership is divided into shares, which can be bought to become shareholder Shareholders benefit from advantage of having limited liability The only potential loss they will suffer is the amount they paid for their shares. Nobody can make a further claim against shareholder if company fails Liability is limited to the shareholding – this holds two important factors:

50. Business and the Environment Limited companies Three important and distinct factors between companies and the two we just looked at: Limited liability: Ownership is divided into shares, which can be bought to become shareholder Shareholders benefit from advantage of having limited liability The only potential loss they will suffer is the amount they paid for their shares. Nobody can make a further claim against shareholder if company fails Liability is limited to the shareholding – this holds two important factors: People are more willing to provide finance to a company The risk of the company failing to pay debts is moved from investors to creditors. Creditors become more interested as they know there is finance available to pay them and look for ‘limited’ in the name of company, and start to scrutinise their accounts

51. Business and the Environment Legal personality: The business is recognised as separate to the owners. If something is wrong then the company can be sued but not the owner – such is the case with sole traders and partnerships. Managers do have a legal responsibility though – this is not lost. Your are responsible if it is deemed that you carry on trading under illegal practices. Continuity In a company the death of an owner or director does not lead to dissolution. Ownership continues through inheritance of shares

52. Business and the Environment Private Limited Companies

53. Business and the Environment Private Limited Companies Protection that comes from being a company is quite big. Small businesses get this when owners turn business private. Shown by the ‘Ltd’. Shares are generally owned by the original owner, family members, close friends and employees The original owner probably owns the majority/controlling stake New issues cant be sold on the stock market Existing shares cant be sold without the consent of the other sharholders

54. Business and the Environment Public Limited Companies

55. Business and the Environment Public Limited Companies Recognised with the ‘PLC’ Most common form of organisation as it gives a business access to large funds Had all the advantages of a Ltd but can advertise shares on the stock market Means the can potentially raise large sums of money by issuing shares Shareholders can sell quickly as well This flexibility encourages the public to purchase shares Main difference in the two types is the divorce between ownership and control: In private quite likely original holder keeps control In public very unlikely due to the large number of shares that are available The share holders appoint directors at the AGM, who will control the business.

56. Business and the Environment Problems arise with varying ideas on the direction the company should take and decisions that are made. An example being that shareholders may want a strategy that provides quick returns but directors may look at long term strategy. Many LTD’s move on to become PLC due mainly to financing available. Best example of this is Virgin. Often suggested and said that large investors are only interested in short term gains – short – termism. This is obviously damaging to the long term planning of the business – important that directors strike a balance that will make every body happy !

57. Business and the Environment List advantages of both private and public limited companies:

58. Business and the Environment List advantages of both private and public limited companies: AdvantagesDisadvantage Shareholders have limited liabilityLegal formalities involved Separate legal personalityCan’t sell shares to public Continuity in the event of deathCan be difficult to sell shares Can raise capital from sale of shares to family, friends and employees End of year accounts must be sent to companies house for public inspection Private Limited Companies

59. Business and the Environment List advantages of both private and public limited companies: AdvantagesDisadvantages Limited liabilityLegal formalities in formation Separate legal identityCosts of business consultants, financial advisers etc… when starting ContinuityShare price subject to fluctuation – sometimes beyond control of business Ease of buying and selling sharesLegal requirements in terms of disclosure of info to shareholders and public Access to large fundsRisk of takeover and directors can be influenced Public Limited Companies

60. Business and the Environment Legal formalities All governments insist that certain legal stages are completed before you are established. Why do this ?

61. Business and the Environment Legal formalities All governments insist that certain legal stages are completed before you are established. Why do this ? In order to protect creditors and investors Steps such as: A Memo of association must be completed. This states : Name Address of head office Maximum share capital that the company seeks approval for (so we know the value of a share) The declared aims of the business

62. Business and the Environment An Article of Association Concerned with the internal workings of the business. Such as: Names of directors Procedures to be followed etc… When these are completed to satisfaction the Registrar of Companies will issue a Certificate of Incorporation. ‘Ltd’s’ can now start to trade PLC’s however maybe forced to have a certain amount of capital available to be able to gain a cert. This is in the best of interests of the public who may invest their money.

63. Business and the Environment Other types of business: Joint venture

64. Business and the Environment Other types of business: Joint venture Two businesses may work closely together on a project. Not same as merger but can lead to them if successful Advantages Spread risk Different strengths Might have their major markets in diff countries and helps the other break into

65. Business and the Environment Holding company

66. Business and the Environment Holding company Not a different legal form of business but becoming more popular Holding company owns and controls a number of businesses but does not unite them in one company. Often in different markets altogether Keeping them separate keeps them independent of each other and major decisions. However some crucial issues maybe centrally decided across the board

67. Business and the Environment Public sector enterprises – public corporations

68. Business and the Environment Public sector enterprises – public corporations Not to be confused with public limited companies in the private sector These are ventures run by government, centrally or locally so are therefore public sector and we call them public corporations Profit is not a major objective. In some countries publically owned TV channels have as their main priority the quality of programming, or state owned airlines have safety as a main issue.

69. Business and the Environment Advantages and Disadvantages of Public Sector Organisations Advantages Disadvantages

70. Business and the Environment Advantages and Disadvantages of Public Sector Organisations Advantages Disadvantages Managed with social objectives rather than solely profit motives Tendency towards inefficiency due to lack of strict profit targets Loss-making services might still be kept running is there is social benefit Subsidies from government can encourage inefficiencies Finance raised mainly from GovtGovt may interfere in business decisions for political reasons, for example do something in a certain area for popularity

71. Business and the Environment Business activity in some shape or form in every country. The nature and level of this depends on ………

72. Business and the Environment Business activity in some shape or form in every country. The nature and level of this depends on THE TYP OF ECONOMIC SYSTEM ADOPTED. What do I mean by economic system ?

73. Business and the Environment Business activity in some shape or form in every country. The nature and level of this depends on THE TYP OF ECONOMIC SYSTEM ADOPTED. What do I mean by economic system ? What kind of market are we Planned Mixed free

74. Business and the Environment Whatever is chosen obviously has a huge impact on business activity and decisions. The growing power and influence of large multi-national businesses are having huge significant impact on all economic systems – except for those heavily planned ones. Why do they have such influence ?

75. Business and the Environment Basic economics tells us that the biggest problem is ……..

76. Business and the Environment Basic economics tells us that the biggest problem is: Scarcity Choice What are the three important questions/decisions that business needs to answer ?

77. Business and the Environment Basic economics tells us that the biggest problem is: Scarcity Choice What are the three important questions/decisions that business needs to answer ? What How who

78. Business and the Environment Free Market Economies

79. Business and the Environment Free market economies Private ownership of all economic resources Resources are allocated towards making products we wish to but Very much supply and demand driven Businesses gather info on what consumers want and least want to buy through price levels and price changes. In a free market the more a consumer wants to buy a product then……..

80. Business and the Environment Free market economies Private ownership of all economic resources Resources are allocated towards making products we wish to but Very much supply and demand driven Businesses gather info on what consumers want and least want to buy through price levels and price changes. In a free market the more a consumer wants to buy a product then THE HIGHER THE PRICE Businesses want to produce more at this level because………

81. Business and the Environment Free market economies Private ownership of all economic resources Resources are allocated towards making products we wish to but Very much supply and demand driven Businesses gather info on what consumers want and least want to buy through price levels and price changes. In a free market the more a consumer wants to buy a product then THE HIGHER THE PRICE Businesses want to produce more at this level because THEY WANT TO MAKE PROFIT

82. Business and the Environment Planned Economy

83. Business and the Environment Planned Economy State ownership/control over most or all economic resources Central state planning decides what should be produced, how it should be produced and how it to be distributed Consumers have little or no influence over hwat is produced, and the use of prices to indicate consumer preference for goods is unimportant

84. Business and the Environment Planned economy generally goes hand in hand with communist political systems – North Korea, Cuba and the previous Soviet Union.

85. Business and the Environment Mixed Economies

86. Business and the Environment Mixed Economies Many products and services provided by private businesses not the state. Most essential services such as police, defense, law are only provided by the state Important commodities which can benefit society as well as the consumer (merit goods) are provided by both the state and private businesses – health, education, broadcasting. Taxes are paid to finance state operated businesses Government places limits on the nature of business activity. For example taking measures to control pollution from factories and restricting the power of monopolies.

87. Business and the Environment IMPORTANT At this level it is not enough just to know the difference and possible advantages and disadvantages. Its important that we know what impact it can have on businesses if we move between the different types or the mixture that we have. The questions you need to ask are: How will private sector firms be affected by the large tax increases needed to pay for higher social security Will increased controls over pollution and location force businesses to switch to other countries If the state decides to sell off its organisations should a business take it over ? Should a multi-national invest heavily in a country where the governmenthas just rejected state central planning in favor of a mixed economy (p24 2.1)

88. Business and the Environment Nature and scope of International Trading Links All countries, to some extent, engage in international trade no matter what economic system then use. What are the benefits of international trading ?

89. Business and the Environment Nature and scope of International Trading Links All countries, to some extent, engage in international trade no matter what economic system then use. What are the benefits of international trading ? Wider choice of goods for consumers. Some products might not have usually been available. Creates competition for domestic businesses – they have to up their game in terms of quality and efficiency. Countries can begin to specialise in products if they are more efficient in production against others in same field. By trading together, countries maybe able to improve political and social links.

90. Business and the Environment However, international trading has its drawbacks. These drawbacks have to be considered carefully by government. Some assistance may be needed to be given to some businesses. What are the drawbacks ?

91. Business and the Environment However, international trading has its drawbacks. These drawbacks have to be considered carefully by government. Some assistance may be needed to be given to some businesses. What are the drawbacks ? Loss of jobs in those domestic firms who cant compete. Maybe a decline in domestic industries that produce important strategic goods like foodstuffs. This could be down to a rise in imports. Switching to production in goods where business can compete since they have lost out to imports may take some time. Some importers may dump goods at below cost to force domestic businesses into trouble. If value of imports exceeds value of exports then this can lead to loss in foreign exchange. In 2001 Zimbabwe had this problem when they couldn’t afford essential aviation fuel.

92. Business and the Environment Free Trade Globalisation

93. Business and the Environment Free Trade Globalisation No restrictions or trade barriers which might prevent or limit trade between countries What are the most common forms of trade barrier ?

94. Business and the Environment Free Trade Globalisation No restrictions or trade barriers which might prevent or limit trade between countries What are the most common forms of trade barrier ? Tariffs – taxes imposed on imported goods to make them more expensive Quotas – limits on the physical quantity or value of certain goods that maybe imported Voluntary export limits – an exporting country may actually agree to limit the quantity of certain goods sold to one country

95. Business and the Environment Globalisation has paved the way for us to remove these restrictions. Globalisation means what ?

96. Business and the Environment Globalisation has paved the way for us to remove these restrictions. Globalisation means what ? Greater freedom of movement of goods, people and capital around the world. With this ever shrinking world, what issues do you think it has forced ?

97. Business and the Environment Globalisation has paved the way for us to remove these restrictions. Globalisation means what ? Greater freedom of movement of goods, people and capital around the world. With this ever shrinking world, what issues do you think it has forced ? Reduced the differences that once existed between national markets Easier to trade and locate in other countries But most importantly has forced companies that were once protected by national governments, to become internationally competitive if they are to prosper and survive.

98. Business and the Environment Reasons behind free trade: World Trade Organisation (WTO) Group of countries committed to freeing up trade from restrictions Regular meetings on reducing tariffs and quotas, these have to be agreed by everyone. China one of the most recent, larger countries, to apply in 2001. However there were concerns about them joining - why ?

99. Business and the Environment Reasons behind free trade: World Trade Organisation (WTO) Group of countries committed to freeing up trade from restrictions Regular meetings on reducing tariffs and quotas, these have to be agreed by everyone. China one of the most recent, larger countries, to apply in 2001. However there were concerns about them joining - why ? Because with their very low labour costs, competing freely with them maybe difficult. They can afford to undercut you and not be making losses !

100. Business and the Environment Free trade blocs Groups of countries, often geographically grouped, that have arranged to trade with each other without restrictions. Best examples being ?

101. Business and the Environment Free trade blocs Groups of countries, often geographically grouped, that have arranged to trade with each other without restrictions. Best examples being ? EU – europe NAFTA

102. Business and the Environment Free trade blocs Groups of countries, often geographically grouped, that have arranged to trade with each other without restrictions. Best examples being ? EU – europe NAFTA (USA, Canada, Mexico) ASEAN

103. Business and the Environment Free trade blocs Groups of countries, often geographically grouped, that have arranged to trade with each other without restrictions. Best examples being ? EU – europe NAFTA (USA, Canada, Mexico) ASEAN (Association of South Eastern Nations)

104. Business and the Environment Multi-national businesses

105. Business and the Environment Multi-national businesses Have headquarters in one country but operate in several More than just importers and exporters, they produce goods and services. Big multi-nationals have annual sales turnovers bigger than some countries economies Can bring problems to countries due to their size and influence - in what way ?

106. Business and the Environment Multi-national businesses Have headquarters in one country but operate in several More than just importers and exporters, they produce goods and services. Big multi-nationals have annual sales turnovers bigger than some countries economies Can bring problems to countries due to their size and influence - in what way ? By having HQ in usually the more developed countries and the manufacturing side of things in less developed countries.

107. Business and the Environment Why become a multi-national ?

108. Business and the Environment Why become a multi-national ? Nearer to markets – which means ?

109. Business and the Environment Why become a multi-national ? Nearer to markets – which means ? Lower transport costs for finished goods Better market information Can be looked upon as a local company which might breed loyalty Lower costs of production Lower labour rates in lower developed countries Cheaper rent sites for factories Governments encourage industrialisation of theses countries by offering tax incentives. Avoid import restrictions By producing locally in a country you avoid import duties Access to local natural resources

110. Business and the Environment Potential problems for a multinational Can be risky setting up operating plants in another country - why ?

111. Business and the Environment Potential problems for a multi-national Can be risky setting up operating plants in another country - why ? Communication maybe poor Language and cultural differences Skill levels in that country may not be up to scratch Benefits to the country are ?

112. Business and the Environment Potential problems for a multinational Can be risky setting up operating plants in another country - why ? Communication maybe poor Language and cultural differences Skill levels in that country may not be up to scratch Benefits to the country are ? Investment will bring in foreign currency Employment opportunities Local firms may benefit from having to provide services to them Tax revenues for Govt may increase if they sell the land Management expertise in the country may improve due to the experience Total output of the economy will be increased which will rise GDP.

113. Business and the Environment Drawbacks for a country maybe?

114. Business and the Environment Drawbacks for a country maybe? Exploitation of the workforce. There may not be strict health and safety rules or pay guidelines. Big companies such as Nike and The Gap have suffered bad publicity through this. Pollution – this is because the company has moved there because of the slack regulations that will possibly exist allowing them to dump their waste easier ! Local firms go bust due to inferior equipment not letting them keep up Can get accused of enforcing your culture onto them. McDonalds held heavily responsible for this - imposing western culture on other societies Profits maybe sent back to the base country Extensive depletion of natural resources in some countries blamed on the big multi- nationals !

115. Business and the Environment State intervention to assist and control businesses Government assistance

116. Business and the Environment State intervention to assist and control businesses Government assistance Training programmes – organised through local education centers. Well trained workforce should improve efficiency Development area grants – most countries have regions that are less prosperous than others. Govt will agree to help a business if they set up there. These could be agricultural areas Support for exporters – selling in other countries can be risky if you do not know a lot about them. Government provides a support service and a scheme to pay you even if your creditors don’t !

117. Business and the Environment Government controls

118. Business and the Environment Government controls Should governments limit the actions of businesses ?

119. Business and the Environment Government controls Should governments limit the actions of businesses ? Some say no because business activity, creates wealth and prosperity. Control may stop this Society may suffer if this is the case, in terms of lower output, incomes and employment. This argument is referred to as the ‘laissez-faire’ attitude. Which means allowing businesses to make its own choices without any intervention. What would be the main objections against this approach ?

120. Business and the Environment Without legal controls businesses can take advantage of the workforce and the conditions they offer, with no security of employment and discriminating between groups of workers Monopolies may form, which leads to exploitation of consumers !

121. Business and the Environment Business Objectives Everything we do is made clearer and is easier to focus on if there is an objective to aim for. For this to be successful we need a strategy or a detailed plan In place To make sure we stay on target we…..

122. Business and the Environment Business Objectives Everything we do is made clearer and is easier to focus on if there is an objective to aim for. For this to be successful we need a strategy or a detailed plan In place To make sure we stay on target we CONSTANTLY REVIEW Aims and strategies of an organisation will often change – good thing ? A poor plan will lead to not achieving the desired aim. Example – British petroleum changed their logo from the original to a sunflower. This seems pointless but it wasn’t. why ?

123. Business and the Environment Business Objectives Everything we do is made clearer and is easier to focus on if there is an objective to aim for. For this to be successful we need a strategy or a detailed plan In place To make sure we stay on target we CONSTANTLY REVIEW Aims and strategies of an organisation will often change – good thing ? A poor plan will lead to not achieving the desired aim. Example – British petroleum changed their logo from the original to a sunflower. This seems pointless but it wasn’t. why ? Showed a repositioning of the business towards a more environmentally friendly one.

124. Business and the Environment Governments raise taxes but without a explanation its difficult to justify why to voters unless they stated the desired objective. Mission statements, aims, objectives, plans and strategies – what do they mean ? You can see the link between these when we look at the hierarchy of needs table. It shows the dependence of each one in the development of the other.

125. Business and the Environment Corporate aims Long term goals of the company This is where the core of the business activity is expressed. Not just big businesses have these but also sole traders and p’ships HOMEWORK PICK 3 MAJOR COMPANIES AND FIND THEIR CORPORATE AIM Corporate aims can be along the lines of ‘meeting customer needs’ or ‘increase value for our shareholders’ The corporate aim provides guidance to the whole organisation

126. Business and the Environment The benefits of corporate aims are: Provide the starting point for the entire set of objectives on which management is based. Can develop a sense of purpose and direction for the businesses Can allow for an assessment to be made later on - if being achieved or not ! A company without a corporate aim is likely to drift around with no real purpose

127. Business and the Environment Mission Statements An attempt to condense business objectives into a sharp statement Doesn’t give specifics Gives the aims of a business in a motivating way ! Examples: School – ‘from trial to triumph – the strive for excellence’ Apple – ‘apple strives for continuous improvement in our environmental, health and safety management systems and in the environmental quality of our products, processes and services. ‘

128. Business and the Environment Are mission statements useful ?

129. Business and the Environment Are mission statements useful ? They quickly inform you what the company is about They can provide motivation to employees If they include moral statements they can guide behavior of employee How could you criticise them ?

130. Business and the Environment Are mission statements useful ? They quickly inform you what the company is about They can provide motivation to employees If they include moral statements they can guide behavior of employee How could you criticise them ? There not detailed and can be misleading Public relations exercise Impossible to analyse and disagree with

131. Business and the Environment Communicating mission statement is important because no point identifying the vision of business without letting anybody know about it ! How do companies let people know what their MI is ?

132. Business and the Environment Communicating mission statement is important because no point identifying the vision of business without letting anybody know about it ! How do companies let people know what their MI is ? In published accounts Company newsletters Mission statements, like corporate aims are insufficient for operational guidelines. Don’t tell managers what decisions etc.. To make

133. Business and the Environment Corporate Objectives Corporate aims and mission statements need to be turned into goals and targets. These need to be made quite specific, which themselves can be broken down Obviously based on the central aim of the business but are expressed in terms that provide a much deeper/clearer guide for management What are the main corporate objectives ?

134. Business and the Environment Corporate Objectives Corporate aims and mission statements need to be turned into goals and targets. These need to be made quite specific, which themselves can be broken down Obviously based on the central aim of the business but are expressed in terms that provide a much deeper/clearer guide for management What are the main corporate objectives ? Maximising profit Growth Increase market share Social, ethical and environmental considerations

135. Business and the Environment Maximising profits All stakeholders want reward Profits are essential for this as well as future growth Also important in attracting new investors What does profit maximisation mean ?

136. Business and the Environment Maximising profits All stakeholders want reward Profits are essential for this as well as future growth Also important in attracting new investors What does profit maximisation mean ? Operating and producing at the level of output where the greatest positive difference between total revenue and total cost is achieved. This seems the obvious choice but there are some limitations to choosing this - which are:

137. Business and the Environment Maximising profits All stakeholders want reward Profits are essential for this as well as future growth Also important in attracting new investors What does profit maximisation mean ? Operating and producing at the level of output where the greatest positive difference between total revenue and total cost is achieved. This seems the obvious choice but there are some limitations to choosing this - which are: Focus on short term can affect long term survival Many want to maximise sales rather than increase market share - which if they concentrated on the latter would provide all the profit needed ! Businesses analysts measure performance on return on capital employed rather than total profit figures Profit maximisation is all well and good but what about those stakeholders that give priority to other issues such as security for the workforce etc..

138. Business and the Environment Growth

139. Business and the Environment Growth Usually measured in sales, has benefits for the managers and owners Larger firms are less likely to be taken over and should benefit from economies of scale (Typically, a company that achieves economies of scale lowers the average cost per unit through increased production since fixed costs are shared over an increased number of goods) Managers will be motivated by seeing the company fulfill its potential Argued that if a business does not attempt to grow then it will fade away and will lose appeal. Limitations are:

140. Business and the Environment Growth Usually measured in sales, has benefits for the managers and owners Larger firms are less likely to be taken over and should benefit from economies of scale (Typically, a company that achieves economies of scale lowers the average cost per unit through increased production since fixed costs are shared over an increased number of goods) Managers will be motivated by seeing the company fulfill its potential Argued that if a business does not attempt to grow then it will fade away and will lose appeal. Limitations are: Expansion too quick produces a cash flow problem Sales growth might be at expense of profit margin Large businesses can experience diseconomies of scale Using profits to finance growth can hurt short term ambitions of shareholders Loss of focus if growth takes away from core business activities

141. Business and the Environment Increasing market share Closely linked to overall growth of business is the market share it enjoys within its market. Although both generally go hand in hand is possible for expanding business to suffer reduction in market share, if the market is growing faster than the business. Increasing market share proves that your marketing mix is better than competitors Benefits from being the ‘brand leader’ are:

142. Business and the Environment Increasing market share Closely linked to overall growth of business is the market share it enjoys within its market. Although both generally go hand in hand is possible for expanding business to suffer reduction in market share, if the market is growing faster than the business. Increasing market share proves that your marketing mix is better than competitors Benefits from being the ‘brand leader’ are: Retailers will be keen to stock and promote your brand Profit margins offered to retailers may be lower than competing brands as shops are keen to stock you Effective promo campaigns are based on ‘buy our product now – it’s the best’

143. Business and the Environment Social, ethical and environmental considerations Should a business have objectives about these ?

144. Business and the Environment Social, ethical and environmental considerations Should a business have objectives about these ? There seems to be a general agreement that businesses become more ‘aware’ of their activities and be more thoughtful towards the wider issues rather than just profit Adverse publicity is main reason behind this along with increasing awareness of issues from the public Legal changes not only nationally but globally along with influential pressure groups are helping to force this issue. Businesses can no longer exploit staff so easily and must take responsibility for their actions more than ever now. One big reason behind the change is that consumers react positively towards businesses that are more socially responsible. What questions need to be asked though of these firms ?

145. Business and the Environment Social, ethical and environmental considerations Should a business have objectives about these ? There seems to be a general agreement that businesses become more ‘aware’ of their activities and be more thoughtful towards the wider issues rather than just profit Adverse publicity is main reason behind this along with increasing awareness of issues from the public Legal changes not only nationally but globally along with influential pressure groups are helping to force this issue. Businesses can no longer exploit staff so easily and must take responsibility for their actions more than ever now. One big reason behind the change is that consumers react positively towards businesses that are more socially responsible. What questions need to be asked though of these firms ? Why are you doing what you do ? Are you just jumping on the bandwagon because its more profitable ?

146. Business and the Environment What are the main issues relating to corporate objectives ?

147. Business and the Environment What are the main issues relating to corporate objectives ? Must be based on corporate aim Should be achievable and measurable if to motivate employees Need to be communicated to employees and investors in the business They form the framework of the more specific departmental objectives Should indicate a timescale for achievement

148. Business and the Environment What do you think determines the corporate objectives ?

149. Business and the Environment What do you think determines the corporate objectives ? Corporate culture Probably the main influence, as not all businesses pursue the same objectives Culture can be defined as the code of behavior and attitudes that influence decision making. Determined by several factors: Personality and management style of owner (small firms). Affects employee attitude The structure of an organisation. Tight run, centralised organisations will resist change and be less adaptable to market changes. Senior management may be the only ones that can enforce changes.

150. Business and the Environment The culture must help determine the objectives Some business cultures are adaptive and seek change. This is good in today’s modern world because ?

151. Business and the Environment The culture must help determine the objectives Some business cultures are adaptive and seek change. This is good in today’s modern world because ? Increase the chances of survival if we can adapt to the rapid changes that take place The business culture will determine:

152. Business and the Environment The culture must help determine the objectives Some business cultures are adaptive and seek change. This is good in today’s modern world because ? Increase the chances of survival if we can adapt to the rapid changes that take place The business culture will determine: Objectives of business The way in which objectives are expressed The involvement of the workforce in setting them How the actions required to achieve objectives are determined and put into effect The motivation the workforce show in their efforts towards the achievement of objectives

153. Business and the Environment Size and legal form of the business Satisficing

154. Business and the Environment Size and legal form of the business Satisficing (being happy with just making enough profit to be happy – small businesses maybe Large businesses with big structures and plenty of investors will/might be interested in rapid growth and making the most of their investment and becoming big and powerful Public or private sector

155. Business and the Environment Size and legal form of the business Satisficing (being happy with just making enough profit to be happy – small businesses maybe Large businesses with big structures and plenty of investors will/might be interested in rapid growth and making the most of their investment and becoming big and powerful Public or private sector Public sector running for the benefit of the people and profit is not a major incentive. Financial targets are inappropriate. Even those public sector firms who do operate at a profit, its probably not their main objective. For example the post office in the UK has an objective to keep open the non profit outlets in rural areas. This is in contrast to the banks In these areas.

156. Business and the Environment The number of years been operating

157. Business and the Environment The number of years been operating New businesses are likely to be driven to succeed at all costs – this shapes their culture When they become more well established objectives may move towards growth and profit.

158. Business and the Environment Establishing strategy Aims and objectives are the targets a business works towards Strategies are long term plans to achieve these Strategies are influenced by four factors:

159. Business and the Environment Establishing strategy Aims and objectives are the targets a business works towards Strategies are long term plans to achieve these Strategies are influenced by four factors: Strengths of the business Resources available Competitive environment Objective Corporate and divisional strategies will be established once an overall strategy has been agreed These have to be well co-ordinated to make sure nothing conflicts between the areas of the businesses

160. Business and the Environment Stakeholders and their objectives Stakeholder is an individual or a group with a direct interest in the performance of a business. Ideally stakeholders will have common views on what the businesses aims should be, but this is unlikely. Reasons behind having a stake in a business will differ from stakeholder to stakeholder which can cause conflict of interests. A business has to find a way of satisfying all stakeholders

161. Business and the Environment Who are stakeholders ?

162. Business and the Environment Who are stakeholders ? Shareholders Workforce Consumers Creditors community

163. Business and the Environment Shareholders Want to be rewarded for their investment – obviously. Must be equal to that of what they would have got elsewhere at the very least. This reward depends on after tax profits, any plans by directors to retain profits to re-invest and the prospect of the company and economy in general. Shareholders have rights such as:

164. Business and the Environment Shareholders Want to be rewarded for their investment – obviously. Must be equal to that of what they would have got elsewhere at the very least. This reward depends on after tax profits, any plans by directors to retain profits to re- invest and the prospect of the company and economy in general. Shareholders have rights such as: Receiving annual accounts Attendance at the AGM To become a director at the AGM if selected To sell their shares (PLC only) Limited liability

165. Business and the Environment Workforce Consequences for the business if the workforce feels unfairly treated and not secure in their jobs. These consequences damage the shareholders interests and include ?

166. Business and the Environment Workforce Consequences for the business if the workforce feels unfairly treated and not secure in their jobs. These consequences damage the shareholders interests and include ? Industrial action Poor productivity High turnover of staff Legal intervention – if conditions are not sufficient such H&S and wages Negative customer reaction The threat of these nearly always ensures that most if not all worker objectives are met. The extent of this depends on:

167. Business and the Environment Workforce Consequences for the business if the workforce feels unfairly treated and not secure in their jobs. These consequences damage the shareholders interests and include ? Industrial action Poor productivity High turnover of staff Legal intervention – if conditions are not sufficient such H&S and wages Negative customer reaction The threat of these nearly always ensures that most if not all worker objectives are met. The extent of this depends on: Profitability of business Culture of organisation Management styles

168. Business and the Environment Customers Customers have buying objectives Customer loyalty does exist but does not take a lot to break it. If a business does not provide to these objectives then the customer will go elsewhere Creditors Most businesses borrow The lending company demands as much security as poss for their loan They will be concerned with the liquidity of the business.

169. Business and the Environment Community We all know about the benefits that a community gets such as increased employment and living standards etc… But what about the drawbacks to a community ?

170. Business and the Environment Community We all know about the benefits that a community gets such as increased employment and living standards etc… But what about the drawbacks to a community ? Increased traffic congestion Increased pollution If business wishes to expand they may get a refusal or an order to modify plans from planning authorities to help the community. These maybe less profitable changes for the company but with clever management you can put a good spin on it. Such as accepted because it benefits the environment and the community – good publicity !

171. Business and the Environment Conflict of objectives With so many stakeholders there is obviously going to be some conflict of interest What kind of conflict are we talking about ?

172. Business and the Environment Conflict of objectives With so many stakeholders there is obviously going to be some conflict of interest What kind of conflict are we talking about ? Workers want a pay rise but managers say it cant be afforded as they are re-investing profits back into the business Creditors demand early repayment, but company accountant doesn’t want to pay out large amounts all at once Shareholders expect high dividends to be paid but directors may want to re-invest Government wants to reduce unemployment by making it more difficult for companies to make workers redundant, but managers need to cut costs. Environmental groups might be lobbying against the practices of the business creating bad publicity All about finding a balance Some managers will say what the hell and ignore stakeholder objectives and their conflict and just go about achieving profit

173. Business and the Environment That approach is however deemed far too ……………

174. Business and the Environment That approach is however deemed far too short termist. Businesses now have codes of conduct that attempt to satisfy as many stakeholders as possible. These include:

175. Business and the Environment That approach is however deemed far too short termist. Businesses now have codes of conduct that attempt to satisfy as many stakeholders as possible. These include: All debts to be paid within 30 days (except obvious long term debt) No unnecessary waste Customer complaint forum Employment law adhered to Keep close relationship with the community – run schemes etc…

176. Business and the Environment Strategic analysis When you’re a new business you need to identify the opportunities that are available that will aide you in achieving your aims and objectives. Established businesses will need to ……..

177. Business and the Environment Strategic analysis When you’re a new business you need to identify the opportunities that are available that will make you a success Established businesses will need to FREQUENTLY MONITOR where they are in relation to achieving them. In business nothing is set in stone, you must be flexible to change and circumstance. What do I mean by this ?

178. Business and the Environment Strategic analysis When you’re a new business you need to identify the opportunities that are available that will make you a success Established businesses will need to FREQUENTLY MONITOR where they are in relation to achieving their objectives. In business nothing is set in stone, you must be flexible to change and circumstance. What do I mean by this ? Economic factors may change or new competitors may arrive Strategies need to be carefully monitored and businesses must be able to adapt, just like objectives may need to be flexible.

179. Business and the Environment What is the process of reviewing business strategies called ?

180. Business and the Environment What is the process of review of the business and strategies called ? Strengths Weaknesses Opportunities Threats

181. Business and the Environment