Business and its Environment

• Enterprise: entrepreneurs combine factors of production and take risks; businesses add value.
• Sectors (primary, secondary, tertiary), private and public sector, legal structures and liability.
• Size is measured by employees, revenue, capital employed or market share; small businesses and growth (internal and external).
• Objectives: SMART objectives, mission statements, CSR and the triple bottom line.
• Stakeholders have different, often conflicting, objectives.

Entrepreneurs and added value

Added value = selling price − cost of bought-in materials and services. Entrepreneurs need qualities such as risk-taking, innovation and resilience, and face barriers such as lack of finance and experience.

Sectors and ownership

Sole traders and partnerships usually have unlimited liability; private and public limited companies have limited liability and separate legal identity. Also know franchises, co-operatives, joint ventures and social enterprises.

Measuring size and growth

Internal (organic) growth is slower and less risky; external growth (mergers and takeovers) is faster but brings integration and culture problems. Integration can be horizontal, vertical (forward/backward) or conglomerate.

From mission to targets

Mission statement → corporate objectives → departmental objectives → individual targets and budgets. Objectives should be SMART: specific, measurable, achievable, realistic, time-limited.