AS Btec business. Report on understanding how businesses operate.

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To: Mr Baker

From: Luke Cohen

Date: 02/10/2010

Report on understanding how businesses operate.

For the attention of Mr Baker,

                                                  As you are aware, we are selling your invention of the portable toilets to developing countries where they will provide improved and sustainable sanitation in rural communities. The toilets are a self-assembly unit and we are selling them for £15 per unit. I believe that it would be appropriate to trust in a voluntary company, as they are most reliable and they have committed more help in charitable organisations, than any company in the private sector would have. Below I have listed some of the developing countries we could sell your product to:

  • Brazil
  • Ethiopia
  • Uganda
  • Egypt
  • India
  • Thailand

P1

Types of Businesses and Their Ownership

As we know businesses fall into different sectors depending on their type and their purposes. The two companies I am going to distinguish are Tesco’s and CAFOD. From here I will be explaining the businesses type, purpose, ownership, size, scale and their aims and objective and how this influences them.

Tesco’s fall into the private sector because it is a business that wants to make a profit. They do this by selling their products such as food, clothes and electronics and so on. Because Tesco’s only sell products and don’t manufacture them, they will be classed as a tertiary in the industrial sectors. The tertiary sector of the economy is the service industry. This sector provides services to the general population and to businesses. Activities associated with this sector include retail and wholesale sales, transportation and distribution and entertainment.

Tesco’s is a PLC meaning anyone can buy their shares on the stock exchange. Anyone who owns a share or shares is known as a share holder. If the company is successful then the share holder will receive a financial reward in the form of dividends. Selling shares to the public will allow the company to raise large amounts of money so they can expand or develop the organisation.

A large organisation can consist of thousands of employees, and could possibly have branches all over the world. A large business has many advantages, they can buy a large amount of stock for a cheaper price than what small business will get, (this is called economy of scale) because their suppliers want to sell their stock quickly. But the disadvantages are is that it will cost a lot of money to open up new branches, and can possibly take a long time to build them. Tesco is classed as a large organisation because of the amount of revenue each year and the number of employees (an estimated 440,000 in 2008). Tesco’s is one of the largest grocery stores and sells other products such as home ware. The amount of revenue of February 2010 is an estimated 62.54 billion.

An aim in a business is important. Businesses have aims so they can move forward quicker (develop their business). Setting aims will allow the company to have long term goals to achieve. Tesco’s aims are to make as much profit as they can, this is called profit maximisation. This can be done in several strategies; the main strategy is to reduce prices to increase sales of the groceries/products, so this can lead to more market share and beating their competitors in price comparison. An objective in a business is also important. An objective is something that you want to achieve at the end of the day/ month/ year or future. Tesco’s will have objectives that are Specific, Measurable, Achievable, Realistic and Time. These are known as S.M.A.R.T objectives. Tesco’s objectives is to make sure that they satisfy the needs of their share holders, and they will do this by meeting their aims and objectives and that their customers are provided with what they require and make sure they are satisfied with what they have received.

CAFOD falls into the voluntary sector because they are not for profit. Voluntary organisations are usually made up of non-governmental organisations, (NGO’s) or charities. NGO’s are legally constituted organisations which operate separately from the government. Activities associated with CAFOD are events to raise money, for example- sponsored walk/run, bike rides and events alike.

CAFODS purpose is to work/help with poverty and suffering in developing countries. Volunteers can contribute to CAFOD either by making donations to the charity itself, or by travelling out to countries that are less developed and physically helping in them. CAFOD try to build better lives for those who are living in poverty or those who are suffering. They try to help people with the funds that they receive as donations, with these donations they build development programmes to try and build a better community. Development programmes can include building schools to provide education, water wells to provide clean water for the community and improve standards of living.

NGO’s tend to be owned by trustees of foundations. CAFOD is run by a board of trustees and it is very important that the CAFOD have good relations with the public so they know that the majority of the money is spent on people in need and not on the business itself. The funds are monitored by the board of trustees, and they produce a public financial report every quarter for everyone to see.

CAFOD is classed as a large organisation because it has thousands of volunteers working for them, and they operate in over 200 countries so they are multinational. Workers are not rewarded with money in return of their help because they choose to work voluntarily. But people in higher positions such as the directors may earn money because of their status.

CAFOD’s aim or vision is a world transformed to reflect the Kingdom of God: a world where;

  • the rights and dignity of every person are respected
  • all have access to basic needs in life
  • women and men share equally in shaping their societies and our world
  • the gifts of creation are nurtured and shared by all for the common good
  • The structures that shape people’s lives are just and enable peace.

CAFOD’s objective is to provide people who are suffering with enough shelter, food and clean water. They do this by using the funds they gather from donations and purchase the essential needs and distribute it to those who need it.

P2+M1+D1

Stakeholders

A stakeholder is anyone who has an interest in what a business does or an influence upon the business. Large organisations have many different stakeholder groups. Some internal to the business, like the employees, managers, owners and other staff members. Others are external as they are outside the business, for example the government or the local community. It is important to identify and balance the needs and expectations of these groups and to act responsibly to all of them in order to keep the ‘licence to operate’, which is necessary for good business.

In businesses there are different stake holders, as I explained before there are internal and external stake holders. Internal stake holders are people such as employees, managers, owners and other staff within the business. And external stake holders are the local community, government, suppliers, distributers, unions and society.

Internal stakeholders in Tesco’s have an interest in the business because they want the business to be successful, and make profit. Employees in Tesco’s have an interest in the business because they want to earn money, so they do this by working in the business and selling products to make the business successful. In return employees would like job security and rewards in payment, and rewards is what influences the employees to work harder.

External Stake holders in Tesco’s are people such as, customers, local community, government, suppliers and distributors. Customers are vital to any business, since they purchase goods or service which provide the business with the majority of its revenue. It is therefore vital for a business to find out what their customers needs and expectations are, and provide them with what they want and then satisfy them, this is done through market research. Customers in Tesco’s expect to purchase cheap products from Tesco’s that is value for money. They expect products that are cheaper than their competitors, and also to having enough stock in stores.

Businesses are most likely to provide job opportunities for the local community. Sponsorship of local events such as a football team or good causes such as charity work can also help the business establish itself in the local community as caring and supportive. Many businesses develop links with local schools and colleges, offering sponsorships and resources to these under-funded institutions. Tesco’s do this by offering vouchers in return for educational purposes for school. Essentially parents or students buy products from Tesco’s, and for every £10 they spend they get a voucher for schools to collect and these can buy equipment such as computers or sports equipment. This influences customers to buy more products at Tesco’s so their children’s school can benefit from it.

The government has an interest in Tesco’s because they want to receive money from the business in form of taxes. They also have an interest in the business so they can create jobs for people in the local community.

Trade unions and employers association have an interest in the business because they are organisations who represent people at work. Their purpose is to protect and improve employers work pays and conditions of employment. Trade unions interest in Tesco’s makes sure that they are paid fairly and their work conditions are acceptable. If workers feel as if they are not being paid enough or being treated fairly, they can inform the trade union and then they will most probably set up a strike so force the manager of Tesco’s to either do what the workers ask for, or fire them and find other employees.

Suppliers want steady orders and prompt payment. They also want to feel valued by the business. Tesco’s suppliers want Tesco to be loyal and not suddenly decide to have a different supplier.

CAFOD stakeholders are quite similar to Tesco’s. CAFODS internal stakeholders are the employees and the board of trustees. The board of trustees want the business to be able to gain money to provide for people in need, and be able to build a sustainable living environment for people who do not have homes. The employees want good working environment and protection when working abroad in different countries, they will also want all the basic needs such as water and food and suitable living conditions.

CAFOD’s external stakeholders will be the local community, customers and the suppliers. CAFOD rely on the local community to make donations for the charity because that is how the majority of its revenue is produced. People who donate to CAFOD believe that it will make a difference in fighting poverty.

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Customers that purchase products in CAFOD’s charity community shops, want products that are good quality and in good condition, for a reasonable price. Seeing as this is one of the ways the organisation makes its money, it is important to the shop that receives regular donations from the local community. This influences CAFOD because it allows them to receive more money, and spend more on their chosen projects.

The suppliers that are involved with CAFOD will be the people who CAFOD buy products from such as, water, food and tools and equipment for people in poverty. They pay for these ...

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