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INTRODUCTION

Nature of subject, expectations and papers

 Business Studies is the study of how businesses operate and how they are managed.
 A business is any organization or commercial activity that is aimed at satisfying human needs
and wants at a profit.
 A need is a good or service essential for living, for example, shelter, water or food.

NB: The classification of things into needs and wants is general. It varies from one person to the other.

1.1 BUSINESS ACTIVITY (p10)

1.1.1 The purpose and nature of business activity

SCARCITY

 It is the lack of sufficient resources to fulfil the total wants of the population.
 Due to scarcity businesses and individuals are forced to make choices to make use of
alternatives or substitutes so that the needs and wants are satisfied.
 In the process they will incur opportunity cost.

OPPORTUNITY COST

 It refers to the next best alternative given up by choosing another item. For example, if one has
money income enough to either go for a holiday trip or buying a car.
 Going for a holiday means a car has been sacrificed.

Importance of specialization

 Specialization is when people and businesses concentrate on what they are best at.
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 Almost all workers specialize on one skill and all businesses specialize on one product these
days.
 Reasons for specialization include:
 Specialized machinery and technology are widely available
 Increasing competition means that businesses have to keep costs low
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 Most people recognize that higher living standards can result from being specialized

Specialisation and division of labour

 Division of labour is when the production process is split up into different tasks and each worker
performs one of these tasks.
 It is a form of specialisation

The purpose of business activity

 A business is an institution that combine factors of production to make products (goods and
services) which satisfy people’s wants.
 Business activity therefore:
 Combines scarce factors of production to produce goods and services
 Produces goods and services which are needed to satisfy the needs and wants of the
population
 Employs people as workers and pays them wages to allow them to consume products
made by other people
 The factors of production are:

The concept of added value and how added value can be increased

 Added value is the difference between the selling price of a product and the cost of
bought in materials and/or components
 OR improvement to the product that makes it worth more [1] plus a relevant example [+
1] e.g. packaging
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The importance of added value

 The business can pay other costs such as labour costs, advertising expenses and power
 Can make profit higher profits the greater the added value is

How the business can increase added value

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 Increase selling price but keep costs of materials the same.

 Can be done by creating a higher quality image for the firm’s products or service. E.g., by
employing experienced and knowledgeable sales staff, decorate the shop in an
upmarket way, use high quality packaging or playing classic background music in a retail
shop
 If customers are convinced, they become prepared to pay a higher price
 BUT, costs may increase when trying to create this image

 Reduce the costs of materials, but keep the selling price the same.
 The business can buy from cheaper suppliers of materials.
 If selling price stays the same added value will increase, BUT, cheaper materials may
reduce quality and customers will be prepared to pay the same price if they believe that
quality deteriorated

1.2 CLASSIFICATION OF BUSINESS ACTIVITY/LEVELS OF PRODUCTION - N14P21, Q2 (a) (p10)

ACTIVITY/SECTOR

PRIMARY SECTOR SECONDARY SECTOR TERTIARY

SECTOR

Primary sector

 It refers to businesses that extracts and uses natural resources of the earth to produce raw
materials
 It is the first stage of production
 The business activities include mining, fishing, hunting, forestry, farming
 The output from this sector is called primary produce or raw materials and it is usually sold at
low prices
 The output should be passed on to the secondary sector for value addition.

Secondary Sector

 It deals with the conversion/processing of raw materials into semi-finished or finished products.
 It involves activities like canning, smelting, baking, milling, brewing etc.
 It is the second stage of production where value addition is done to primary products.
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Tertiary Sector

 It refers to businesses that provide services to consumers and the other sectors of industry
 It involves businesses like insurance, banking, internet providers, transporting, warehousing and
retailing
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 It also includes provision of direct services like education, hairdressing entertainment and
medical care
 It is the third stage of production

STRUCTURAL CHANGES IN THE ECONOMY

The contribution of businesses from various sectors will change from time to time. Economies can
industrialise or de-industrialise.

 Industrialisation means the growing importance of the secondary sector in the economy. During
industrialization more people can be employed in the secondary sector and more output (GDP)
will come from the secondary sector.
 De-industrialisation means decrease in the importance of the secondary sector in the economy.

The contribution of each sector may change because of the following:

 Depletion of raw materials: If raw materials are exhausted, for example minerals, it means less
people will be employed in the primary sector and less output will be realized
 Introduction of machines : If businesses introduce machines, more output is produced and less
people will be employed in the sector
 Raising incomes: If citizens are having more disposable income, they tend to buy more services
like tourism. This means the tertiary sector will increase in terms of output and employment
 Raising imports: when a country imports raw materials and goods, the primary and secondary
sector may decrease in their importance. There will be an increase in retailing and tertiary
sector activities
 Recycling: Recycling will reduce the contribution of the primary sector because the secondary
sector will use raw materials or finished products over and over again
 Change in the climatic conditions: A change in the weather patterns can lead to poor harvests in
the primary sector. This means contribution of the primary sector can decrease if there is a
drought

1.2.2 Classification of business enterprises in between private sector and public sector in a mixed
economy

PRIVATE SECTOR PUBLIC SECTOR

 businesses owned by individuals  businesses owned by the government/local
authorities
 main objective is to make profit  main objective is to provide services at an
affordable price
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 firms managed by board of directors  Firms are managed by the government minister
who usually appoint a managing of relevant government department. CEO is
director politically appointed.
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1.3 ENTERPRISE, BUSINESS GROWTH AND SIZE (10)

1.3.1 Enterprise and entrepreneurship

ENTERPRENEURSHIP

 It is the ability to organize, manage resources and assume risks so as to make a profit.
 In business land, labour and capital are resources that must be managed so as to make a profit.
 this is done by entrepreneurs

ENTERPRENEUR

 It is a person who organizes, manages resources and assumes risks for a new business venture.

QUALITIES OF ENTERPRENUERS

Contents of a business plan and how business plans assist entrepreneurs

BUSINESS PLAN

 It is a document which describes a business that is to be set up in terms of objectives and

important details about the operations, finance and owners.
 It contains:

 Name of the business, ownership, objectives, executive summary, proposed location,

finance, forecast profit, products to be sold, the strengths and weaknesses,
opportunities and threats, marketing strategies, number of people to be employed,
likely expenditure and revenue of the business, Market research OR Competition
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OR market analysis, Financial, e.g. cash flow forecast OR budgets, Human

resources OR number of employees OR skills needed, Production details,
Organisational OR management details, e.g. structure, type of, business, name
and location of business

IMPORTANCE/BENEFITS OF PREPARING A BUSINESS PLAN

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 It gives the business direction, so the owner will know what is to be achieved.
 It helps the business to estimate the likely course which enables the owner to source finance in
advance.
 Helps understand OR reduce possible risks [k] as have time think about possible
solutions to problems [an].
 It helps to attract loan providers as the bank can assess if the business is able to repay.
 It helps to control the business operations. This is because the owner of the business can
compare the actual performance of the business against what is contained in the business plan.
 Act as a checklist / track progress
 Helps set targets / clear aims / future planning [k] as can see what need to do to achieve
aims [an]
 Help decision making [k] so will not waste time / money on buying the wrong products
 Provide an estimate of costs/ help set budgets [k]

GOVERNMENT SUPPORT TO BUSINESSES (N14P13 Q (a); J15P23 Q1 (a)

The government of a country can encourage entrepreneurship by:

 providing loans at lower interest rates so that business people will have capital to start business
ventures
 Providing training and advice to business owners so that they have the skills to run businesses
efficiently, for example owners can be trained on how to keep records.
 providing cheap land so as to reduce set up costs
 Providing tax holidays, that is, new businesses can be exempted from paying tax. This will help
businesses to retain more profit and to expand.

REASONS WHY GOVERNMENT SUPPORT SMALL BUSINESSES

 To widen the tax base, because if more businesses are set up, the government will have more
businesses to charge taxes
 small businesses may grow into large businesses of tomorrow
 to increase competition for large firms
 to help them survive
 it promote economic growth, that is new businesses can design better ways of doing things
which can help to increase national output

1.3.2 The methods and problems of measuring business size

 The size of a business can be measured using:

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a) Number of employees
Generally large businesses employ more people than small businesses. BUT, it also depends on
whether a business is labour or capital intensive

b) Sale Revenue
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Usually large businesses sell more products as compared to small businesses. This means if
there is an increase in sales, the business would have expanded

c) Market Share
This refers to the portion of the total market held by the business. It is calculated as follows:
𝑆𝑎𝑙𝑒𝑠 𝑜𝑓 𝑏𝑢𝑠𝑖𝑛𝑒𝑠𝑠 𝐴
× 100
𝑆𝑎𝑙𝑒𝑠 𝑜𝑓 𝑏𝑢𝑠𝑖𝑛𝑒𝑠𝑠 𝐴+𝐵+𝐶…….

For example, out of the nine million subscribers in Zimbabwe 5, 5 million have econet lines. Therefore,
5,5 𝑚
Econet market share = 9
× 100 = 61%

Usually small businesses have a small market share as compared to large firms.

d) Capital Employed/Invested
Usually large businesses will have more capital employed than small businesses. However, it
also depends on whether a business is capital intensive or not. Capital intensive businesses will
also require more capital than labour intensive businesses.

SUMMARY: (W18P12)

 Sales value OR value of output OR revenue OR income

 (Value of) capital employed
 Value of balance sheet
 Market share
 Number of employees
 Number of outlets
 (Volume of) output OR number of services OR number of customers

1.3.3 REASONS WHY SOME BUSINESSES GROW AND OTHER REMAIN SMALL (p 11)

 Business growth refers to the increase in size of a business

Reasons owners of a business may want to expand the business (Benefits of business Growth) (w19p13)

 The market share will increase such that the business will have control over the market. This
means the business will be able to charge high prices and get more profits.
 Risk will be spread over many products or regions. This is because if one product fails the
business will get profits from their products. This will increase the chances of business survival.
 It allows the business to enjoy economies of scale. That is per unit cost of production will
decrease. This gives the business a competitive advantage.
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 Perceived/better reputation or status of the business such that it will get loans or credit lines
easily.
 Less risk of being taken over
 Specialisation of roles possible

Disadvantages
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 It increases capital expenditure, which means the business may have cash flow problems
 It leads to control problems, because there will be more employees to be monitored. This
means the business may fail to achieve its objectives.
 Communication problems may arise as information may be distorted. This means wrong
decisions may be made.

Different ways in which businesses can grow

1. Internal Growth/organic growth

This occurs when a business ploughs back profit in expanding the business. The profits will be
used to open new outlets and to increase sales.

2. External Growth/Integration
This is when a business grows by taking over or merging with other businesses. The takeovers or
the mergers can take different directions which include:

a) horizontal integration
This is when a business combines with its competitor. The objectives may be to reduce
competition and to share skills. The businesses will be in the same sector, for example, OK can
combine with TM.
Horizontal integration

TM supermarket OK supermarket

b) downward integration
It is when a business combines with its supplier at a lower level of activity. This can be aimed at
an uninterrupted supply of raw materials or at a lower price.

Dairiboard Colcom

Dairy farm Piggery Farm

c) Upward integration
It is when a business combines with its customer or a business at a higher level of activity. The
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objective is to have an assured market and to control the price of the final product.

Lobels Bakery

Victoria Foods
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d) Lateral Integration/Conglomeration/Diversification
This is when a business combines with another in a totally different industry, for example:

Standard Chartered Bank

Netone

The business will be able to spread risks and to get certain services that may be technical.

Merging

 It is when two businesses combine their resources to work together.

 The businesses may retain their names, for example Kingdom Bank and Meikles once merged
into Kingdom Meikles Africa Limited.
 The businesses can also demerge as time progresses.
 Demerging means the splitting up of two or more businesses that were previously merged.

Takeovers [J14 P12 Q1e; J14 P21 Q5a]

 It is when one business buys another.

 The business may not retain its name or identity.

Benefits of Integration to:

a) Employees/Workers [N14 P23 Q3a]

 The employees may receive better salaries because after merging or takeover more profits may
be generated
 Employees may also get challenging work which motivate them to work hard
 BUT, some employees may be retrenched which can be costly to the business because they give
the employees retrenchment packages. The employees will also lose their source of income.

b) Managers
 The salaries of managers may also increase which will enable them to satisfy their physical
needs. The manager will therefore be more prepared to work if their needs are satisfied.
 The status of managers will also improve which is motivating.
 BUT, some managers may also be retrenched. This can cause insecurity in the remaining
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managers.

c) Customers
 The quality of products can improve or increase. This is because this is because the business will
share skills and will be able to invest in product research and development.
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 The prices of products will also decrease. This is because large businesses will incur low average
per unit cost.
 BUT, it can lead to creation of monopolies which means customers may be charged high prices
than before.

Advantages to the business of taking over another (s19p11)

 Benefit from economies of scale [k] helping to reduce average costs [an]
 Increase its market share [k] by removing a competitor

Disadvantages

 Can they afford to pay the cost of purchase [k]

 Risk of diseconomies of scale [k] e.g. communication errors may arise
 Different management styles [k] may reduce productivity [an]

Problems linked to business growth and how they can be overcome

Reasons why some businesses remain small

 Nature of industry
 Some industries offer provide personalized services or specialized products.
 If the business grow, it may find it hard to keep on offering the close personal service as
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demanded by customers.
 Examples are hairdressing, car repairs window cleaning, plumbers and catering.

 Market size
 If the total number of customers is small the business will not be able to expand
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 Examples are those operating in rural areas or businesses offering a specialised product
such as expensive fashion clothing

 Owners objective
 Owners may prefer to remain in control
 Avoid the stress of running a large firm
 Keep close contact with customers and employees

1.3.4 REASONS SOME WHY (NEW OR ESTABLISHED) BUSINESSES FAIL

Causes of business failure (w18p11)

 Lack of demand / recession

 Poor management skills / poor planning
 Change in tastes
 Financial problems e.g. lack of cash flow forecasting
 Change in legal controls
 Action of competitor
 Change in economic situation e.g. rise in interest rates, taxes

Why new businesses are at greater risk of failing

 Inadequate market research

 Poor planning
 Lack of finance
 Owner lacking experience and decision making skills

1.4 TYPES OF BUSINESS ORGANISATIONS (p 11)

1.4.1 The main features of different forms of business organization:

PRIVATE SECTOR

PUBLIC SECTOR
SOLE TRADERS PARTNERSHIP
COMPANIES OTHER
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PRIVATE LIMITED COMPAMIES PUBLIC LIMITED COMPANIES JOINT VENTTURES FRANCHISE PUBLIC ENTERPRISES

Sole Traders

 It is an unincorporated business owned and controlled by one person

 Sole traders do not enjoy limited liability
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 They belong to the private sector of the economy

 They are formed with a profit motive

Advantages - J15P23, Q4 (b)

 It is easy to form because they are no many legal formalities

 The owner enjoys all profits
 Decisions can be made quickly which means the business is quick to respond to changes in
customer tastes
 Accounts are not published, that is privacy of business affairs. This means competitors will not
access the accounts of the business

Disadvantages

 The owner suffers from unlimited liability – Unlimited liability means the owner can lose private
property and capital invested if the business fails to pay liabilities or debts. This means a risk
form of business.
 Limited capital is raised which limits the chances of expansion
 It lacks continuity that is the business usually dies with the owner.
 Wrong decisions can be made because of lack of consultation
 There may be limited range of skills
 Long working hours hence difficult to take a holiday

Partnership

 It is when 2 or more people agree to own and run a business together.

 It belongs to the private sector of the economy
 It is an unincorporated business – that is it is not formed according to the law
 On formation partners are encouraged to prepare a partnership agreement or deed which will
guide the day to day running of the business

Partnership Agreement/Deed contains: - J14P21; Q1 (b) – choosing a partner

 Capital to be contributed by each partner

 Profit/Loss sharing ratios
 Salaries to be awarded to partners
 Interest on capital or drawings

NB: Partners can agree on anything and it must be written somewhere. If they fail to prepare an
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agreement, the partnership act can be applied.

Benefits of partnerships – J14 P1

 More capital is raised as compared to a sole trader, this means a larger business can be
established
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 Partners can share ideas which means better decisions can be made
 Partners can share responsibilities, which reduces the need to employ other people. For
example, one partner can specialize in marketing and finance and the other can specialize in
production
 Increases illness the other partners can continue operating the business
 Losses are shared which reduces risk on partners

Disadvantages

 Profits are shared which means partners will get a low return on investment as compared to a
sole trader
 Decision making is slow because of consultation which means the business will slow to respond
to market changes
 Each partner is responsible for the actions of other partners
 Partners have unlimited liability which means they may lose private property if the business fails
to pay debts
 Disagreements may occur because partners may have different objectives. This can lead to
partnership dissolution (closing the business)

Limited Companies

 business which has a separate legal identity/status to its owners

 OR a business whose owners are legally responsible for its debts only to the extent of
the amount of capital they invested.
 On formation the owners are required to a memorandum of association and articles of
association
 The documents must be submitted to a government official called registrar of who will give the
business permission to start operating
 Shareholders enjoy limited liability: - liability of shareholders in a company is only limited
to the amount they invested (w19p13)

The memorandum of association outlines the following:

a) The objectives of the business

b) The physical location of the business
c) Names of at least two directors

The articles of association govern the day to day running of the business. It includes:
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a) voting rights of share holders

b) When annual general meetings are to be held
c) the procedures to be followed when declaring dividends

 Companies owned by shareholders appoint directors to run the day to day affairs of the
business.
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 A shareholder is a person who contribute capital by way of purchasing share in a company

 The shareholders get dividends in return
 A dividend is a portion of profit given to shareholders as a return on investment basing on the
number of shares held
 A shareholder who holds many shares is called the majority shareholder and a shareholder with
a few shares is called a minority shareholder.

PRIVATE LIMITED COMPANY

 It is an incorporated business that cannot issue shares to the general public.

Features

 Share transfer is restricted, that is the shareholders must agree before shares are sold to
new shareholders.
 Shareholders have limited liability, that is they are only liable to debts up to capital invested
and not private property
 They start trading after getting a certificate of incorporation from the Registrar of
companies
 They are required to submit their financial statement of the Registrar of Companies but the
accounts are not published

Advantages of Private Limited companies

 Shareholders have limited liability which means they will not lose their private property in the
event of business failure. This makes companies a less risk form of investment
 More capital is raised which increases the chances of business expansion, this is because more
people will contribute capital as compared to partnership and sole traders.
 There is continuity because companies are separate from their owners
 It easy to get loans or credit facilities from suppliers. This is because companies will have
collateral security. Collateral security refers to non – current assets that will be pledged by a
business when obtaining a loan. This means if the business fails to pay back the loan provider
can take the non – current assets.

Disadvantages

 There is a lot of legal formalities to be satisfied when forming a company. This is time consuming
and expensive as compared to forming a partnership and sole trader
 Accounts are totally private because they are submitted to the registrar of companies
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 Less capital is raised as compared to a public limited company

Public Limited Company

 It is a business that can sell shares to the general public

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 The shareholders will have limited liability and they elect a board of directors to run the
business on their behalf
 Public Limited Companies sell shares on the stock exchange market to the general public
 The price of shares will vary from time to time depending on the performance of the company
and the confidence of shareholders in the company
 If a shareholder is not interested in owning some shares, he/she can sell them to another person
 Usually people buy and sell shares as an investment
 Shareholders and board members are required to hold AGMs. An AGM is a formal meeting
aimed at: [ N12, 12, Q3b.] Functions of AGMs.
a) Approving or presenting financial statements and dividends
b) Approving or rejecting business proposals by the board of directors, for examples mergers and
takeovers
c) Appointing auditors
d) Vote on resolutions e.g. approve directors pay
e) gives opportunity for shareholders to question the board or inform it on its performance
f) Elect or re-elect directors
 Public limited companies are required to submit memorandum of association and articles of
association and they will start trading after receiving a certificate of trading from the registrar of
companies
 They are also require to prepare a prospectus that will be given to shareholders to motivate
them to buy shares

Advantages of a Public Limited Company

 Shareholders have limited liability which reduces the risk of losing private property
 Companies have a separate legal identity, which means there is continuity as compared to sole
traders
 They have a higher status which makes it easy to acquire credit facilities
 More capital is raised because shares can be sold to the public. With the capital the business can
expand and employ skilled managers.

Disadvantages

 There are many legal formalities on formation which are time consuming and expensive
 Shareholders expect dividends which may reduce profit available for expansion. In cases of no
profits, ordinary shareholders may not get dividends which can reduce investor confidence in th
business
 Accounts should be published, which means rivals can access information on how the company
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is operating
 There can be conflict of interest between shareholders and managers. This can delay or affect
decision making.
 There can be dilution of control if more shareholders are brought into the business. This can
lead to disagreements.
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Multinational Corporations (MNCs) – see Topic 6

Joint Ventures

 It is where two or more businesses agree to work on a specific project together sharing capital,
risks and profits.

Franchise
 It is a business based upon the use of the brand names, promotional logos and trading methods
of an existing successful business.

Benefits to the franchisor: (w18p11)

 Do not need to raise as much capital to expand [k] as franchisee will pay a fee to buy the
franchise [an]
 Will receive a share of each franchise’s profits [k] providing an extra source of revenue
[an]
 Faster way to expand [k] so can quickly become a large business]
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Disadvantages to the franchisor

 Mistakes by one franchisee may create a bad image for whole business [k] damaging
reputation [an] and reducing sales revenue [an]
 Will be expected to offer support and advice [k] which can increase costs [an]
 Can share risks with franchisee [k] when many businesses are failing
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 Brand / Customer awareness increases [k]

RECOMMEND AND JUSTIFY A SUITABLE FORM OF BUSINESS ORGANISATION TO

OWNERS/MANAGEMENT IN A GIVEN SITUATION

Public Sector businesses

Parastatals/Public Corporation

 These are state owned businesses which are managed by a board of directors appointed by a
relevant minister. Examples include National Railways of Zimbabwe (NRZ), (Zimbabwe United
Passenger Company (ZUPCO), Zimbabwe Electricity Supply Authority (ZESA) and Air Zimbabwe.
 Public enterprises are normally found in the education sector, medical care, that is hospitals and
in provision of utilities (Water and Electricity).

Reasons for having Public Enterprises existence

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 To provide employment even during difficult times. This will help to reduce unemployment and
anti-social activities
 To control strategic commodities or areas, for example in Zimbabwe the government owns GMB
which controls the buying and selling of maize as a staple food. This will avoid shortage of
mealie-meal
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 To increase competition which will help to reduce prices of products, for example ZUPCO
charges reasonable fares and this forces other transport operators to reduce their fares.
 To get revenue. This can be used to finance government expenditure. This is because in some
cases parastatals report profits.
 To provide essentials services or goods at reasonable prices. For example, government schools
in Zimbabwe charge low fees so that citizens have access to education.

Disadvantages of having parastatals

 They can drain government revenue especially if they make losses from one year to another
 Usually they provide poor services because they do not have a profit motive and they are usually
run by incompetent manager who are appointed on political grounds.
 It may increase taxes charged on citizens and private sector businesses. This can reduce the level
of demand as citizens will be having less income.

1.5 BUSINESS OBJECTIVES AND STAKEHOLDER OBJECTIVES (p 11)

1.5.1 Businesses can have several objectives and the importance of them can change:

 A business objective is a specific target that a business seeks to achieve

 The objectives change from time to time depending on marketing conditions and the size of the
organization. Examples of objectives include:
a) maximize profits (s19p11)
b) increase market share
c) survival
d) increased sales
e) growth
f) Returns to shareholders
g) reduce costs [k] as it is more concerned about profit than providing services
h) improved service [k]

BENEFITS/IMPORTANCE OF SETTING OBJECTIVES: [N12, P12, Q5c.]

 They help to motivate employees (k)as they will know what is expected out of them(an)
 give a business an aim or target [k] so employees/managers will know what they must
do to be seen as successful [an]
 they provide a sense of direction [k] so able to take decisions/allocate resources
effectively [an]
 measure of success against which performance can be judged [k] so objectives act as a
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benchmark to alert if the business is performing below or above standard/target (an)

 they facilitate budgeting OR planning [k] as staff is able to effectively identify milestones
which would help them achieve goals [an]

NB: The most important objective to businesses is maximizing profits. This is because profits are used to
pay bonuses to employees, to expand operations and to reward investors.
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OBJECTIVES OF SOCIAL ENTERPRISES

 A social enterprise is a business that has social objectives as well as an aim to make a profit to
reinvest back into the business.
 A social enterprise operate for the following three objectives:
 Social: - to provide jobs and support for disadvantaged groups in society, such as the
disabled or homeless
 Environmental: - to protect the environment
 Financial: - to make a profit to invest back into the social enterprise to expand the social
work that it performs

BUSINESS STAKEHOLDERS (internal and external)

 A stakeholder is person or group with a direct interest in the performance and activities of a
business.
 The stakeholders can be affected by the way a business would be operating or they can
influence the operations of a business
 Stakeholders include shareholders, employees, government, customers

Stakeholder groups and their aims for the business

Stakeholder Main features Most likely aims for the stakeholder group
group
Owners or  They put capital in to set up and expand  A share of the profits so that they
Shareholders the business gain a rate of return on the money
 They will take a share of the profits if the put into the business
business succeeds  Growth of the business so that the
 Success cannot be guaranteed and if the value of their investment increases
business does not attract enough
customers, then owners may lose the
money they invested
 They are risk takers.
Workers  They are employed by the business; they  Regular payment for their work
are also called employees  A contract of employment
 They have to follow instructions of  Job security – workers do not want
managers and they may need training to to look for new jobs frequently
do their work effectively  A job that gives satisfaction and
 They may be employed on full or part provides motivation.
time contracts and on a temporary or
permanent basis
 If there is enough work for all workers,
some may be made redundant
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(retrenchment) and told to leave the

business.
Managers  They are also employees of the business  High salaries because of the
and control the work of other workers. important work that they do.
 Important decisions are taken by  Job security – but this will depend
managers on how successful they are
 Successful decisions lead to the business  Growth of the business so that
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expanding managers can control a bigger and

 If managers make poor decisions, the better known business. This gives
business could fail. them more status and power.
Customers  Customers are important to every  Safe and reliable products
business. They buy the goods that the  value for money /buy at affordable
business produces or the services that the prices
business provides.  Well – designed products of good
 Without enough customers, the business quality
will make loses and will eventually fail.  Reliability of service and
 The most successful businesses often find maintenance
out what consumers want before making
goods or providing services – this is called
market research
Government  Governments are responsible for the  Governments want businesses to
economy of the country succeed in their country.
 They pass laws to protect consumers and Successful businesses will employ
workers. workers, pay taxes and increase
the country’s output.
 Many laws affect business activity
and governments will expect all
firms to stay within the law.
The whole  The community is greatly affected by  Jobs for the working population
community business activity. For example, dangerous  Production that does not damage
products might harm the population. the environment
Factories can produce pollutants that  Safe products that are socially
damages rivers, the sea and reduce air responsible.
quality.
 On the other hand, businesses create jobs
and allow workers to raise their living
standards. Many products are beneficial
to the community, such as medicines or
public transport.

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