Business Definitions

• Basic definitions are important to understand in business.

Basic Definitions

• Barriers to entry are restrictions making it difficult for new firms to enter the market.
• Mergers refers to when two or more businesses join to form one large business.
• Dumping is where businesses sell goods in another country below cost.
• Trade barriers are measures designed to restrict trade.
• Quotas are physical limits on the quantity of imports allowed into a country.
• Subsidies are financial support given to a domestic producer to help them compete with overseas firms.
• Tariffs are a tax making imports more expensive.
• Administrative barriers includes, the use of strict health and safety regulations to make imports more awkward.
• Interests are the prices of borrowed money and the reward to savers.
• Urbanization: process of constructing more buildings on villages.
• Capital intensive: using more machineries than labor
• Market Orientated: When a business concentrates more on its consumers rather than products
• Sustainable developments: idea of that people must satisfy their basic needs for survival and improve their living standards ensuring that they don't compromise the quality of life for future generations.
• Pressure groups: groups or organizations that try to influence the opinions of ordinary people and persuade the government to take actions
• Communication channels: the route through which the messages pass from the sender to the recipient.
• Jargon: a word or phrase used between members of a specific group but meaningless to others.
• Recruitment: the process of employing people due to reasons such as expansion.

Government Spending and Taxation Basics

• Governments spend a lot on public services, like education, healthcare, and infrastructure.
• Higher spending benefits businesses because people have more disposable income to purchase goods.
• Governments earn a lot of revenue from taxes, which are of two types: direct and indirect.
• Direct taxes are levied on income or profits of individuals or businesses, such as income tax and corporation tax.
• Indirect taxes are levied on the producers of products but are indirectly passed on to consumers through higher prices, such as VAT and excise duties.
• Governments use fiscal policy to change taxation and government spending to stimulate the aggregate demand in an economy.
• Lower taxes leads to people having more incomes and purchasing more, which increases profits for businesses.
• Government reduces spending which reduces profits for businesses.
• Private sector businesses, like construction companies, may lose business if the government cancels projects.

How the Government Affects Business Activity

• Infrastructure provision: Government spends money to; build schools and motorways which enables private construction companies to get projects and increases revenues and profits.
• Employees will see an increase in salaries and wages so they have more disposable incomes hence purchase more which will result in an increase in the profits for businesses.
• Legislations are without government business intervention may not meet the needs of the stakeholders.
• Consumer protection: consumers want the best product with the best quality at the reasonable prices.
• Government ensures that businesses don't use any anti-competitive legislation that may exploit the consumers such as increasing prices higher than they would be in a competitive market.
• Consumer laws in the UK: sale of goods act, and food safety act.
• Competition policy: Government tries to promote competition.
• The growth of small firms can be encouraged subsidies or grants making them more competitive and able to compete with the larger firms.
• Government can promote competition by lowering the barriers to entry, so that more firms find it easier to enter the market.
• Introducing anti-competitive legislations designed to restrict the formation of monopolies or mergers exploits the consumers by increasing prices.
• Environmental legislation: Business activities have negative impacts on the environment such as: air pollution caused burning of coal and water pollution caused by sending of waste materials to rivers and lakes.
• Government imposes strict laws with penalties which are big enough for businesses to be encouraged to cause less pollution.
• Trade policy: Governments in many countries find international trade to be a disadvantage and impose trade barriers to protect domestic industries.
• Protectionism involves; protecting the jobs of citizens working domestic industries, avoid inflow of harmful products and protect infant businesses.
• Governments can form a trade bloc in which businesses will be able to sell and buy product with no forms of trade barriers which will reduce their costs.

Benefits of Trade Blocs

• Access to wider markets
• Lower costs due to economies of scale
• Protection from large MNC's from outside the blocs
• Regional monopolies may form which may exploit consumers and conflicts may occur.

Effects of Interest Rates

• Monetary policy uses interest rates and money supply to stimulate aggregate demand in an economy.
• Higher interest rates means more expensive to borrow money and more worthy to save money.
• Lower interest rates means cheaper to borrow money and less worthy to save money.

Effects on Businesses

• In businesses, when interest rates are higher, the costs of borrowing increase, resulting in consumers having less disposable income.
• Because of these they may purchase less which will decrease profits for businesses.
• As interest rates rise costs may increase if the business has borrowed money.
• Costs may increase, this will increase production and decrease profits.
• As interest rates increase, consumers will save more purchase less which effects the businesses.
• Consumers may save less as savers will be hit if interest rates are lower.
• Demand for goods and services may fall as interest rates increase as more consumers purchase using the borrowed money.
• When interest is higher it becomes expensive to borrow not borrow and purchase lower quality products which will decrease the livings standards.

Social Factors

• Increased consumer awareness: Consumers have choices and make purchases over the internet.
• Many business publish their information online and setup e-commerce businesses becoming more market orientated.
• Changing demand patterns leads to lifestyles of people changes according to the modern era and result changes with in goods that they want.
• More consumers want the advanced products such as: automated cars.
• Increased numbers of woman at work has led an increase in the supply of labor.
• Part time workers have increased so more income is required which has also resulted in an increase in the purchase of goods and services.
• This increased the flexibility for businesses.
• Urbanization: More people have moved from rural areas to towns which has increased labor supply and profits of many businesses.
• Technology saved time, Reduces the costs as employment in labor reduces, Productivity increases and Development in social media has improved the communications and reduce the costs of advertising.

Environmental Pollution

• As businesses produces a lot of waste materials it causes pollution such as: Air pollution, water pollution and noise pollution.
• Global warming: business factories emits carbon dioxide gas a greenhouse gas which contributes to global warming.
• Economy expanding increases cars and planes to different which increases global warming.
• Habitat destruction: some businesses build factories in habitats for animals such forests reducing animals habitats like birds.
• Resource depletion: Oil, coal and gas are non-renewable can't be replaced.
• Businesses can reduce environmental issues by using environmentally friendly products and reduce the greenhouse gases produced.
• Businesses are affected by political factors and can be affected by unstable, democratic counties.
• Large firms might be in a better position than small firms to cope with the negative effects of external factors as they make detailed contingency plans and more resources to fall back on.
• Capital employed is the amount of money that is being invested in the starting of the business usually or in the middle.

Ways to measure if a Business is Successful

• Increase in revenues indicate that the business is successful.
• Business set an objective to increase revenues by 5% in the upcoming year then achieving this means they are successful.
• Business compare revenues with their competitors in the same industry.
• Advantage of revenue is that it is readily available in the income statement however does not take the costs of production in to account.
• Market Share meaning that they are winning consumers from rivals and a competitive advantage with their differentiate products.
• If consumers are satisfied then the business is considered successful.
• When customer satisfaction increasing the revenues and profits increase.
• Business Owners collect information by; providing customers questionnaires, monitoring the customers' complaints on social media and overcome their weaknesses and benefit the business.
• Profits are compared with rivals profits, also could be measured more effectively for smaller businesses.
• Drawbacks are the profits of business are often depending on the size and it may be possible to make higher profits if there is no competition.
• When revenues increase, the costs increase with increases in the production, Turnover/revenues is growing.
• When number of employees are increasing is the output level increases, the number of people employed also increases is growing
• If the amount of capital employed is increasing is a sign the business is successful.
• Owners can judge the success of the business by the amount of money they get in return for the capital invested and if it increases year by year.
• Shareholder judge increase in dividends is success and mostly shareholders in publicly listed companies.
• Employee judged success by the increase in salaries, job securities and a good working environment.
• Businesses set objectives this make easier to judge the success by meeting these objectives.

Reasons for Business Failures

• Lack of cash is one main problem.
• Some businesses tart with insufficient capital which is known to be as undercapitalized leading to failing.
• Cash Flow Problems can be as result of.
• Overtrading: Accepting more orders than they can produce.
• Investing too much in non-current assets: Investing too much in non-current assets but is cheaper to lease them.
• Allowing too much of Credit to consumers to long.
• Over borrowing: Borrowing to much this increases interests which increases costs and increases prices.
• Seasonal factors: Higher revenues in certain seasons but not in others.
• Unexpected expenses they didn't know about.
• External Factors: changes in Consumers' fashions, tastes, demand patterns may change from time to time
• Poor Financial Management: managers not capable or experience.

Lack of Finance

• Some businesses underestimate cash importance which result to fail.
• Some businesses underestimate the need for money to start-up new restaurants.

Not Competitive due to

• New entrants not challenging established members.
• Ineffective costs control and high unprofitable cost.
• Ineffective marketing needs are not satisfying.
• Lack of business skills: owners/managers have less skills or experience
• Poor leadership: managers are not skillful.
• Some businesses are unable to innovate as latest technology is too expensive.
• Businesses can be affected by a long chain of command resulting in difficulty in communication.

Internal Communication

• Internal communication takes place inside a business between employees.
• External communication is the communication between the business and an outsider.
• Upward communications helps managers and directors to understand the requirements of the employees.
• The staff also feel valued.
• Downward communications allows managers to command, control and organize.
• Employees can look for their managers for leadership and guidance.

Communication Styles

• Downward communications: messages from the top of management (directors) to lower (blue-collar workers).
• Upward communications: messages from employees/workers to the top management (managers).
• Horizontal communications: communications and talk between workers of same grade.

Methods of Communications

• Face to face communications: information shared verbally such in discussions employees and managers.

Advantages

• Allows immediate feedback and Encourages corporations.

Disadvantages

• Negative body language could be a barrier.
• Record of information cannot be kept for future, saves time with non-relevant information being included.
• Written communication: Can be send private information such as letters but time consuming and need good writing skills.
• Memorandum are short messages sent to employees and can be distributed.
• It is easy to distribute to all employees makes them aware of events but no details.
• Form are used to communicate routine information easy to get makes getting information easier.
• Noticeboards pass of information due cheapness advantage.

Electronic Communications

• Emails: allows file sharing, documents etc globally from one corner of the world to the other but may be ignored due large quantities.
• Internet is used for communication with employee, getting feeback from customers.
• Advertising: used to make improvements to the products.
• Mobile phones are used to communicate.
• Communication with consumers, allows promotion, and fast feedback.
• Intranets server allows uploading sudden schedules changes.
• Video conferencing allows in-person communication and information to be discussed.

Barriers to Communications

• Technological breakdown means resolve issues fast due higher percentage of transactions happening online.
• Communication can be affected by bad verbal skills and attentiveness.
• Communication may be affected if jargons from the group are used not appropriate or noise leads to mis understanding.
• Communication is affected by culture which may need improvement sending wrong messages passed down. Different countries, Languages and Cultures affect communication.
• Communication can become hard if language is lost.
• Businesses can recruit skilled workers to overcome this for improvement.
• Internal and external communication can causes difficulties in information passing.

How Barriers can be Removed

• Recruitment: businesses assess written communication during the application process.
• Verbal communication such as body assessment can increase assessment during interviews.
• Trainings improve staffs performances and reduce mistakes.
• Businesses can reduce costs, and prioritize written and verbal training.
• Providing company letters to make details clearer using company logos.
• Using good and fast Broadband Connections to keep communication.
• Shorten chain of command with less levels of management, easily understood messages that are clear.
• Social events: businesses can organize events which build better company relationships.
• Culture Change: Businesses change communication in the upcoming changing systems.