A2 business studies What is a business? - Huntington School

A2 business studies
     What is a business?

A business is an organisation that exists to
            provide goods and services on a commercial
            basis to customers.
            Goods are physical or tangible products: e.g.
            consumer electronics, industrial components,
What is a   cars

Business?   Services are intangible products: e.g. insurance,
            dental services, cleaning

            Customers can be individuals (buying on their
            own behalf or for households), businesses or
            other organisations.

Why Businesses Exist
Businesses    exist    because       they are   formed
by entrepreneurs and are subsequently developed if they
manage to get beyond the survival stage.

Most businesses exist in order to earn a return for the
business owners, and the potential for profit is a key motive
for entrepreneurial activity.

However, there are other potential business objectives, which
are explored further during your studies.

Businesses play a key role in wider society. In particular they:

         1                     2                      3                      4                      5
Create and sustain      Drive innovation     Contribute to the       Pay taxes on profits   Create wealth by
employment &            through research &   infrastructure of the   earned & collect       providing returns on
develop the skills of   development (R&D)    country                 taxes on behalf of     investment
people                  and new products                             government

Role of Entrepreneurs

Entrepreneurs (and the enterprise that they demonstrate) play a key role in the formation
and development of businesses. In particular, entrepreneurs:

Spot business opportunities

Take (calculated) risks in order to gain possible future returns

Act a catalyst for the creation & growth of new business enterprises

Tesla – Public Limited
         Company
Public Limited Company
Key points to remember:
• Minimum share capital £50,000
• Shares may be traded on a public stock market (but
  don't have to be)
• Usually many shareholders
• More detailed disclosure of information required
• More costly to administer

Market capitalisation

Market cap—or market capitalisation—refers
to the total value of all a company's shares of
stock. It is calculated by multiplying the price of
a stock by its total number of outstanding
shares.

For example, a company with 20 million shares
selling at £50 a share would have a market
cap of £1 billion.

Market cap is value of shares multiplied by how many shares are issued

Mission statements

Tesla's mission is to accelerate
the world's transition to
sustainable energy. Tesla was
founded in 2003 by a group of
engineers who wanted to
prove that people didn't need
to compromise to drive electric
– that electric vehicles can be
better, quicker and more fun to
drive than gasoline cars.

Objectives & ownership
SpaceX will not go public until it achieves
        regular flights to Mars

Dividends are payments made to
                                  shareholders by the company from earned
                                  profits

                                  Amount paid is “per share” – e.g. £1 per share
                                  held
          Dividends
                                  Normally no requirement to pay dividends, but
                                  most quoted companies do

Tesla has never declared dividends on our common stock. We intend on retaining all
future earnings to finance future growth and therefore, do not anticipate paying any
                      cash dividends in the foreseeable future.

Market conditions
Market conditions relate to the attractiveness (or otherwise)
of the overall market in which a business operates.
Market conditions tend to affect all businesses in an industry,
although their ability to take advantage or, or respond to
changes in market conditions will vary. Two key indicators of
market conditions are:
• Economic Growth (GDP)
• Market Demand

Economic Growth (GDP)

Economic growth measures the value of output (activity) in the economy.

Key points to remember are:

The level of demand in most markets is influenced by the rate of economic growth

Economies vary in terms of their “normal” long-term growth rate

A mature economy like the UK has a long-term growth rate of around 2-3%

GDP growth will vary depending on the state of the economic cycle

Market demand measures how much of a good or service
          a consumer wants – and is able to pay for. For a business,
          market demand turns into revenues (sales).

 Market   Key points to remember are:

demand    • The size and growth rate of a market is a key indicator of market
            conditions
          • A fast-growing market will encourage new entrants as well as benefit
            existing competitors
          • A slow-growing or declining market makes market conditions much
            tougher, with competitors fighting for their share of weak demand

Careful what you say…. The market is watching

“Tesla stock
price is too
high, imo”       Shares of Tesla dropped as
promptly         much as 12% Friday before
                  closing down 10.3% after
causing $14     CEO Elon Musk tweeted that
billion to be     the company’s shares are
knocked off           priced “too high.”
the share
value.

Your task
Inside Aldi