Pre-U Business and Management CAIE

This subject is broken down into 31 topics in 4 modules:

  1. Business Organization and Environment 7 topics
  2. People and Operations Management 10 topics
  3. Marketing and Finance 7 topics
  4. Strategy and Decision Making 7 topics
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  • 4
    modules
  • 31
    topics
  • 12,055
    words of revision content
  • 1+
    hours of audio lessons

This page was last modified on 28 September 2024.

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Business and Management

Business Organization and Environment

The purposes and objectives of businesses

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The purposes and objectives of businesses

Understanding Business Purposes and Objectives

What are Business Purposes?

  • Businesses exist for various purposes. These might include producing goods or services, generating profit for owners, providing employment, or offering solutions to societal problems.

Profits and Financial Objectives

  • The desire to generate profits is a common reason to establish a business. This can satisfy the owners or shareholders who invested money into the business.
  • Businesses also often set specific financial objectives, such as increasing sales or profit margins, minimising costs, expanding market share, or maximising shareholder value.

Survival and Growth Objectives

  • For young or small businesses, the main aim often is survival. This means earning enough revenue to cover costs and keep the business operational.
  • Established businesses frequently aim for growth, which might entail increasing sales, expanding into new markets, diversifying product ranges, or acquiring other businesses.

Social and Ethical Objectives

  • Some businesses set social objectives, aiming to benefit the community or environment, rather than focusing solely on profits. This could include creating jobs, enhancing the local economy, or providing valuable services.
  • Relatedly, many businesses set ethical objectives, seeking to operate in a way that is morally right, even if this means lower profits. This might involve ensuring ethical sourcing of materials, fair treatment of employees, or reducing environmental impact.

Challenges in Achieving Objectives

  • Achieving objectives often poses challenges. These could range from lack of financial resources to competitive pressures, regulatory issues, or changes in the market environment.
  • To address such challenges, businesses need to devise effective strategies, adapt to changes, and carefully manage their resources.

Remember, while businesses have diverse purposes and objectives, they all need a clear sense of direction to steer their decisions and activities. Understanding these foundations is crucial to understanding the rest of the Business Organization and Environment unit.

Course material for Business and Management, module Business Organization and Environment, topic The purposes and objectives of businesses

Business and Management

People and Operations Management

Capacity utilization and production planning

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Capacity utilization and production planning

Capacity Utilisation

  • Capacity Utilisation is the percentage of total output capacity that is actually being used by a business. It is calculated as actual output divided by maximum possible output.

  • Businesses aim for optimal capacity utilisation, which is a level of output where the operational costs are minimised, while meeting the demand efficiently.

  • Operating at under capacity can lead to increased per-unit costs and resources not being used efficiently. It suggests that the business has more resources than needed for the current level of output.

  • Operating at over capacity can lead to overtime costs, increased errors due to rushing, and wear and tear on equipment from overuse.

  • Seasonal businesses often face challenges in managing capacity utilisation due to fluctuations in demand at different times of the year.

  • Strategies to improve capacity utilisation can include increasing demand (e.g. through marketing campaigns), diversifying products or services, and increasing efficiency of operations.

Production Planning

  • Production Planning is the process of scheduling production activities to deliver products on time while optimising for cost efficiency and quality.

  • It starts with the forecasting of demand, which is the process of estimating the quantity of a product that customers will purchase in the future.

  • Production schedules detail when each task should be performed, considering factors such as workers' shift patterns, equipment availability, and seasonal variations in demand.

  • Input resources necessary for production are determined through material requirements planning and these include raw materials, labour and equipment.

  • Just-In-Time (JIT) production is a strategy where raw materials arrive just before they are needed in the production process. This can reduce storage costs but requires accurate forecasting and reliable suppliers.

  • Quality control ensures that the output is free from defects and errors, and meets the established standards of the business.

  • Regular review and adjustment of the production plan is necessary to respond to changes in demand, productivity, and other factors.

Course material for Business and Management, module People and Operations Management, topic Capacity utilization and production planning

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