People and Business Environment

What is business?
Business is an economic activity, which is related with continuous and regular production and distribution of goods and services for satisfying human needs and wants.

What is business?
An organization or economic system where goods and services are exchanged for one another or for money.

Every business requires some form of investment and enough customers to whom its output can be sold on a consistent basis in order to make a profit.
Businesses can be privately owned, not-for-profit or state-owned.
An example of a corporate business is PepsiCo, while a mom-and-pop catering business is a private enterprise.

Features of Business
Exchange of goods and services
Deals in numerous transactions
Profit is the main Objective
Business skills for economic success
Risks and Uncertainties
Buyer and Seller
Connected with production
Marketing and Distribution of goods
Deals in goods and services
Satisfaction of human needs and wants
Social obligations

Stakeholders
A stakeholder is anyone with an interest in a business.
Stakeholders are
individuals,
groups or
organisations
that are affected by the activity of the business.

Stakeholders
Internal stakeholders
External stakeholders
Groups within a business
Owners
Managers
Workers
Groups outside a business
Customers
Suppliers
Lenders
The community

Stakeholders’ interests
Owners are interested in how much profit the business makes.
Managers are concerned about their salary.
Workers want to earn high wages and keep their jobs.
Customers want the business to produce quality products at reasonable prices.
Suppliers want the business to continue to buy their products.
Lenders want to be repaid on time and in full.
The community which has a stake in the business as employers of local people. Business activity also affects the local environment.

Influence of stakeholders on business objectives
In a small business,
the most important or primary stakeholders are the owners, staff and customers.
In a large company,
shareholders are the primary stakeholders
Less influential stakeholders are called secondary stakeholders.

Owners have a big say in how the aims of the business are decided.
The directors who manage the day-to-day affairs of a company may decide to make higher sales a top priority rather than profits.
Customers are also key stakeholders. Businesses that ignore the concerns of customers find themselves losing sales to rivals.
Shareholders are the primary stakeholders as they can vote out directors if they believe they are running the business badly.

Assessing business performance using accounts
Information published by a business helps stakeholders to judge how well it is performing.

Owners can judge how well the business is performing. Increased profits improve the chances of directors being re-elected at the next annual general meeting (AGM).
Rivals can compare the amount of profit they are making with the business.
Pressure groups can find out about the environmental policy of the business.

Conflicting stakeholder objectives
Different stakeholders have different objectives.
The interests of different stakeholder groups can conflict.
For example:
Owners generally seek high profits and so may be reluctant to see the business pay high wages to staff.

A business decision to move production overseas may reduce staff costs.
It will therefore benefit owners but work against the interests of existing staff who will lose their jobs.
Customers also suffer if they receive a poorer service.