The business I have chosen is Boots due to my interest in health and beauty products. Boots is a multi-national company. It has branches all over the world including Thailand and Japan. Boots was established by John and Mary Boots. The first ever Boots store opened in 1849 in Nottingham selling herbal remedies for poor city people. One hundred and fifty four years later Boots now owns 700 retail units which have a value of 740 million and a gross income of about i?? 900 million. The Boots organisation is a public limited company (PLC); Boots is a company run by a set of directors and a chairman for investing shareholders.
Boots has its shares bought and sold at the Stock Exchange. By this it is open to anyone who trades in this market. When dealing with shares the organisation can issue different types of shares called preference and debenture shares. These shares have a higher status than ordinary shares. Advantages of being a PLC The organisation can become multinational or conglomerates. A good example of this is Boots as they have been bought by BASF a German owned company and due to this they have opened Boots stores in many other countries.
Also the organisation can expand to third world countries which Boots has also done. By doing this Boots can use raw materials and nationalise even further. Public limited companies have advantages that they can expand their organisations into different businesses and conglomerates. This protects the firm from dealing in one market. > The organisation can be on the stock exchange and this enables them to offer shares for sale publicly. Due to this PLC's can acquire ready capital for further development if they are doing well.
High volume sales and turnover enables the PLC to buy in bulk thus at large discounts. > The possession of multiple outlets or business centres helps the PLC to dominate the market and thus to control prices. > The collateral provided by its many capitals assets assists the PLC in securing loans to fuel other expansions. Disadvantages to this would be > It is possible for the PLC to be taken over by another company which manages to secure 51% of its shares. An example of this is Boots it has been taken over by BASF.
Net profit shrinks because overheads are allowed to proliferate – too many people and activities have to be supported > Its size and dispersion of its land and employee makes communication more costly, complicated and time consuming. Distribution advertising and administration cost escalate > Decision-making becomes time consuming and emasculated because of decisions by committee. > It becomes slower moving because of its size and structure. The PLC is vulnerable to the speedier and more dynamic activities of a small and young business.
The main advantage of selling shares in the stock exchange is that huge amounts of capital can be raised very quickly. Another disadvantage can be by one shareholder he can have bought a large amount of shares and when he wishes he can take his or her shares out. P1 describe clearly the activity, aims and objectives of your chosen business Mission Statement The Boots company intends to become the leader in well being products and services in the UK and overseas. This will be achieved through a major programme of change to a more integrated and focused company supported by the power and values of the Boots brand.
Their commitment to managing for value remains unchanged – to maximise the value of the company for shareholders and generate superior long term returns. While vigorously pursuing their commercial interests they will always work to enhance their reputation as well as a managed, ethical and socially responsible company. A clear Description and explanation of the objectives of Boots Boots believes having focused objectives gives a clear idea of the direction you are heading this also help you to judge how successful you have been in meeting your objectives.
The objectives of the Boots organisation are > To make a profit (surplus) > Surviving > Increasing sales or market share > Market leaders > Providing a service to the community > Producing high quality products or offering high quality service > Fulfil charitable or non-profit objectives such as caring for the environment Making a profit (surplus) Boots believe that profitability is the ultimate concern and this is best served by meeting customers' needs. Profit is the difference between the total revenue of a business (what it takes in receipts) and its total cost.
This is particularly important to Boots because it is owned by shareholders that expect a good dividend payment at the end of each year, which in turn depends on profit. With good profit the directors and chairman can put money back in the business (retained profit). So Boots can use this money for expansion, research and development of new products, and for new equipment and many more things. This will in return improve Boots and make the service they provide better. So profit is extremely important in a business.
It also gives good indication to external investors to invest money in the business. Investors want to put their money where they can make most profit and if you are profitable you will attract more investor this makes the organisation grow and prosper even more. Also trade creditors and bank mangers will also look more favourably to lending capital to the business if it is doing will because they will know that the money will be secure. * The ripple effect of profit is: When a business fails to make profit it makes a loss.
A business is in loss when total cost is greater than total revenue. When a business makes a loss it leads to loss of confidence in the business, particularly amongst the shareholders (people who have bought shares in the company) as their share prices go down. Also Employees feel insecure and the business will find it difficult to reward employees for good work and employees will start worrying about their jobs and some will lose their jobs due to cost cuts. Others will leave the business and share their skills with the companies competitors.
Also suppliers who supplied the company with goods on credit worry if they will be paid. The government will receive less tax for the business. Also the business will not be able to afford to invest in new technology or in new products and slowly the business would fade away. The ripple effect of making a loss is Surviving The main objective of a business is surviving with out surviving the business cannot achieve any of its other objective, because with out surviving the business is no longer in existence.
Increasing sales or market share A business prefers to have high market share because this enhances the image of the organisation and place the business in a strong position than its competitors. It has been stated that if you get in the market at the right time you will receive good profit. Boots is in the market at the right time and is now and is receiving a good profit. An organisation like Boots greatly benefits from the cost saving that arises from producing on a large scale.
Boots benefits from using a twenty-four hour a day production line for mass-production also the Boots organisation bulk buys products so it receives them at a discount. This is cost affective and saves money thus Boots can sell quality products at competitive prices while maintaining a sufficient profit margin. As Boots has a vary good computer system it enables Boots to control stock and reordering patterns in the shop to best meet customer needs. Market leader Organisation want to become market leaders Boots intends to become market leaders in well being products and ants the most shares in the well being market.
This will only be achieved through a major programme of change. Providing service to the community Organisations can make a profit and survive. But by only doing this they will not last for long. Boots helps the community because when a company helps the community they help the company back by giving them their custom. An organisation like Boots provides a service that makes the customers happy this is Boots main concern. Boots runs many of its activities in a profit-orientated way, but this is not the sole concern of Boots.