Business Yr 9 content

3.1.1 The purpose and nature of businesses notes:

Factors of production:

• Land – somewhere to produce the goods e.g. a farm​

• Labour – people to work in the business e.g. farm workers​

• Capital – money to get the business started​

• Enterprise – This is the drive or motivation from the owners to start a business​

Opportunity Cost: The cost of NOT selecting an alternative

Reasons for starting a Business:

• To fulfil a business opportunity

• To supply a service

Social Enterprise:

• Aim to help the planet

• Aim to tackle poverty and unemployment

Basic functions and types of Businesses:

• Primary Sector - Raw materials are extracted (ores)

• Secondary Sector - Raw materials are manufactured

• Tertiary Sector - Selling the finished product / deliveries

Entrepreneur: A person who starts a business and takes on a financial risk in hope to make a profit

Characteristics of an Entrepreneur:

• Hardworking - Dedicate hours into the business

• Initiative - May start the business after identifying market gap

Entrepeneur Objectives:

• Be your own boss - Take orders from no one

• Flexibile hours - Work life revolves around personal life

Dynamic Business enviroment: The enviroment is always changing and a business has to adapt to these changes

Changes to:

• Technology - Businesses can reach customers easily online

• Ecenomic situation:

  • infalation Rates - Rate of which the price of goods + services increase - (effect on business) = Raw materials cost more, costs of business increase - effects profit

  • Interest Rates - the cost of borrowing ​— rising interest rates impact a business — loans or overdrafts will cost them more​

  • Unemployment Rates - More unemployed = business have more applicants per job when advertising​ + households on lower incomes - sales + profits may fall​

  • Exchange Rates - Cost of one currency expressed in terms of another e.g. $ to £​ - If £ is strong (increases) - a

    business importing - goods becomes cheaper

• Legislation:

  • Employment Laws - Government legislation. designed to protect employees from exploitation

  • Health and Saftey Laws: Workers have right to work in places where risks to their health and safety are properly controlled​

  • Consumer Laws: Goods must be; as described, fit for purpose and satisfactory quality​ - (effect on business) - products must be quality

• Enviromental Expectations:

  • Making enviromentally friendly goods - less gas emmisions

  • Reducing paperwaste - Recycling when possible

Explain, using one business example, what the tertiary sector is:

• Final stage of production - finished product is sold

• E.g. Beans sold at a shop

Explain one reason why someone might want to start a business:

• To be there own boss, meaning they wouldn’t tke orders from an authority

3.1.2 BUSINESS OWNERSHIP

Sole Trader:

• Unlimited liability

• Only 1 owner - can employ workers - wont control business

• Profits are taxed

Advantages:

• Own boss - Decisions made quickly

• Can offer personal attention to customers (high quality service

Disadvantage:

• Unlimited Liability

• No Economies of Scale

Partnership:

• Unlimited Liability

• Partners are all joint owners

• Profits shared proportional to amount invested

Advantages:

• Easer to raises capital (more partners)

• Motivated workers (profits go to partners)

• Multiple set of skills

Disadvantages:

• Unlimited Liability

• Partners may have disagreements

Private Limited Companies (Ltd):

• Public can’t buy the businesses shares (Owner controls this)

• Limited Liability

• Expand by selling shares

• Minimum 2 people

Advantages:

• Easier to get loans (rather than a sole trader)

• Can sell Shares to raise Capital

Disadvantages:

• Business has to show public accounts annually (can be expensive)

• Competitors can see this information and benifit from this

Public Limited Company:

• Shares are open to the public

• Limited Liability

• Very Large Businesses

Advantages:

• Limited Liability

• Banks willing to lend money (less risk to a big business)

Disadvantages:

• Owners can lose ownership - if 1 party has 51% or more shares

• Public can see annual accounts + expensive

Not-For-Profit Organisations:

• Objective of something other than making a profit

• Dedicated to a social cause​

• Limited Liability

Why might a sole trader invite a partner for the business?

A. To give a friend a job

B. So shares can be sold

C. To share the profit

D. To get more skills into the business

Answer = D

What are 2 benfits of being a Private Limited Company?

• Limited Liability - the business is a seperate entity from the Owners - so private belongings are protected if the business goes into debt and fails

• Multiple skill set - more ideas = more opportunities = perhaps more chances to make more capital

3.1.3 Business setting Aims and Objectives

4 Factors of Production

• Land

• Labour

• Capital

• Enterprise

These factors influence the location of a business:

• Raw Materials - if business is closer to the production area of the raw materials, costs will be less

• Labor - access to a reliable supply of skilled staff is important

• Competition - locate near competitors (clustering effect), or to locate away from competitors (gap in the market)

Types of business Aims

• Survival:

  • Start-up business aim — when more established - aims may change - unless a recession or problems in the market - business may keep this as aims

  • Objective = reach sustainable sales - allows business to reach break-even point

• Profit Maximization:

  • Profit = Total revemue - total costs

  • To increase profit — increase the Total revenue OR reduce total costs

• Growth:

  • Objectives may change — owners want to grow business

  • Can be done by, selling more or providing and producing more

• Market Share:

  • The % of sales held by the business in the market

  • So taking away sales from competitors — by promoting more+ discounts

• Customer Satisfaction:

  • Aim to have quality service

  • So less complaints and less returns

• Ethical responsibilities

• Shareholder value