1.4- Making the business effective

1.4.1 What is unlimited liability?

The owner is personally and fully responsible for all losses and debts of the business so the government views the owner and the business as one entity. The owner is able to lose their personal assets.

1.4.1 What is limited liability?

owners are not personally responsible for debts of business, they can invest without the fear of losing their personal assets. The government views the owner and the business are two separate entities.

1.4.1 What is a sole trader

It is a business run by one person. Often referred to as a self-employed business. Examples of this are hairdressers, photographers and plumbers

1.4.1 What are the pros of being a sole trader

Pros: easy to set up and low start up costs
\> owner has complete control on their decision making
\> keeps 100% of their profits
\> financial information is kept private

1.4.1 What are cons of being a sole trader

Cons: Unlimited liability
\> lots of pressure on one person
\> long working hours
\> difficult to raise capital

1.4.1 What is a partnership?

A business legally owned by 2 or more people and usually contains skilled professionals e.g dentists. It requires a "deed of partnership" and each partner will take a share of the profits and they share decision making

1.4.1 What are the pros of being in a partnership

Pros: risks and responsibilities shared
\> easily to raise finance as it is shared
\> more input and ideas
\> financial information kept private

1.4.1 What are the cons of being in a partnership

Cons: unlimited liability
\> conflicts can arise between partner
\> if a partner leaves, the business becomes non existent
\> profits are shared

1.4.1 What is an LTD?

A private limited company which is owned by shareholders and is usually classed as a LTD. Examples are local retailers like restaurants. Big LTDs are Mars. inc and Dyson.

1.4.1 What are the pros of being a LTD

Pros: limited liability
\> easier to raise finance as you can selling shares to friends and family (share capital)
\> business can continue to trade even if shareholders change

1.4.1 What are the cons of being a LTD

Cons: More complex to set up- paperwork and registration
\> accounts are available for anyone to see
\> possible loss of control

1.4.1 What must LTDs register with

Companies House. LTDs must register their accounts and paperwork to this association. With the right amount of money, people are able to access a business' accounts.

1.4.1 What is a PLC

public limited company - A company owned by shareholders where the shares can be traded openly on the stock market

1.4.1 What is a franchise?

A franchise is when an existing business (a franchisor) gives another business (the franchisee) the legal right to use its name, business idea and to sell its goods and services.

1.4.1 What is the franchisor

The business that gives franchisees the right to sell its product or service

1.4.1 What is the franchisee

A person who buys a franchise

1.4.1 What are the pros of running a franchise

Pros: established brand name
\> support and training provided by the franchisor
\> Franchisee has to pay a percentage of sales revenue(royalties) to the franchisor
\> Franchisor still has control over the franchises
\> Franchisees benefit from national marketing campaigns

1.4.1 What are the cons of running a franchise

Cons: requires an initial cost to obtain the franchise and ongoing costs to retain it
\> franchisees cannot make independent decisions
\> Brand reputation may be damaged by other franchisees if they do not maintain standards

1.4.1 Explain one benefit of running a franchise

One benefit is it is a cheaper method of growth. This is because the franchisee will cover some of the costs of expansion with their fee they pay. This will lead to the franchisor having lower costs and therefore they are less likely to suffer cash flow problems.

1.4.2 What factors influence business location

-Proximity to competitors
-Proximity to labour
-Proximity of the market
-Proximity of raw materials
-Nature of business activity
-The internet

1.4.2 Why should a business consider the proximity to the market when choosing a business location

Businesses want to have a large footfall which helps with passing trade. Some businesses e.g takeaways need a large footfall as they will miss out on sales as they would not be accessible to their target market. This increases convenience for customers.

1.4.2 Why should a business consider the proximity to the labour when choosing a business location

The term labour refers to the people whom a business employs. It is important to be located close to high-quality labour or in an area which employees are willing to travel. Roles with low requirement for skills, a business locates itself near any populated area to ensure it can hire employees. Roles with high level of skill, businesses may locate itself near big cities and unis.

1.4.2 Why should a business consider the proximity to the raw material when choosing a business location

Being close to the raw materials is extremely important for saving money. Bulk-gaining products is where the product is larger than the raw materials, it makes sense to locate near the market as it is cheaper to transport the materials than the finished items. Bulking-reducing is where the product is smaller than the raw materials, it makes sense to locate close the materials which allows businesses to save on transportation costs.

1.4.2 Why should a business consider the proximity to the competitors when choosing a business location

Some businesses like to be far away from competitors because they can have access to customers without having to fight off the competition. Others choose to be close to competitors because it means these businesses are more likely to be considered by customers. Being far away from each other could limit sales.

1.4.2 Why should a business consider their nature of their business activity when choosing a business location

A start up business will have limited finance so will have to consider carefully the cost of different location.
Infrastructure need to have a physical presence with their customers.
Certain industries like the shoe industry has developed historically in an area of poor skilled workers.

1.4.2 How does e-commerce influence a business choosing a business location

E-commerce and M-commerce allows the business to choose cheaper location because there is no requirement to be located near to customers.
This allows:
lower costs
flexible working hours
convenience
low price marketing and promotion

1.4.3 What is the marketing mix?

A combination of the 4 keys elements of marketing (Product, Price, Place, Promotion)

1.4.3 How is product used in the marketing mix

The product is what the business sells. A business should conduct market research to find out the needs and wants of its target market. A business needs to create an USP to make their product stand out

1.4.3 How is price used in the marketing mix

Customers want value for money so a business may need to set low prices to generate high levels of sales. High quality \= high prices and vice versa.

1.4.3 How is place used in the marketing mix

Customers want to have convenience- somewhere it is easy to buy products and order services. So a business may sell from a:
Retail store
Online store/app
Directly from a manufacturer

1.4.3 How is promotion used in the marketing mix

Promotion aims to persuade customers to purchase or inform customers about products. They may do this by:
branding
sponsorships deals
influencers
The chosen method of promotion depends on the type of product or services on offer, relative costs of the methods and the size of the budget

1.4.3 Why do businesses adapt their marketing mix

1) to convince customers that their product is better than the competitors
2) consumers need change over time as a result of technological improvements
3) Social media makes promotion cheaper as sponsorships and influencers are ways to promote

1.4.4 What is a business plan

A written document detailing how a business will be set up and run

1\.4.4 What are the 8 sections of a business plan

\

> Business idea - brief description of product or service

> Business aims and objectives (SMART)

> Target market and market research

> Forecast of revenue, costs and profit

> Cash flow forecast

> Sources of finance

> Business location

> Marketing mix

\
inside a tech firm countless sections like microsoft

1.4.4 Discuss the benefit of a business having a business plan

One benefit is that the business will ==minimise risk.== This is because the business plan contains a cash flow forecast which helps to identify times where a business will have negative balances. This will lead to the business being able to make a decision beforehand e.g taking out a bank loan as a result reducing the risk of running out of cash.

Another benefit is that the business can ==obtain finance.== This is because the potential investors prefer to see a detailed plan. If the business plan is detailed- it proves the business has been well researched and investors will most likely want to invest. This will lead to the business having a new source of finance therefore allowing them to invest the money into new machinery or cover costs. As a result, the business ,ay become financially secure

Drawbacks of a business plan

* costly and time consuming
* may stop a business from being flexible and adapting to teh constantly changing market