Business Edexcel GCSE Theme 1

Why new business ideas come about

changes in technology

changes in what consumers want

products and services becoming obsolete.

How new business ideas come about

original ideas

adapting existing products/services

risks of business activity

business failure

financial loss

lack of security

rewards of business activity

business success

profit

independence

role of business enterprise/ purpose of business activity

produce goods or services

meet customer needs

add value

ways of adding value

convenience

branding

quality

design

USP

role of entrepreneur

organize resources

making business decisions

take risks

what are customer needs

price

quality

choice

convenience

importance of identifying and understanding customer needs

generating sales

business survival

purpose of market research

identify and understand customer needs

identify gaps in the market

reduce risk

inform business decisions

methods of primary research

survey

questionnaire

focus group

observation

methods of secondary research

internet

market reports

government reports

types of data

qualitative and quantitative

social media

helps collect market research data e.g instagram polls

importance of the reliability of market research

so business owner makes correct decisions as reliable market research represents the people that the business is interested in accurately so is more useful

market segments

location

demographics

lifestyle

income

age

market map helps identify

a gap in the market

strengths and weaknesses of competitors based on

price

quality

location

product range

customer service

impact of competition on business decision making example

having to lower prices if competitor's prices are much higher

financial aims and objectives

survival

profit

sales

market share

financial security

non-financial aims and objectives

social objectives

personal satisfaction

challenge

independence

control

revenue equation

Price x Quantity sold

variable cost equation

VC per unit x number of units sold

Total costs equation

fixed costs + variable costs

profit equation

total revenue - total cost

interest equation

(total repayment - borrowed amount / borrowed amount) x 100

break even level of output equation

fixed cost/ selling price - variable cost

margin of safety equation

actual sales - break even sales

importance of cash to a business

pay suppliers, overheads and employees

prevent business failure (insolvency)

difference between cash and profit

cash is the money a business can spend immediately for day-to-day expenses

profit is the amount of money a business earns after costs have been taken into account

cash inflow

total receipts

cash outflow

total payments

net cash flow

Inflows - outflows

opening balance

Closing balance from previous month

closing balance

Opening balance + net cash flow

short-term sources of finance

overdraft

trade credit

long-term sources of finance

personal savings

venture capital

share capital

loan

retained profit

crowd funding

limited liability

owners not personally liable for the business's debts

unlimited liability

owners personally liable for the business's debts so can have personal assets taken if debts aren't payed

types of business ownership for start-ups

sole trader

partnership

private limited company

franchising

franchisee buys rights from franchisor to trade under their name

factors influencing business location

proximity to market, labour, materials and competitors, nature of business activity

impact of internet on location decisions

internet and/or fixed premises

marketing mix

price

product

place

promotion

how the elements of the marketing mix work together

balancing them based on competitive environment

impact of changing customer needs

impact of technology: e-commerce, digital communication

business plan outlines

What the business will do and how they will do it:

business idea

business aims and objectives

target market (market research)

forecast revenue, cost and profit

cash-flow forecast

sources of finance

location

marketing mix

business plans helps

convince bank to lend them a loan

reduce risks

make business decisions

spot potential problems

stakeholders

anyone who is affected by a business

shareholders (owners)

employees

customers

local community

pressure groups

the government

possible conflict between stakeholders

shareholders and employees because if employees want higher wages this will increase costs so reduce profit and so dividends

different types of technology used by business

e-commerce

social media

digital communication

payment systems

principles of consumer law

the product should be fit for its purpose

the product should match its description

the product should be of satisfactory quality

principles of employment law

recruitment: new recruits should have legal rights to work in the UK, no discrimination

pay: NMW & NLW

discrimination: must all be payed be the same if they do the same job or work of the same value for the same employer

health and safety: must carry out risk assessments to identify dangers and take reasonable steps to reduce risks

impact of legislation on business

cost: expensive

consequences of not meeting them: bad publicity, could be fined, sued (prosecuted) or even closed down. Less productivity if employees take time off work to recover from injuries

unemployment

Percentage off population that is able to work but can't find a job

+ can pay lower wages and fill jobs easily

- people have less disposable income so less demand

changing levels of consumer incomes

if they rise at a slower rate than inflation: less demand for luxuries

if they rise at a faster rate than inflation: more demand for luxuries

inflation

increase in prices over time

people feel 'poorer', employees may demand higher wages, UK becomes less competitive globally as UK exports get more expensive

changes in interest rates

The cost of borrowing money

if they increase, spending decreases and saving increases

and vice versa

government taxation

income tax decreases: people have more disposable income and vice versa

corporate tax increases: less money to reinvest so less growth but if corporate tax decreases this might encourage firms from abroad to set up in the UK, thus increasing competition

changes in exchange rates

the price of once currency expressed in another

SPICED:

Strong

Pound

Imports

Cheaper

Exports

Dearer