BUSINESS ACTIVITY AND INFLUENCES ON BUSINESS

Premises

Buildings and land used by a shop or business.

Goods

Physical products such as mobile phones or a pair of shoes.

Services

Non-physical products such as banking and car washing.

Consumer Goods

Goods and services sold to ordinary people rather than businesses.

Producer Goods

Goods and services produced by one business for another.

Needs

Basic requirements for human survival.

Wants

People's desires for goods and services.

Consumer Goods

Final product ready for sale that is used by the consumer to satisfy current wants or needs

Producer Goods

Products used to produce other goods

Private Enterprise

Owned by individuals or groups of individuals who’s aim is to make profit.

Social Enterprise

Non-profit making (e.g. charity)

Public Enterprise

Owned by the government

Stakeholder

An individual or group with an interest in the operation of a business.

Stakeholder (examples)

. Customers - Buy goods/services

. Employees - Work for business

. Financiers - Lend money to a business

. Suppliers - Business that supplies raw materials

. Owners - The owners of the business

. Managers - Help to run the business

Objectives

Goals set by a business to achieve their aims.

Revenue

Money from the sale of goods and services.

Private Enterprise

Owned by individuals or groups of individuals with the aim to make profit.

Social Enterprise

Non-profit making organizations, for example charities.

Public Enterprise

Businesses owned by the government.

Limited Liability

Business owners are only liable for the original amount of money invested in the business.

Sole Trader

Business owned by a single person.

Partnership

Business owned by between 2 and 20 people.

Franchise

Structure in which a business (franchisor) allows another operator (franchisee) to trade under their name.

The importance of clear objectives

. Employees need something to work towards

. Objectives motivate people

. Objectives decide where to take a business and what steps are necessary to get there

.Makes easier to assess the performance of a business

Co-operative

Businesses aimed at supporting the wider community rather than just profit.

Limited Companies

Business organizations that have a separate legal identity from that of their owners.

Multinational

Large business with significant production or service operations in at least 2 different countries.

Dividend

A share of profit.

Public Corporation

Business organizations owned and controlled by the government.

Globalization

When businesses operate in more than one country around the world.

Globalisation Trends

• Increased trade across national boundaries.

• One company having subsidiary companies and plants in many countries.

• One company producing material required from multiple countries.

• One company selling its products in many different countries.

• Growth of joint ventures and technical collaborations between companies from
  different countries.

• Lowering of trade barriers and simplified impact and export procedures

Exchange Rate

Rate at which one currency may be converted into another.

Fiscal Policy

Using changes in taxation and government expenditure to manage the economy.

Monopoly

When one business only provides a certain product, controlling the market and owning all market share.

Cash Flow Problems

Issues that arise from overtrading, over-borrowing, or unexpected expenditure affecting business liquidity.

Primary sector (industry)

Production involving raw material extraction
from the earth.
(e.g. agriculture, fishing, forestry,
mining and quarrying.)

Secondary sector (industry)

Production involving converting raw materials
into finished and semi-finished goods.
(e.g. metalworking, car production,
energy utilities and shipbuilding)

Tertiary

Production of services in thr
economy.
(e.g. commercial,
financial and household
services)

Factors influencing location of a business

• Proximity to the market.

• Proximity to labour.

• Proximity to materials.

• Proximity to competitors.

• History and tradition.

• Cost of premises.

Ventures

new business activity that involves taking risks

Exploitation

treating someone unfairly by asking them to do something for you
and you give them very little in return

MNE

Multinational Enterprise

MNC

Multinational corporations

Multinationals

Have a head office in one country but operate from many different countries with factories
around the world

Multinationals (Advantages)

• Jobs are provided.

• An injection to the local economy that it enters.

• Training and education is provided for
  employees.

• MNE’s will pay tax in that country.

• Helps the world’s knowledge and
  understanding of other countries

Multinationals (Disadvantage)

• High wage jobs aren’t given to locals.

• Charge low prices as a large business,
  pushing smaller local competition out.

• Can influence government’s decisions with regards to grants, tax and land.

Economy

how developed a country is and how much money it has

Imports

goods and services bought from overseas

Exports

goods and services sold overseas.

Effects of Imports

Increase in value of currency → Cheaper costs -→ Imports rise

Decrease in value of currency → Expensive costs → Imports fall

Effects on Exports

Increase in value of currency → Expensive costs -→ Exports Fall

Decrease in value of currency → Cheaper costs → Exports Rise

What is happening outside a business that affects it

(STEP)

Social Factors - things that affect people like fashion and changes in society

Technological Factors - as technology improves and changes, the economy
advances.

Environmental Factors - as economies grow, environmental damage increases.
Sustainable development- whatever you use, you have to replace

Political Factors - government makes laws and regulations that all businesses
should follow

Measures of Success

- Revenue
- Market share
- Customer satisfaction
- Profit
- Growth
- Shareholder satisfaction
- Employee satisfaction

Reasons for business Failure

- New entrants
- Ineffective marketing
- Lack of business skills
- Poor leadership

Cash Flow Problems

- Overtrading
- Investing too much in fixed assets
- Allowing too much credit
- Over-borrowing
- Seasonal factors
- Unexpected expenditure
- External factors
- Poor financial management