Business test (1.1,1.2,1.3)

What is part of the business chain?

primary, secondart, tertiary and quaternary

Goods

Tangible products that we can take home

Services

Intangible and can’t take them home

What is a private sector

Firms/businesses owned and controlled by individuals.

Public sector?

Firms/businesses controlled by government

what is it called when a firm/business goes from public to private?

privatisation

Customer?

Purchases and pays for product/service

consumer?

ultimate user of product

what types of goods are there?

Consumer goods and capitol goods

What are consumer goods?

Sold to an individual and are long lasting

What are capitol goods?

Purchased by other businesses (tools, computers etc)

Steps of starting up a business?

1. Organising the basics

2. Researching the market

3. planning the business

4. establish legal requirements

5. raising the finance

6. Testing the market

Advantages of setting up a business?

1. easy to set up

2. Can be based on hobby

3. Being your own boss

4. Privacy (competitors don’t know whats happening)

Disadvantages of setting up a business?

1. Unlimited liability

2. Hard to raise finance

3. No continuity

4. Work load is a lot

5. May need to learn new skills

Challenges businesses may face (organisations)

Inappropriate location, suppliers were unreliable

Challenges businesses may face (market research)

Research poorly done, inappropriate target market

Challenges businesses may face (Business plan)

Plan didnt convince, goals were too vague

Challenges businesses may face (legal)

labour laws not adressed, tax laws not adressed

Challenges businesses may face (finance)

Raising money to difficult

Challenges businesses may face (the market)

launch failed, success limited

Profits=

total revenue-total costs

Most common profit based organisations

sole traders, partnerships, privately held companies or cooperations, publicly held companies or cooperations

Sole Trader main features:

• owns and runs the business

• unlimited liability

• No legal distinction between individual and business

• finance usually limited

• has privacy (declaring finance)

Sole Trader advantages

• control over decisions

• flexible work hours

• privacy

Sole Trader disadvantages

• stress

• competing against established businesses

• unlimited liability

• lack of capital

• Lack of continuing

Partnership main features

• owned and managed by more than 1 person

• finance more available

• “sleeping partners”

Partnership advantages

• different skills and qualities

• more expertise

• more chance of continuing

• access to more finance

Partnership disadvantages

• each partner unlimited liability

• may disagree on decisions

• profits must be shared

• no one has complete control

how can businesses become comapanies?

businesses and owners are legally separated

advantages of being share holder?

• price of share may increase

• limited liability

disadvantages of being share holder?

• share price may decrease

• may have no meaning in decisions

when businesses decide to become companies they either become…

privately held companies or publicly held companies

who can privately held companies share shares to?

friends, family, associates.. (roughly 20 people)

who can publicly held companies share shares to?

to everyone

Main features of a company

• shareholders own but dont necessarily run business

• details of company are public

• business and owners are seen as separate

Advantages of a company

• finance normally more available

• investor has limited liability

• continuity

disadvantages of a company

• can take time and cost for legal requirements

• selling shares doesnt always get desirable amount

• loss of privacy

• limited control on who buys shares

what does “social enterprise” mean

has a social purpose

Do for-profit social enterprises have a main focus on making profit?

only if it doesnt affect the companies social purpose

what are cooperatives?

type of business owned and run by individuals whos objective is to provide essential service for the benefit of the members

features of for-profit social enterprises?

• profit important but not priority

• collaboration between business and local community

• operates the same as any other business

advantages of for-profit social enterprises

• strong communal identity ecists

• stakeholder community benefits

disadvantages of for-profit social enterprises

• capital may not be enough for growth

• decision making can be complex

features of non-profit social enterprises?

• profits arent generated

• aim to make surplus rather than profit

• donations important

aim of charities (ngos)

• provide as much relief as possible for those in need

• focus on those who aren’t able to help themselves

advantages of non-profit social enterprises

• help people/causes in need

• can create conversations in community

• enhance spirit in community

disadvantages of non-profit social enterprises

• intense lobbying

• can have employees that have passions which ill serve organisation

• funding can be irregular

Vision statement

-outlines business aspirations in distant future

-no actual targets that need to be realised

what do we want?

mission statement

-outlines businesses values and purpose

-How vision will be achieved

why are we doing what we are doing?

Aims of a business are…?

long term goals, what they want to achieve in the future

where are all the aims summarised?

in the vision statement

what are objectives?

goals showing how business will achieve aims and reach vision

where will objectives be summarised

Mission statement

common business objectives?

strategical, tactical, operational

what do strategical objectives include?

long-term primary objectives, affect whole organisation (eg growth, image)

what do tactical objectives include?

short-term secondary objectives, affect segment of organisation, specific goals guiding daily functioning of business (eg sales revenue maximisation)

what do operational objectives include?

day-to-day goals

What do SMART objectives stand for?

Specific

Measurable

achievable

relevant

time

changes in external environment could include?

political, environmental, social, economic, technological, ethical, legal

why organisations set ethical objectives:

• customer loyalty

• positive image

• positive work environment

• increasing profits

Impact of setting ethical objectives:

business itself - more money long run

competitors- maintain market position, competitors may have to respond

suppliers- buying from ethical suppliers

customers- more loyalty and trust

local community - relationship normally improves

government- recognising ethical businesses

what does SWOT analysis help do…

help set business objectives

What does Ansoff Matrix look at?

growth potential of a business in terms of market and product.

Market penetration (low risk)

• Increase market shares (same product in same market but more sales)

• Familiarity with market

Market development (medium risk)

• New distribution channel (eg overseas)

• Familiarity with product

Product development (medium risk)

• product extension/development,

• existing market

Diversification (high risk)

• No familiarity