business activity

1.1 - 1.4

consumer goods

goods/services produced for consumers

capital/producer goods

goods/services sold by one business to another

needs

needed to survive

wants

not needed to survive

business activity

businesses carry out activities with the aim to make a profit, The purpose is to provide goods/services ata price consumers want to pay

profit

amount left over from sales after paying costs

what does a business need to do to increase profits?

reduce costs to produce a product/provide a service and increase sales

private enterprise

objective often to make money & shares are sold privately

social enterprise

non profit and has social objectives

public enterprise

government owned, often provide healthcare, education, mail delivery, policing, fire service, enviromental services

stakeholders

people who have direct interest in the business or is affected by the business

internal stakeholders

groups within a business

external stakeholders

groups outside a business

private sector or public sector?

soletrader, incorporated, franchises

unincorporated/unlimited liability

when business in debt owner is in debt. personal assets are at risk.

incorporated/limited liability

when business is in debt only the money put into the business is used and not personal assets.

what is part of unincorporated businesses?

sole trader and partnership

what is part of incorporated businesses?

private limited company (LTD) & public limited company (PLC)

examples of business stakeholders

owners, customers, employees, managers, financers, suppliers, local community, government

purpose of setting up business objectives

to give employees something to work towards, provide purpose and direction, decision making, assess success/performance of a business

SMART objectives

specific who & what, measureable, achievable realistic, relevant to the people responsible for achiving them, timed

why do objectives differe?

size, competition, type of business

examples of financial objectives

survive, make a profit, increase sales, expand through more customers & branches, increase market share, achieve financial security

example of non financial objectives

challenge oneself, gain independence and control over decision making, social objectives, achieve personal satisfaction

why do objectives differ?

size, competition, type of business

changing business objectives

market conditions, technology, performace, law, internal factors

sole trader advantages

control, dont need to slpit profit, personal relation ship with customers, easier to manage, own boss own decisions

sole trader disadvantages

cannot have multiple stores, unlimited liablity, doesnt produce as much profit, harder to grow, limited skills, takes longer to grow, lots of competition, may not have expertise, long work hours, difficult to get loans

partnership advantages

less workload, variety of skills, more capital available so they can operate/grow easier, easy & cheap to set up, easy to take on partners, different perspectives, illness less of a problem, financial info is private

partnership disadvantages

profit has to be shared, unlimited liablity, disagreements, limited number of partnerd, poor performance from partners

private limited company (LTD)

2-250 shareholders with limited liability and incorporated legal structure, shares are only sold to family and friends

LTD advantages

limited liability, incorporated legal structure, increased sources of finance as there are more shareholders, more expertise available

LTD disadvantages

competitor can see financial info, must complete two legal documents, cant sell shares to general public, profits are shared

public limited compay (PLC)

shares are sold on the stock market. the company has limited liability and incorporated legal strucutre

PLC advantages

easier to get more finance for investment, limited liability, incorporated legal structure, lots of innovation and new ideas

PLC disadvantages

competitors can see financial accounts: gain insight to managed & operated, profits shared so more dividents given, difficult to set up, limited set up cost, owners/shareholders might not agree with how the business is run

public cooperations

profit is not a major objective, protect jobs, create employment and maintain key industries, privide essential services to the public, free of charge/low price, sources of finance comes form taxes

public cooperations advantages

provide products to benefit society, can make a loss in the short term and still be kept operating, availability & stability of finance as they are backed up by the government

public cooperations disadvantages

slow and inefficient due to lack of strict profit targets and market competitions, decisions based on political decisions rather than efficiency

franchisor

sells the rights to use business name, logo, products/services etc

franchisee

purchases the rights to use an existing brand and open stores

franchisee advantages

less risk of failing/ideas for future success, back up support is given, people already trust the brand, no prior experience needed, established relationships with suppliers

franchisee disadvantages

franchisor might go bust/fail, continual service cost, restrictions on how to run business, cant implement own ideas, profits can be shared

franchisor advantages

business can grow and develop, easier management, reduced risk of business failure, easier to finance business

franchisor disadvantages

if the business is failing it cant stayy as a franchise, franchisees may need large amounts of support, franchisee poor actions may damage brand reputation, potential profit is shared with franchisee

primary sector

where raw materials are grown/extracted

secondary sector

where raw materials are processed and turned into goods through manufacturing

tertiary sector

where goods & services are provided to other businesses & the public

key reasons for location

where the customers are, availability of skilled labour, transport links for supplies and distribution, cost of premises and local government charges, financial help available, history and tradition

proximity to market

locating near their customer base may increase their chance of making sales, some may not need to be located near their customers, this may be because their are in the secondary sector

proximity to labour

companies often locate in the same region as other similar businesses to take advantage of a pool of skilled employees

proximity to resources

most businesses need to be accessible to their suppliers and distributors, businesses that distribute their products within/outside of the country will have to be close to transport & infrastructure

cost of premise

Busy areas with high customer traffic, busy high streets, shopping centers, will cost more while out-of-town areas often offer the cheapest premises.

direct taxation

charged based on income such as income tax and corporal tax (paid on company profits)

indirect tax

levied on spending such as value added tax

fiscal policy

using changes in taxation and government expenditure to manage the economy

corporation tax

a way for governments to collect money from businesses based on how much profit they make.