Studied by 3 people
reasons for starting a business
make a profit
provide a good/service
to distribute products
to benefit society
to fill a gap in the market
to fulfil a business opportunity
service definition + examples
intangible e.g. hairdressing, train journeys
why has primary sector of production declined in UK?
depletion of raw materials
machines replaced workers
materials cheaper from abroad
why has secondary sector of production declined in UK?
competition from cheaper/better quality foreign imports
machines replacing workers
why has tertiary sector of production increased in UK?
consumers have higher incomes
more leisure time
rise in pop. so more education + healthcare required
objectives of an entrepreneur
be their own boss
flexible working hours
pursue an interest
earn more money
identify a gap in the market
dissatisfaction with current job
disadvantages to being an entrepreneur?
financial risk of losing all money
health can be affected
time consuming can lead to strained relationships
changes the business environment can experience
technological change (new ad methods, machinery, e-commerce ect.)
economic factors (inflation, interest rates, GDP ect.)
legal change (new legislation coming in)
environmental expectations (how to produce, package + transport)
who are the external stakeholders and what are their objectives?
people outside the business and not directly involved in its running
Suppliers - obtain higher prices for their supplies
customers - lower prices, better service
local community - more jobs, less congestion
pressure groups - less pollution (NIMBY)
government - increased tax revenue + jobs from successful businesses
who are the internal stake holders and what are their objectives?
people inside the business and involved in operations
Owners - increase profit
managers/employees - increase salary, improve working conditions
Advantages of a sole trader
total control (make quick decisions)
cheap and easy to start
keep all profit
disadvantages of soletrader
Unlimited liability (the business is not a separate legal unit, unincorporated business)
Full responsibility
Lack of capital (sources of finances are only from owner's savings or from banks but they can be reluctant to give soletraders because it's risky)
Difficult to expand/likely to remain small (due to the lack of capital)
Difficult to expand/likely to remain small (due to the lack of capital)
Advantages of Partnership
More capital available
Relatively easy to start
workload is shared
more skills
disadvantages of partnerships
Unlimited liability
division of profits
Disagreements among partners
slower decision making
advantages of being an Ltd
limited liability ( limited to amount shareholder has invested)
continuity (if owner dies business ca continue to operate)
can raise money more easily (banks more prepared to lend money)
control over share sale ( no risk of takeover)
disadvantages of being an Ltd
financial info available to public (unlike soletraders + partnerships)
administration ( more complex/expensive to set up and run)
sale of shares is restricted ( restricts amount of capital that can be raised)
dividends (conflict between shareholders + directors over where the profit goes)
Advantages of being a PLC
can raise large amounts of capital (shares sold to public)
easier to borrow money (banks see them as low risk -- have to have issued share capital greater then £50,000 to become one anyway )
Limited liability
Disadvantages of being a PLC
size (complex to manage all operations, inefficient)
costly + complicated to set up (specialist bakers and lawyers needed)
financial info available to public (competitors can see performance ect.)
shareholders expect dividends
threat of takeover (competitor could buy large number of shares + vote in new management team)
why buy shares?
dividends payed
share may increase (sell it for more - 'capital gain')
can influence management of company
what is divorce of ownership and control?
people who own the PLC don't control business 364 days a year (AGM exception)
shareholders many have to money but not time/ management skills
directors normally have large shares so doesn't happen often ( incentive for good dividends + capital growth )
ethical issues for businesses
treatment of workers (underpaying, child labour, long hours, unsafe, discrimination)
treatment of suppliers (late payment of bills)
treatment of customers
treatment of environment
advantages of being ethical as a business
workers like it (improve motivation, costs of production fall, can get more workers)
customers like it (good rep. , sometimes necessary to gain contracts with other businesses)
investors like it (long term success)
disadvantages of being ethical
higher costs (higher wages, safety precautions, sick pay)
lost sales ( unethical bussinesses can increase sales by lower prices + unfair advertising)
reduced profits (higher costs = lower sales revenue)
poor financial figures
advantages of being environmentally friendly as a business?
increased sales
reduced tax bill
reduced costs
subsidies from govt
reduces resource scarcity
disadvantages of being environmentally friendly as a business?
raw materials cost more
capital costs (investment as have to change the way business works)
production costs increase (cheaper often not good for environment
advantages of using technology in production process
costs reduced (fewer workers)
machines more accurate (improved quality)
production more flexible
24/7
do dangerous/ boring jobs
new technology = new products
disadvantages of using technology in production process
reluctant workers + redundancy payments
new skilled workers needed (in high demand = high salaries)
training for workers (expensive)
machines break
expensive to buy + set up
security issues
advs of businesses using e-commerce
sell worldwide
open 24/7
professional look at small cost
lower operating cost (don't need workers ect.)
cons of businesses using e-commerce
worldwide competition
delivering goods/ accepting returns
online security (data protection + safe payments)
advances in technology
pros to customers of e-commerce
price comparison
24/7 availability
wide range of products
cons to customers of e-commerce
lack of personal contact
returning goods difficult/expensive
only image of goods seen (unsafe?)
security for payments
payment methods (no cash)
technology (not everyone on internet)
