AQA Business GCSE - paper 1

- Business in the real world - Influences on business - Business Operations - Human resources

difference between a customer and a consumer

A customer is someone who buys the product from the business

A consumer is someone who uses goods and services produced by businesses

stock exchange

A place where shares in a company or business enterprise are bought and sold.

Social enterprise

a business that has a social or environmental purpose as its primary objective and generates revenue from selling goods or services.

Inflation

The rate at which prices are increasing

Stakeholder

Individuals and organisations that are affected by, and affect the activities of a business

Shareholder

A person or organisation that owns part of a company.

three objectives of entrepreneurs

(1) They want to be their own boss and make their own decisions

(2)They want to keep all the profits for themselves - they earn more money than of they were employed by someone else

(3)They are unhappy with their present job and want to do something different

Capital, Enterprise, Land, Labour

Factors of Production

Capital (factor)

The buildings and machinery needed for the business

e.g. Coffee Machines

Land (factor)

This includes the physical land where the business is located and also the natural resources that a business might need.

Labour (factor)

This includes the staff needed by the business and the skills and qualifications they have.

e.g. Nurse

Enterprise (factor)

This is the entrepreneur who takes a risk and creates the business using the other three factors of production.

opportunity cost

The sacrifice we make whenever we decide to do anything

Primary Sector

The first stage of production and uses raw materials

e.g. farming, fishing

Secondary sector

The processing of raw materials into finished/semi-finished goods

e.g. Car manufacturers

Tertiary sector

The selling of goods or services

e.g. retailing, tourism

State characteristics of entrepreneurs.

Innovative, Risk Taking, Hard Working and determined, organised

two changes in technology that can affect a business

gives new ways of producing products

makes new products themselves - self driving cars

two changes in economy that can affect a business

a sudden increase in prices of raw materials, rise in costs and falling levels of unemployment making it easier for people to find jobs

two reasons why an entrepreneur might want to become a sole trader

you are your own boss, easy to set up

disadvantages of a sole trader

- Unlimited liability

- May lack finance

- Heavy workload

- May not have all the skills required

- Difficult to take a holiday

limited liability

A form of business ownership in which the owners are liable only up to the amount of their individual investments.

unlimited liability

The owner is personally and fully responsible for all losses and debts of the business

main difference between unlimited and limited liability

level of risk that a business is willing to take

Two advantages of a partnership compared to being a sole trader

- Share skills

- More sources of finance than a sole trader

Partnership

A business owned by two or more people

Disadvantages of Partnership

- May disagree with other partners

- Liable for the actions of the other partners and share profits

Deed of partnership

a legal document drawn up by a solicitor/lawyer setting up rules for the partnership

Why might someone buy shares of a business?

Buying shares gives the buyer part ownership of the business and therefore certain rights, such as the right to vote on changes to the business.

Private limited company

Owned and run by shareholders who are family and friends

public limited company

Owned by shareholders who are members of the general public

Shares are bought and sold on the stock exchange

Advantages of a private limited company

- Shareholders have limited liability

- Capital can be raised by selling shares

- They do not have to disclose most of the information that public limited companies have to provide

- Ownership is not lost to outsiders as all shareholders are known

Advantages of a public limited company

- Limited Liability

- Greater Public Profile

- can achieve economies of scale

- Raise higher levels of funds

Disadvantages of private limited company

- Profits have to be split with shareholders by issuing dividends

- Legal process required to set up the company

- Shares cannot be sold publicly on the Stock Exchange, so there is a limited source of capital available

- Financial accounts can't be kept private as they must be shared with the Companies House and are therefore made publicly available

- Larger companies are more difficult to manage effectively

disadvantages of public limited company

-Certain financial information must be available- for everyone to see including competitors and customers

-Shareholders expect dividends

-Expensive+ complicated to set up

Aim

A general goal/purpose of a business

Mission statement

General description of overall aims of the business

objective

A specific target that contributes to a business achieving its aims. It is usually SMART

Good mission statements should be..

Concise/ communicate the purpose of the business

Relevant to stakeholders

Differentiate the business from competitors

Based on consultation

SMART

Specific

Measurable

Attainable

Realistic

Time specific

What is the purpose of setting objectives?

1. Gives a target to aim to, therefore all efforts will be focused on attaining the objective instead of being inefficiently used

2. Gives participants a sense of direction, a glimpse of where they're going to

3. Motivates the staff, a reward could be given once the team completes a project

4. You can measure whether the objective has been a success.

Common objectives for a business

Survival

Earning a Profit

Customer Satisfaction

Market share

WHY SET OBJECTIVES

- Direction

- Focus

- Planning

- Measuring success

Why objectives change

Internal

- achieved one objective

- change in views

External

- new competitors

- tech change

- ethical issues

Organic vs external growth

Organic

- Also known as internal growth, involves the expansion of the business size and profits without merging with other firms

External (Integration)

- usually involves a merger or takeover

Franchising

Occurs when a franchisor sells the rights to its products to a franchisee

- usually in return for a fee + percentage of turnover

Horizontal integration

a business joins a business a business at the same stage of the production process

Vertical integration

Backwards

- business joins with its suppliers

Forwards

- business joins with its distributors

Conglomerate

a business joins a business in a different market

Merger

Two or more firms join to create a new business

Takeover

One business buys another

Factors affecting growth

- size of business

- nature of the product

- position in the market

- financial position

- regulations (laws)

Pestle factors

Political, Economic, Social, Technological, Legal, Environmental

Diversification

Occurs when a firm moves into a new market

Recession

period of reduced economic activity

Market share equation

(sales of product / total market sales) X 100

Flotation

The process of a company 'going public' and its shares are sold on the stock market

State two reasons as to why a business might want to change its objectives

It may want to grow in order to get more sales and profits

It may also involve expanding overseas to target new customers

profit

financial gain

Volume of sales

total quantity sold

Value of sales

number of units sold x price per unit

two examples of information that a business might exchange with its customers using ICT

Prices of a product

Product Details

M-commerce

The act of buying or selling a products through wireless handheld devices such as smartphones

E-commerce

The act of buying or selling a product using an electronic system such as the internet

Ethics

the principles of right and wrong that guide an individual in making decisions

State two reasons that might be asked to decide whether a business is ethical or not

Are suppliers paid on time, or is the payment delayed?

Are employees treated fairly?Are they Paid well?Is child labour used in overseas factories?

Interest rates

The cost of borrowing money or the reward for saving money, expressed as a percentage

overdraft

A flexible loan which businesses can use, whenever necessary, up to an agreed limit

One possible effect on falling interest rate

Consumers will be more willing to spend money on much more expensive items such as a house or a car.This is because lower interest rates will reduce the initial price of the item.

consumer spending

The value of goods and services bought by consumers over a time period, usually a month or a year

legislation

a law or set of laws

Market

a group of buyers and sellers of a particular good or service

How do firms in markets with a small number of rivals compete?

- Price competition

- Competing by developing new products

- Competing through advertising

A monopoly exists in ...

a single business selling a product in a market NO COMPETITION

risk

possibility of something going wrong

uncertainty

occurs when there is a lack of information about a situation and therefore makes the outcome unpredictable

internal risk

Employee's may refuse to work

External risks

business maybe faced by a new competitor or natural

disaster

How can businesses reduce risks?

By making a business plan

Business plan

a written document that describes a business, its objectives and its strategies, the market it is in and its financial forecasts

Purpose of a business plan

- Clarifies aims

- Sense of direction

- Anticipate risks + plan solutions

- Useful to show to potential investors or the bank

Fixed costs

Costs that remain constant as output changes

- rent

- insurance

Variable costs

costs that vary with the quantity of output produced

- raw materials

- wages

Total costs

fixed costs + variable costs

Sales

the number of products sold

Revenue

Any money a business makes from selling goods/services

Profit

total revenue - total cost

Opportunity cost

The sacrifice a business makes when it makes a choice over another

Advantages of business planning

- Opportunity to review ideas (viable/profitable)

- Reduces risks

- Review the progress made

- Secure Finance

- Market research

- Identify potential problems -> solutions

Measuring the size of the business

- value of sales

- value of the business

- number of employees

Disadvantages of business planning

- May be low in quality due to lack of research

- Sales overestimated

- Require constant update

- Requires time + effort

- Can cause opportunities to be missed (if not predicted)

Economies of scale

Where the average costs (of production, distribution and sales) fall as the business increases the amount of product that it produces, distributes and sells.

Diseconomies of scale

Where the cost per unit rises as the business increases the amount of product that it produces, distributes and sells.

Diseconomies of scale occur when..

Poor communication

- Chain of command is more difficult

Lack of motivation

- workers can feel demotivated in a larger business

Loss of direction + coordination

- Difficult for managers to supervise subordinates

Entrepreneur

A person who organises, manages, and takes on the risks of a business.

Production

The process of turning raw materials into goods and services that can be sold

- Job

- Flow

Job production

A method of production whereby a product is produced that meets specific customer requirements.

Advantage of job production

Can charge higher prices (better quality)

Workers are more satisfied

Flexibility

High levels of customer loyalty

Excellent customer service

Easier to differentiate from competitors

Disadvantages of job production

need highly skilled staff--costs more

unit costs are higher

larger firms can offer equivalent products at a much lower price due to the economies of scale

labour intensive (not suitable for machinery)

Flow production

The continuous movement of items through the production process using production lines to manufacture products