Theme 1 - Business

How to add value

More convenience

Good brand

Improve design or quality

Good USP

How do new ideas come about

Change in tech

Change in needs and wants

Obsolete products

Entrepreneur skills

Organise resources

Take risks

Make business decisions

Risks

Financial loss

Lack of security

Business failure

Rewards

Success

Profit

Independence

How new business ideas come about

Original ideas

Adopting existing products

What are original ideas

Solving problems

Find go in market

Carrying out a passion

What is adapting existing products

Mix and match two ideas

Create new versions of old products/services

Factors of production

Capital

Enterprise

Land

Labour

Types of customer needs

Price - right for product/low

Quality - satisfactory quality

Choice - variety of options

Convenience - more comfort and ease

How can a business generate sales

Lower prices and improve quality

Promote and run competitions

Why is market research important

Identifies customer needs and finds a gap in the market which reduces risk as they can make informed decisions

What is quantitive data

Numerical data by measuring responses and creating graphs like questionnaires or surveys

What. Is qualitative data

Data about customer's feelings and opinions about products like interviews

Advantages of using social media for market research

Cheaper

Up to date

Access to larger market

Able to track trends

What is primary research

New, original data gathered by the researcher

Examples of primary research

Surveys and questionnaires

Focus groups and observations

What is Secondary research

Research that has already been done by someone else

Examples of secondary research

Internet

Market and Government reports

What is market segmentation

Dividing a market into sub groups of similar characteristics

What do market maps do

Identifies key features of competition to identify gaps in the market

What is a competitive environment

Dynamic external system where a business competes

How do businesses change due to competition

Add USP and build brand

Differentiate products

Build customer loyalty

What are business aims

Strategic goals

What are business objectives

Steps needed in order to meet aims

Examples of financial aims

Survival - mostly during first years, establish firm in market

Profit/Sales - Maxine's sales and profits to expand

Market Share - increase to take sales from competitors

Financial security - may have quit jobs/source of income

Examples of non financial aims

Social - serve purpose to community

Personal Satisfaction/Independence - work for themselves

Control - not work under someone

Equation for revenue

Price x Quantity

Equation for total costs

fixed costs + variable costs

Equation for profit

total revenue - total cost

Equation for gross profit

Sales revenue - cost of sales

Equation for net profit

Gross Profit - Expenses

Equation for intrest

Total repayment -borrowed amount/borrowed amount x 100

Equation for break even

Fixed costs/selling price - variable cost

Equation for margin of safety

Actual sales - break even

Importance of cash

Pay suppliers for deals

Pay employees to keep them - expensive to recruit

Pay overheads

Prevent failure/insolvency

What is a cash flow forecast

It is an estimate of future inflows(money in) & outflows(money out) of the business

Equation for net cash flow

Inflow - outflow

Equation for closing balance

Net cash flow + opening balance

Limited liability

The owner cannot lose more than what they have invested into the nusiness

Unlimited liability

The owners can lose personal assets as well as the law sees the business account and personal account as one

What is a sole trader

There's only one owner and has unlimited liability but can employ people but pay tax on profits

Advantages of sole trader

Get all profits

Control and make decisions

Independent

Disadvantages of sole trader

Unlimited liability

Taxes on profits

Partnerships

Between 2-20 joint owners who have unlimited liability and share profits and control

Advantages of partnerships

Some control and decision making

Disadvantages of partnerships

Unlimited liability

Shared profits

Private limited companies

When shares cannot be bought by public and owners are friends/family

Advantages of private limited companies

Control who buys the shares

Limited liability

Public limited companies

Where anyone can buy shares

Advantage of PLC

Limited liability

Disadvantage of PLC

Anyone can buy shares

People can see financial info

May lose competing advantage

Franchise

Business which expand by selling business idea - like business in a box

Franchisor

The owner who sells the idea

Franchisee

Individuals who are buying the franchise

Advantage of franchises

Franchisor does advertising

Market research already done

Well known brand

Less competitors

Disadvantage of franchises

Less control

Pay royalties

Still pay rent and wages

Franchise lost if under performing

Factors influencing business location

Proximity to market, labour, materials, competition

Why do business locate close to market

Locate close to customers to reduce cost for transport and firms that sell bulky or perishable goods need to be close to consumers as goods cannot be transported

Why do business locate close to labour

Locate where there's an adequate supply of good labour with right skills for good quality and productivity - e.g. Scotland is known for whiskey

Why do business locate close to materials

Close to suppliers to reduce transport cost and cost per unit for more profit

Why do business locate close to competition

Locate in areas which are known for certain products so specific customers are drawn to that area and would look at your shop - cluster concept

Where would a retailer locate

Close to market with good parking and transport for consumers as well as good rent charges

Where would a service firm locate

Locate close to customers but may not need a premises but go their house etc

Where would a manufacturing firm locate

Close to labour and transport links to send their products cheaply

What is e-commerce?

Selling goods/services online

Benefits of e commerce

- lower operating costs

- larger market

- open 24/7

- respond to changing customer habits

- multi channel approach for max sales

Drawbacks of e commerce

- returns for items can increase transport costs so less profit

What is the marketing mix

Product, Price, Place, Promotion

What is a stakeholder

Anyone who is interested with the business

How does technology affect sales

Better service as instantly buy products online so more sales

How does technology affect costs

Cheaper than renting a premises

How does technology marketing mix

ProMotion made easier due to social media and viral hashtags as well as bigger target market accessible

What is the purpose of legislation

Protect employees and consumers

What does consumer rights act 2015 do

Protects consumers from faulty products, poor quality and service

What does Health and Safety at work do

Protects employees against business - they have to provide safe place to work, give equipment and training

How does legislation impact the business

Increase costs and may cause them to face consequences

How does changing levels of consumer income impact businessss

If increased, consumers have more to spend on luxurious products so revenue can increase but have to pay higher wages so costs increase

If decreased, then they spend on necessities and cheap products - unemployment can make business lose customers

What is a recession

Downturn in sales and output throughout the economy so rising unemployment

What is inflation

Increase in prices and decrease in currency so people feel poorer in their normal salaries as it doesn't last as long when spending

What is corporation tax

A 20% tax on profits to the government

How do exchange rates impact businesses - imports/exports

If the business' value is strong they can buy cheaper goods but if the country's value is strong then businesses have to pay more

Import - buying internationally Export - selling internationally

If exchange rate is strong then your products will cost more overseas so demand may fall and sales decrease - your currency has to be weaker for more profit

How does changes in tech impact businesses

Faster and more effective communication through internet

Better research and can develop products online - 3D printing

Social media can be used for reviews/complaints and grow brand

How does changes in consumer law impact businesses

May increase costs as return time changed from 14 to 30 days in 2015

How does change in employment law impact businesses

Increased minimum wage can lower profits and can result in legal action if not followed

How does changes to regulation impact businesses

Advertising has rules - no false messages, no aggressive sale methods and cannot leave out important information or business can be prosecuted and fined

How does changes in tax law impact businesses

Increased costs as corporation tax and VAT may increase

How does changes in pension law impact businesses

Pensions Act 2008 states that business have to have a pension scheme which employees can automatically contribute to