Section 1- Business

Needs

Goods & Services that are Essential, and people must have to be able to stay alive 🍞

Wants

Goods & Services that people want to raise living standards, but are not essential 📱

Opportunity Cost

The next best choice that is given up by deciding on another choice ⚖️

Factors of production

The input needed to create a a good or service That includes: Land, labour, Capital, Enterprise

Added Value

The difference between the price of the finished product and the cost involved in making that product 📈

Added Value - Branding

Developing a logo, name and other promotional activities to make the product appear to worth more and increase Customer trust to willing to pay a Higher price ™️

Added Value - Improve quality

Provide higher Customer service to make customers feel like getting more value for their money ⭐

Added Value - Unique Design

Adding extra features or improving design to Make the product stand our against competitors, allow the company to charge a higher price. 🎨

Added Value - Add convenience factors

Customers pay a higher price if the product could be gotten straight away and saving them time ⏱️

Private Sector (Extraction)

The sector involved in the extraction of natural resources and the making of raw materials Ex: F ⛏️

Secondary Sector

Turns raw material and resources into a finished product Ex: 📦

Tertiary Sector

Sector involved in providing logistics, management, and service to customers 🚚

Private Sector (Organizations)

Organizations that are owned by an individual or a group of individuals. Their goal is to maximize profits and provide services and products to a certain range of customers 💼

Public Sector

Organizations that are owned by the government funded through taxes and the government budget. Decision are made by the goverment 🏛️

Entrepreneur

An entrepreneur is a person who organizes, operates and takes risks for a new business venture 💡

Characteristics of an Entrepreneur - Risk taker

Willing to take chances even though it might not work. This might not guarantee to work and could lose everything if you bet all in the idea 🎲

Characteristics of an Entrepreneur - Creative

The ability to think of new ideas or different ways to do things. As a result, New ideas could fill gaps in the market and gain an advantageous competition 🎨

Characteristics of an Entrepreneur - Determination / Perseverance

Never give up even through hard challenges or if things do not go well. Takes alot of Therefore Lenders will not finance you and hard to raise finance 🧗

Characteristics of an Entrepreneur - Self-Confident

Having trust in your own ability and ideas to carry them out successfully. Therefore, they can convince people to finance them or to buy your product 🦸

Characteristics of an Entrepreneur - Initiative

Being willing to make new ideas or project to make things happen. To take advantage of opportunities that other may mis 🎯

Characteristics of an Entrepreneur - Decisive

Ability to make good decisions and quick one, even though it might be critical to the firm or a hard one to make. There for it may save resources and time, so that unnecessary work might not need to be done ⚡

Business Plan

a document containing the business objectives and important details about the operations, finance and owners of the new business. 📋

Business plan components

+ Overview

+ Objectives

+ Resources

+ Market Research

+ Marketing

+ Finance

+ People

+ Operations

Importance of business plan

Raise finance,

Set goals and targets for direction,

Understand potential risks,

Monitor business progress,

Aid decision making 🧭

Why do governments want to help new start-ups?

provide employment,

contribute to the growth,

Contribute to the exports,

Introduce fresh ideas and technologies 🌍

How do governments support businesses?

Organize advice, Provide low-cost premises, Give grants for capital, Give grants for training, Lower taxation and breaks in the first few years 💰

Measuring Business Size

1. Number of employees

2. Values of Sales and Output

3. Capital Employed !!! Profits are not included 📏

Problem of using size of workforce

1. Business can be captial intensive with many machinery

2. Nature of workers contract

Problems of using value of capital employed

1. Not accurate when comparing labour intensive and capital intensive production methods

2.Diffrent property values and business nature

Problems of using Value of Output

1. Based on value of product

2. Product can be unsold

3. Diffrence in selling price

Why do businesses want to grow?

Increased market share,

Increase in profit,

Lower average cost,

Spread risks 🌱

Internal Growth

AKA Organic growth is when a business grows naturally as it sells more product, launches new products, and expands to new markets 🌿

Internal Growth Advantages

Low cost,

Easy management to changes to

Reduce risks,

Owners control ✅

Internal Growth Disadvantages

Slow growth to Miss out on opportunities giving competitors chanceto increase their influence, Limited expansion to finance & space ❌

External growth

AKA Inorganic growth, when a merger/Takeover occurs 🤝

Vertical Integration (Backward/Forward)

An expansion method by acquiring a company backward or forward in the supply chain/ sectors in the diffrent stages of the supply chain🏗️

Vertical Integration (Backward/Forward) Advantages

Quick Growth,

Gain External Customers,

Gain assets skill and technology to New ideas,
Reduce competition to Increase influence to price and suppliers ✅

Vertical Integration (Backward/Forward) Disadvantages

High Cost of the takeovers and merger to financing problems,

Control/communication problems because company have different way of working to lower efficency ❌

Horizontal Integration

An expansion method that involves acquiring a company that is in the same stage of the supply chain/sector 🤝

Horizontal Integration Advantages

Reduce Competition,

More Market-share,

Reduce Cost as buy by bulks ✅

Horizontal Integration Disadvantages

Increased risks,

Hard to control two sets of employees ❌

Problems linked to growth

Harder to control,

Poor communication,

High Cost to Cash flow problems,

Difficulties in merger and takeovers ⚠️

Why do some businesses remain small?

Owners choice,

capital Availlabillty,

Market size,

Type products/service 🏪

Factors that affect success/failure of a company

Management skills,

Availabillity of Finance,

products demand,

products suitable?,

level of Competition,

Changes in Economy 📊

Sole Trader

Business owned and operated by one owner, can hire part time workers but cannot be involved completely 🧍

Sole Trader Advantages

Easy to set up, Owners have complete control, Owners get to keep all the profits, Flexible with working time ✅

Sole Trader Disadvantages

Risk of losing personal assets to for company debt, Hard to raise finance, No continuity, No one to share decision-making with to wrong decisions made ❌

Partnership

A business run by >2 people, Need to sign obligations to protect the rights for each partners 👥

Partnership Advantages

Easier to raise finance than sole trader, Shared responsibilities /workload, Provide larger range of skills, Shared decision-making, Shared costs ✅

Partnership Disadvantages

Unlimited liability, Risk of conflicts, No continuity, Shared profits ❌

Private Limited Company

Business owned by shareholders to close friends/Family members, Incorporated a business identity different than the owners identity 🔒

Private Limited Company Advantages

Can raise finance by selling shares, Limited liability to Only liable to amount they invest, Easier to control the business, Continuity ✅

Private Limited Company Disadvantages

Cannot sell share on the stock exchange market, Must make some financial info public, Large paperworks, Expect of dividends ❌

Public Limited Company

Anyone can own shares, tends to be larger than a Private Ltd. 🌍

Public Limited Company Advantages

Limited liability, Can sell shar on stck exch., Raise large finance, Incorporated ✅

Public Limited Company Disadvantages

Must publish financial info, Cannot control share buyers, Many legal req, Selling shares to the public is expensive to Advertising & Management cost ❌

Franchiser

A business model in which the franchisor allows other franchisees to operate under its brand and products and gets a small amount of profit from the franchisee 🍔

Franchisee Advantages

lower chance of failure, Provided training and bus. Advice, Paid national advertising, Organized supplier and logistics ✅

Franchisee Disadvantages

a large amount of fees, Must pay proportions of profits, Limited power, Must pay for local advertising ❌

Franchisor Advantages

Receive license fee, Fast growth, Share of profits, Minimal management ✅

Franchisor Disadvantages

Prone to damage reputation, small share of profits, must provide training and advice, Limited controls ❌

Joint venture

When two or more businesses work together on a project 🤝

Joint venture Advantages

Share cost & resources,

Brings different expertise,

Shared market and product knowledge ✅

Joint venture Disadvantages

The Reputation of each business can be damaged, Decision-making could be difficult,

Profits are shared ❌

Social enterprise

A Business with social objectives that reinvests the revenue into the business and benefits society 🤝

Business Objectives

Survival

Profit

Growth

Market share

Social and ethical & Enviromental

Business Objectives - Survival

Earn enough revenue to cover cost, survive the competition for start ups and survive during recession and change in demands for established businesses 🛟

Business Objectives - Profit

Acts as reward to it is owner and source of finance to fund the business growth 💰

Business Objectives - Growth

Help the firm spread risks lower average cost, cost per unit, makes the business more competitive and increase revenue 📈

Business Objectives - Market share

number of sales in the market to helps the business increases it is influence reputation leading to higher sales 🥧

Business Objectives - Social Ethical and Enviromental

Good publicity, no legal actions, prevent damaged reputation, sale and revenue 🌍

Why set objectives? - Target

Provide a target or goal to work towards this helps ensure everyone is working in the same direction.

This can help the business to remain focused on what it wants to achieve. 🎯

Why set objectives? - Decision-making

Help with decision-making because the business knows what it wants to do, time and resources are not wasted on unnecessary things. 🧠

Why set objectives? - Measure success

Provide a way to measure success as objectives can provide a point of reference to compare progress against. 📏

Why set objectives? - Motivate

Can help motivate employees as employees also have a target to work towards. 🚀

Example of objectives - Private Sector

Maximise profits, Expand the business, Increase Market Share 💼

Example of objectives - Public Sector

Meet customer targets, Keep cost low 🏛️

Example of objectives - Non-profit

Increase revenue from donations, Reduce cost, Provide to those in need ❤️

Stake holders

Anyone who have interest in the company and may have control over the decision and activities of the business 👥

Internal Stakeholders objectives - Owner

high profits, Increase Value 👑

Internal Stakeholders objectives - Manager

Increase status, Work motivation, Increase promoted 👔

Internal Stakeholders objectives - Employees

Better conditions, Job security, Payment, Motivation, promotions 👷

External Stakeholders objectives - Customers

Receive a variety of good products, Low and fair price, Good customer services 🛒

External Stakeholders objectives - Suppliers

Increase in orders, Receive payments, Receive fair price 📦

External Stakeholders objectives - Bankers/lenders

Interest/payment on time

External Stakeholders objectives - Goverment

Pay correct amount of tax on-time, Provide jobs 🏛→ Lower benefits for the unemployed 🏦

External Stakeholders objectives - Local commu

Jobs for the locals, support local projects, Reduce pollution 🏘️

Stakeholder objectives conflicts

different in objectives can cause disagreement. Managers need to compromise to decide the best objectives for the company ⚔️