business

Business Planning

A business plan is a document created by a business that provides details about each element of the business.

What is included on a Business plan?

Cash flow

Business idea

the Aims and Objectives the long term objective of the business.

Market research

Financial info

Sources of finance

Marketing mix

Location

The purpose of a business plan

• Minimise risk due to forward planning & market research

• Obtaining finance from a bank or investors

• Can share the vision for the company with staff

Specific

Measurable

Achievable

Realistic

Timed

For example : make an addition 15% profit within the next: 12 months,

KNOW THE

FACTS

Why might business aims change?

• Faster or slower growth than expected

A sudden change in demand

Already achieved the aims

Changes in consumer income

New taxes or legislation

Increased pressure on social issues e.g. sustainability

Business Ownership

ADVANTAGES

DISADVANTAGES

Sole Trader

Businesses owned by one person who has unlimited liability. Other people can be employed but there is only one owner

• Keep all of the profit

• It is quick and easy to set up as a sole trader

• Be your own boss & make all the decisions

• Low set-up costs

• Unlinited liability

• Long work hours as no one toshare workload

• Have to make all of the
  decisions

• Harder to raise finance

ADVANTAGES

DISADVANTAGES

Partnership

• shared workload

•

More ideas and skills / expertise

• Shared decisions

• Raise more capital than sole traders

• Unlimited liability

Disagreements over business decisions

• Profits are shared

• Some partners may not work as hard as others

A partnership is a type of business that has a minimum of 2 owners.

They decide to set up a run a business togethe

KNOW THE FROTS

Unmited Liability means that the owners of a husiness are responsible for all of the debts of a business. Personal belongings may nue to be given up to pay the debts of the business

Privote Limited Company Ltd.)

The owners are known as shareholders. Shareholders have to be invited by the business before they can purchase a share.

ADVANTAGES

DISADVANTAG

Limited liability

Full control over who becomes a shareholder

• More capital by selling shares / more likely to get finance

• Legal procedure in settie up costs money

• Financial accounts made public so can be lookedat by competitors
  Slower decision making
  Shared profits

ADVANTAGES

DISADVANTAGES

• Limitedliability

• More capital by selling shares / more likely to get finance

• Anyone can buy shares so large number of potential investors

• Risk of being taken over as they cannot contral who buys their shares

• Cost of setting up

• Shared profits with shareholders

• Accounts published

públic Limited Company (PLC)

The owners are known as shareholders. Shares are bought and sold by anyone on the stock exchange.

Social Enterprises

A business that prioritizes solving social or environmental issues while reinvesting profits to achieve its mission.

DONATE

Charities

A charity business is a non-profit organization aiming to help a cause,

funded by donations and fundraising activities.

co-operative

owned and operated by members, who share pro decision-making. It priori community, ethical pract equality. Members could customers or members public.

Labour availability

Are there potential employees living nearby that have the required skills.

Cost of Rent

City centre locations are more expensive than out of town

Transport Links

Is the premises close to main roads, parking, accessible to customers and delivery vehicles

Where are suppliers

Closeness to suppliers reduces delivery

expenses and ensures a steady stock supply.

FAGTORS

INFLUENCING BUSINESS LOGATION

Competition

Are there shops close b' that sell similar goods/ services? This could be both an advantage and a disadvantage.

Infrastructure

Does the location have high speed internet, utilities such as water and electricity.

Footfall

Do lots of people walk past the location? This is especially important for retail stores.

Customer location

Is it close enough to the target custmers?

Business Growth

1. Internal (organic) Growth

Occurs when a business decides to expand its own activities in order to improve their chances of increasing their customers, revenues and profits.

Methods include:

• launching new products, including diversification

• entering new markets.

• increase advertising

KNOW THE FACTS

Why do businesses want to grow?

• Increased market share, leading to more customers and increased revenue

• Increased sales
  Economies of scale (purchasing, technical, marketing, financial and administrative

• Spread the risk

2. External Growth (Integration)

Occurs when a business merges with or takes over another business.

Merger

When two or more businesses join together to form a new business.

Horizontal Integration

2 competitors join together

Forward Vertical Integration

Business takes over another at a later stage of the supply chain

Take over

When a business buys all or over half

SOLD

of the shares of another business.

3. Growth through Franchising

Backward Vertical integration

Business takes over another at an earlier stage of the supply chain

unother.

ADVANTAGES

DISADVANTAGES

Franchising

Franchising is when one business sells the right to another to use its name, ogo and to sell its products.

• Fast method of growth

• Franchisee has to pay costs

• Franchisor receives money

and share profits with

from royalties & start up fees

franchisor

• Franchisee buying into a ready • Franchisee does not have made successful business

control over business

• Franchisor will provide

decisions

advertising and training

• Franchisor brand may suffer

Technological influence on business activity

The following IT packages (software) are used for Businesses to assist in administration, communications, recruitment, stock control and production:

CAM

Computer Aided Manufacturing

Computer controlled machines used in production e.g. Robots

Databases

Storing stock information, customer and staff details.

Searching for specific items

Graphics

Produce business logo, advertisements & promotional materials.

CAD

Computer Aided Design Software that is used to plan and design 3D models of a product.

TECHNOLOGY

USEDIN BUSINESS

Presentations

Help present information in a clear, professional way.

E / M-commerce

Buying goods and services online or via a mobile device such as a phone

Digital Media

Digital and social media has changed the way businesses can communicate with their customers

Ethical influence on business activity

What are business ethics?

Spreadsheets

Making financial calculations e.g. profit, cash-flow forecasts etc.

Video conferencing

For meetings across different locations, job interviews.

Web Design & Email

Build a website to promote the business.

Email to communicate

with other staff, suppliers and customers

DISADVANTAGES

Doing the right thing, regardless of the impact on profit. An ethical business is one that considers the needs of all stakeholders when making business decisions.

• Increased costs

• Staff training

• Packaging issues e.g. hygiene, costs

• Bad publicity when errors made

Paying staff fairly & using suppliers that do the same

SAFETY

Accurate, not misleading advertising

ADVANTAGES

• Improved worker morale

• Improves the image of the
  business to customers

• Consumer & pressure group pressures

• Can charge a premium price

Provide safe working conditions

Pay suppliers fairly & on time

Environmental influence on business activity

How businesses influence the environment

Sustainable

Production

What can

businesses do?

Pollution, climate change, congestion, waste reduction, use of finite resources

Production, of goods and services does ne result in future generations being afiected, eg using up non renewable resources such as o

Use renewable energy bio-degradable packaging, recycling schemes, fairtrade suppliers, minimise waste

The + and- impact to businesses

Increased sales, lower fuel costs,

government grants, employee motivation,

Increased costs packaging issues, staff training

Economical influence on business activity

Levels of

Unemployment

Low levels (more people working)

High levels (less people working)

Consumer income

Low levels less

income)

High levels (more income)

Impact on consumer spending & business recruitment?

Impact on consumer spending on luxury / budget items?

Interest Rates

Low rates (good for borrowing, bad for saving)

High rates (bad for borrowing, good for saving)

Impact on consumer spending & business growth?

Inflation

Rates of Taxation

Low rates-uncertainty and reduced consumer spending

High rates - difficult to grow, customers will shop elsewhere for better prices.

Increased expenses

Low levels - higher consumer spending but poorer public services

High levels - Less consumer spending, increased contributions from

businesses

The impact of Legislation on business activity

Employment • Minimum / Living

Law

wage

• Contract of employment

• Zero hours contracts

• Safe working conditions
  Discrimination

Consumer

Unfair selling

Law

practices incuding:

• poor quality

RECEIPT

• misleading advertising

• Inaccurate product descriptions

Intellectual Property

IP protects the work from being copied eg.

Trademarks

• Copyright

• Patents

The impact of International Trade and Globalisation on business activity

What is International trade?

International trade happens when a ousiness buys or sells goods / services to or from other countries.

Exports: Produced in one country and sold in another

Imports: Bought from producers overseas

What is Globalisation?

As International trade has grown, countries have become more connected and dependent on each other.

This has led to more international trade, the development of multinational companies, movement of labour and capital.

ADVANTAGES OF TRADING INTERNATIONALLY

DISADVANTAGES OF TRADING

INTERNATIONALLY

• Opportunities for growth in new locations

• Global brand of company created; increasing customers, shareholder interest etc.

• Businesses can enter new markets (increased sales / profits)

• Spread risk - if sales in one country fall, this can be countered by increased sales in another.

• Cheaper production costs in different parts of world.

• Take advantage of changes in exchange rates

• Avoid trade barriers

• Economies of scale for purchasing, improved technology, lower interest rates on loans.

• Spreading of knowledge across experts in different countries.

• Difficulty in managing and controlling a business operating in many countries.

• Language barriers

• Supply chain issues with great distances - transport costs will be higher and take longer

• Exchange rate issues may lead to higher costs

• Different laws across the world.

• Political systems will be different and there may be political unrest in some areas, affecting sales and

• Lower morale in home country employees who may feel their jobs have been exported abroad.

A business may buy and sell goods / services abroad but NOT be a multinational company (operate in other countries with shops, offices, factories etc.)

Methods of Production

Job Production

Goods are produced to meet the exact needs of the customer-individually produced.

Batch Production

A fixed number of identical goods are made before changes made and the next batch is produced

Flow Production

Goods move along an assembly line continuously. All goods are identical and produced in large quantities.

Can charge higher prices

Workers highly motivated as work varies.

Business can meet personal needs of customers

• Highly skilled staff needed which costs money

Production is slow

No purchasing economies of scale as every job is different.

Quality

KNOW THE FACTS

Quality means meeting the consumer needs and expectations

• Produce larger quantities of different variations

Can be partially automated

More opportunity for machinery to be used.

Resetting of machinery / set-up can be time consuming

Not fully automated or

continuous

• Faster production of goods due to automation

Consistency between goods

Economies of scale

•

Profit margins very low

Lack individuality

Demotivated workers doing repetitive jobs

Expensive initial costs

Using high quality raw materials

Having the best production processes and equipment

ADVANTAGES OF PRODUCING

QUALITY GOODS

Increase customer satisfaction and therefore loyalty

• Increase sales
  Reduce costs
  Reduce waste

• Charge higher prices
  PROBLEMS WITH PRODUCING
  QUALITY GOODS

• Cost of QA and oC
  Fast growth and larger scale production can make it difficult to manage quality

How can

Quality be acheived?

High skilled workers & providing ongoing training

PASSED

Quality Assurance - the process of carrying out quality checks at specific stages during the production process.

Quality Control- the process of inspecting finished products and services to ensure that what customers receive is of a high standard.

The Supply Chain

PROCUREMENT

Procurement means getting the right supplies from the right supplier, at the right price. It is the buying of the raw materials needed by the business.

Price of the goods

Quality of the goods

Range of goods supplied

Reliability of supplier

HIGH QUALITY

Payment terms & conditions

Ethical /

Environmental concerns

Delivery times and costs

Reputation of supplier

LOGISTICS

Logistics means the movement of goods services or information throughout the production process. It occurs at all stages, from Procurement to the end consumer.

Transportation

Storage

Distribution

STOCK CONTROL

Stock can include raw materials needed to produce the goods, partly finished goods or finished goods awaiting distribution.

Just in Case (JIC)

Stock Control

Aims to keep "buffer" or "extra" stock

Just in case there is an issue with supply chain or there is extra customer demand

However, storage is expensive and stock may go out of date / fashion

Just in Time (JIT)

Stock Control

Just in time (JIT) is a method for managing stock that aims to keep stock levels very low at all times.

The Impact of Supply Chain on others - Think about how choices made throughout the supply chain impact different stakeholders (customers, staff, suppliers, local community). E.g. A business who uses JIT will get regular deliveries throughout the day, impacting the traffic to the local residents living nearby

The Sales Process

Preparing through good product knowledge

HOw?

Greet the customer

Identify sales opportunities

Identify needs and wants

Understanding needs and

wants of customers

Stages of the Sales Process

Informing customers of features & benefits

Getting feedback and responding to it

Closing the sale

Customer Service

The process of ensuring customer satisfaction

Factors to

consider when

Procuring goods

Why?

Attract new

customers

Increase loyalty

Increase customer spending

sources of Finance

When starting a business, it's essential to plan how to finance both the initial setup of the business and ongoing costs. This includes covering expenses like equipment, stock and bills.

BANK LOAN

Large amounts can be borrowed

partnessip

HIRE PURCHASE

and repayments over a long period

A loan from a finance

of time, but interest has to be paid/

company for a specific item e.g. a van

NEW PARTNERS

More money and new skills brought in but would have to share the profits & loss of control.

SATERNAL SOURCES

VENTURE CAPITALIST & BUSINESS ANGELS

An investor who provides capital to startups or small businesses in exchange for equity or ownership stakes, often offering mentorship and strategic guidance as well.

OVERDRAFT

Small amounts borrowed over very short period of time e.g. days

SHARE ISSUE

A Limited company may sell more shares, but risk of loss of control and existing shares may lose value

FAMILY & FRIENDS

Lower / no interest but could cause disagreements

LEASING

When the business hires equipment at a monthly cost.

GOVERNMENT GRANTS

Given to a business on the condition that they meet certain criteria such as providing jobs in areas of high unemployment.

TRADE CREDIT

Interest free short term credit for the purchase of supplies e.g. stock.

Usually repaid within a month/

Retained Profit

Profits kept in the business account from previous years.

INTERNAL SOURCES

Owner's Capital

The owner's own money used to pay. No interest payments, immediately available.

Selling assets

Selling equipment, stock etc that the business no longer needs.

Revenue, Costs and Profit

What is Revenue?

The amount of money taken in by a business when selling a good or a service.

Revenue = Quantity sold X Selling Price

What are costs?

A cost is anything that a business has to pay for.

Costs are split into three main categories: fixed variable, and total costs.

How can revenue be improved?

• Increase price → make more revenue per item sold

• Reduce price → may create demand/sell more goods to increase

• Increase promotion/ advertising to encourage more sales

Fixed Costs

Costs which do not change with the number of goods made or sold.

E.g. Rent

Variable Costs

A cost that changes with the number of goods produced/sold/output.

E.g. Raw materials

Total Costs

Fixed Costs

Variable Costs

Identifying and understanding customers

Age

Location

Lifestyle

What is market segmentation?

Market segmentation is the process of splitting the target market into specific groups. Businesses use these groups to make it easier for them to develop products aimed at certain people and to help them target their marketing.

Gender

Income

Market Research

When a business wants information about competitors, market trends or what customers want, it carries out market research. This helps the business identify and understand the needs of customers.

PRIMARY MARKET RESEARCH

Primary market research (field research), is when a business collects new data itself.

SECONDARY MARKET RESEARCH

Secondary market research (desk research), is when a business looks at existing data, collated by someone else.

Surveys

Questionnaires

ADVANTAGES

Internet

Books

ADVANTAGES

• Specific to the
  business

• Detailed

• Up to date

Quick and easy to gather

• Inexpensive and often free

Interviews

Focus Groups

Government reports

Newspapers /

Magazines

DISADVANTAGES

Time consuming

Expensive

Can be biased

• Could be out of date

• Not specific to the business

• May be~ inaccurate

The Marketing mix

What is the marketing mix?

The 4 P's of the marketing mix are very important for businesses. They determine what products or services the business sells, which people the business sells to and where and how they sell their products. Businesses will carry out market research to help inform the most effective marketing mix for their target market

PRODUCT

How will your product be different? What will

your brand be?

4P

PROMOTION

How will you promote the sales or the product or service? What methods of advertising will be

used?

PLACE

! Where will the product or service be sold? What channels will it use to get from the manufacturer to the consumer?

PRICE

How much will the product or service be sold for?

How might this change?

Topic 6 Human Resources 1

Recruitment

Recruitment is the process of identifying a job vacancy within a business and then finding a suitable candidate to fulfil that role

Identify the job vacancy

job description created

Job advertised

Shortist

potentral

candidates

Interview /

Selection

method

Appointment

(subject to

reference)

The joo description will include.

Person specification

The business will outline the type of person they would like to employ eg qualifications, skills & experience

Job Description

Outline of the job e.g. responsibilities, hours, pay

Internal recruitment

Recruiting within the business

External recruitment

Recruiting from outside the business

Cheaper and faster

Motivates existing staff

No new ideas

could cause resentment

Wider range to choose from

New ideas / fresh eyes

Cost

Existing staff demotivated

Training

When is training needed?

• New staff

• New technology or equipment

•

New laws e.g. health and safety

ON-THE-JOB TRAINING

Demonstrations

Coaching

ADVANTACES

Cheaper & quick to organise

• Employees still contribute to work

Job shadowing

Job rotation

DISADVANTAGES

• May pick up bad habits

• Takes up production time

OFF-THE-JOB TRAINING

Off-site

Computer

ADVANTAGES

Employees feel more valued

• Can bring in new ideas

Outside Trainer

Sandwich course

DISADVANTAGES

Benefits of training staff

• Improves worker motivation

• Improved quality of products / services

• Improved customer satisfaction

• Reduce costs

Expensive & employees may leave

• May not be aimed at specific business needs

Motivation

Increase wages

Job rotation

What is the benefit of having motivated employees?

KNOw

THE FACTS:

• Increased productivity / better performance

• Less staff leaving & lower absenteeism which will save costs

• Better customer service

• Improved quality of goods

• Improved business reputation

Staff discount

DISCOUNT

Training

Company

car

MOTIVATE

Enrichment

D-O

GYM

Other fringe benefits eg gym membership

Empowerment

organisation Structures

A plan showing the roles and relationships between all of the employees in a business. span of control

The number of staff that a manager has responsibility for

Chain of command

The route instructions and communications flow from the top to the bottom

Delayering

The process where a business removes layers to make its structure more flat

Delegation

where work can be passed to others lower down the hierarchy

Subordinates members of staff below a manager in the chain of command

Hierarchical / Tall Structure

A hierarchical (tall) structure has many management layers, a long chain of command, and a top-down approach. Managers have a narrow span of control with few subordinates, leading to long communication pathways.

•

ADVANTAGES

Narrow spans of control can help to limit managers' workloads

Clear and more regular opportunities for promotion of junior employees

•

DISADVANTAGES

Communication may be more difficult as it passes through many levels of hierarchy

Decisions slow as information has to be passed through the organisation

Wide Flat Structure

A flat organisational structure has few management layers, a wide span of control, and a short chain of command, allowing quicker communication. It is common in smaller or modern businesses.

ADVANTAGES

• Fewer managers can help to reduce costs

• Communication can be quick and effective as fewer levels of hierarchy

DISADVANTAGES

Lack of progression opportunities

Higher workloads for managers

• Managers have more subordinates

Working Practices

Trade unions

Communication in the workplace

Businesses communicate internally and externally through emails, texts, reports, calls, video meetings, and more.

Good communication will lead to a better understadning, faster decision making and a more motivated workforce.

Poor communication may lead to reduced employee cooperation, poor morale and slower decision making.

Employees are usually employed on a part-time or, full-time basis.

However, many companies now

• Flexible-hours - allow employees to choose when they work within set limits.

Zero hours - employees have no set hours and work only when needed.

Home working

Job sharing- is when two or more employees split one job role, often working on set

An organisation that represents employees interests in exchange for a membership fee.

They negotiate better pay, improve working conditions, and support employees in disputes using collective bargaining.

If negotiations fail, unions may take industrial action, such as go-slows (reducing productivity) or strikes (refusing to work), to pressure employers into making changes.