business unit 1

Business Unit 1: Exploring Business (CTEC Level 3)

1.1 Different Types of Business Activity

• Primary Sector: Businesses involved in extracting natural resources (e.g., farming, fishing, mining).

• Secondary Sector: Businesses that manufacture goods or construct infrastructure (e.g., car manufacturing, construction).

• Tertiary Sector: Businesses that provide services (e.g., retail stores, healthcare, education).

1.2 Different Sectors of Operation

• Private Sector: Businesses owned by individuals or groups for profit (e.g., Apple, Tesco).

• Public Sector: Organizations funded and operated by the government to provide services (e.g., NHS, public schools).

• Third Sector: Non-profit organizations focused on social or environmental goals (e.g., Oxfam, RSPCA).

1.3 Different Forms of Legal Business Ownership

• Sole Trader: Single owner, simple to set up, full control, unlimited liability.

• Partnership: Owned by two or more people, shared responsibility, unlimited liability.

• Private Limited Company (Ltd): Shares owned privately, limited liability, more complex setup.

• Public Limited Company (PLC): Shares traded publicly, limited liability, significant regulation.

• Community Interest Company (CIC): Combines profit-making with social goals, reinvests profits.

• Franchise: A business model where individuals operate under an established brand (e.g., McDonald’s).

1.4 Factors Which Inform Business Ownership

• Control: Sole traders have full control; partnerships and companies share control differently.

• Liability: Sole traders and partnerships have unlimited liability; companies have limited liability.

• Taxation: Sole traders and partnerships pay income tax; companies pay corporation tax.

• Finance: Larger businesses often require significant capital, influencing ownership type.

• Growth Potential: PLCs can raise large amounts of capital via public investment.

1.5 Differing Business Aims and Objectives

• Profit: Generating surplus revenue after costs.

• Growth: Expanding operations, which can be internal (e.g., opening new stores) or external (e.g., mergers).

• Survival: Ensuring the business continues to operate, especially during challenging periods.

• Customer Satisfaction: Providing quality products/services to build loyalty.

• Reputation: Building a positive brand image through ethical practices and quality.

• Sustainability: Reducing environmental impact while maintaining profitability.

2.1 Key Tasks of Functional Areas of Businesses

• Marketing: Running campaigns, market research, managing brand identity.

• Human Resources (HR): Recruiting, training, managing employee relations.

• Customer Service: Handling complaints, providing after-sales support.

• Operations Management: Overseeing production processes, ensuring efficiency.

• Finance: Managing budgets, monitoring cash flow, preparing financial reports.

• Purchasing: Sourcing materials and negotiating with suppliers.

2.2 How Business Functions Interrelate

• Example: A marketing campaign increases demand, requiring operations to boost production and HR to hire additional staff.

• Poor customer service can damage reputation, reducing sales and impacting finance.

3. Understand the Effect of Different Organisational Structures

• Hierarchical Structure: Clear chain of command, but slower decision-making.

• Flat Structure: Fewer management levels, faster communication, but managers may be overstretched.

• Matrix Structure: Combines functional and project-based teams, promoting collaboration but potentially causing confusion.

4. Be Able to Use Financial Information

• Costs: Expenses incurred by the business (e.g., rent, wages, raw materials).

• Revenue: Income from sales of goods or services.

• Profit/Loss: Profit occurs when revenue exceeds costs; loss occurs when costs exceed revenue.

• Break-even: The point where total revenue equals total costs, neither profit nor loss.

5. Understand the Relationship Between Businesses and Stakeholders

• Stakeholders: Individuals or groups affected by the business, including:

  • Owners: Seek profit and business growth.

  • Employees: Want job security, fair wages, and good working conditions.

  • Customers: Expect quality products/services at fair prices.

  • Suppliers: Rely on consistent orders and timely payments.

  • Local Community: Concerned about environmental impact and job creation.

  • Government: Interested in tax revenues and compliance with laws.

• Stakeholder Conflicts:

  • Owners may prioritize profit, while employees seek higher wages.

  • Local communities may oppose expansion due to environmental concerns.

Additional Notes:

• PESTEL Analysis: Evaluates external factors affecting a business:

  • Political: Government policies, trade regulations.

  • Economic: Inflation, unemployment, economic growth.

  • Social: Changing demographics, cultural trends.

  • Technological: Innovations, automation.

  • Environmental: Sustainability, climate change.

  • Legal: Employment laws, health and safety regulations.

• Corporate Social Responsibility (CSR): Businesses adopting ethical practices to benefit society and the environment.