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Paper 1 info:

• 2 sections 

  • A - do all questions 

  • B - ONE  10 mark question

• List whatever you want - credit for what's right 

• Brush up on the earlier stuff 

Economic of scale - as a company grows, the cost of production goes down 

• Managing 

• Buying 

• Technical - 

• Financial - lower interest rates  

Public sector - owned by government 

Public company - shares on the company 

Limited liability - protected

Unlimited liability - not protected,falls on owner

Gig economy - (side-hustle) 

The private sector - consists of businesses owned and run by private individuals and organizations that usually, but not always, aim to earn a profit. They operate independently of the government

The public sector - consists of those organizations controlled by a regional and/or national government, with the main aim being to provide essential goods and services for the general public.

For-profit social enterprises 

• Social enterprises aim to primarily provide a solution to important social or environmental issues.

• A sole trader (also known as a sole proprietor) is a commercial for-profit business owned by a single person. Although this person can employ as many people as needed, the sole trader is the only owner of the business.

Joint venture - two companies have a baby 

Strategies are long-term objectives 

Tactics are day to day things to achieve objectives 

unincorporated business - one person or multiple people, unlimited liability 

Incorporated business - limited liability, bigger, government restrictions, double taxation 

A partnership is a commercial business that strives to earn a profit for its owners. It is owned by two or more people.

• For an ordinary partnership, the maximum number of partners is usually capped at twenty owners, although this does vary from one country to another.

1: What is a business 

• Business: a decision- making organization involved in the process of using inputs to produce goods and/or services 

• Inputs: labour, land, capital, enterprise (anything needed to make something 

• Processes: (human resources, finance, marketing, operations management (makes products worth selling)

• Outputs: gods, services (products in general) 

• Services: resources used in the production process collectively known as: factors of production 

• Cost of output: adding value 

• Added value: values gets added to goods as it goes through production 

• Customer - buys 

• Consumer - uses 

Functional Area of Business 

Human resource management: 

• Manages the personnel of the organization 

• Personnel issues: workforce planning, recruitment, training appraises, dismissals, redundancies, outsourcing HR strategies 

Finance and accounts 

• Manages the organization's money 

• Accurate recording and reporting of financial documents must take place to : 

1. Comply with legal requirements 

2. Inform stakeholders (shareholders and potential investors) 

Marketing

• Responsible for identifying and meeting the needs and wants of customers

• product, price, place, promotion, people, processes, physical evidence 

Operations management 

• Responsible for the process of converting raw materials and components into finished goods 

• Operations management also applies to the process of providing services to customers 

Sectors of production 

Primary sector 

• Business that are involved in the extraction, harvesting, and conversion of natural resources (not technology focused) 

  • Farming, mining 

Secondary sector

• Businesses that are involved in the manufacturing of construction of products

  • Car manufacturers 

Tertiary sector 

• Businesses that specialize in provisioning services to a general population 

  • Retail stores, hospitals 

Quaternary sector 

• Businesses that are involved in intellectual, knowledge-based activities that generate and share information (technologically advanced)

Chain of production 

• Links all the production sectors by tracking the stages of an item’s production from the extraction of raw materials all the way through to it being delivered the consumer 

• As the item makes its way through the chain of production, value is added to the item 

* Extraction → manufacturing → services → consumers

• Entrepreneur: an individual who plans, organizes, and manages a business taking on financial risks in doing so 

Reasons for starting a business (GET CASH) 

• Growth - capital growth is a reward for starting a business 

• Earning - earn far in excess of salaries from any other occupation that they might pursue 

• Transference and inheritance - next generation of children to secure the future of the younger generation 

• Challenge - some people view businesses to be an enjoyable challenge 

• Autonomy - independence, freedom of choice, and flexibility in how a business is run by the self-employed 

• Security - more job security being self-employed 

• Hobbies - turn one’s hobby into a business 

1.2: Types of business entities 

• Private sector: organizations owned and controlled by private individuals and businesses 

  • Main aim - make profit 

    • Profit - the positive difference between a firm’s sales revenue and costs 

    • Sales revenue - money earned from selling its products 

    • Cost - production expenditures such as wages and rent 

• Public sector: Organizations owned and controlled by the government 

  • Main aim - to provide essential goods and services 

• State-owned services - organizations that are partially or wholly owned by the government 

• Reasons for public sector business activity 

  • Ensure access to basics services 

  • Avoid wasteful competition as the government is able to achieve huge economies of scale 

  • To project citizens and businesses through institutions such as the police 

  • To create employment opportunities 

• Profit-based organizations differ in terms of two factors: 

  • Ownership 

  • Control

• Sole traders - businesses owned by individuals who own and run a personal business

  • Sole trader - most common business ownership that is relatively easy to set up 

• Partnerships - at least 1 partner must have unlimited liability, start-up finance is raised by personal funds, deed or partnership (how profits/losses are shared between partners) 

  • Partnership - owned by two or more people 

  • Ordinary partnerships - max number of owners is 20 - varies by country 

  • Silent partners - investors eligible for a portion of any profits earned by a partnership invest by capital 

  • Deed of partnerships - legal contract that includes…

Companies 

• Joint-stock companies - corporations that are jointly held by numerous entities 

• Limited liability - shareholders do not stand to lose personal belongings if the company goes into bankruptcy 

• Board of directors- elected by shareholders to run company on their behalf 

• Private limited company - held by general public, no prior permission by other shareholders is required for a shareholder to sell their shares 

Companies - owned by shareholders (only private and public companies) 

Business- includes other forms of business entities such as sole traders and partners 

• Two documents that are required before accompany can begin trading 

• Memorandum of association 

• Articles of association 

Publicly held companies 

• Can sell shares on the stock exchange 

• Shares are held by the general public 

• No prior permission by other shareholders is required for a shareholder to sell their shares 

• Flotation: term used to describe when a publicly held company first sells all or part of its business to external investors 

• IPO: process of flotation 

• Social enterprises: revenue generating businesses with social objectives at the core of their operations 

  • Three main types: 

• Private-sector companies 

  • For profit social enterprises reinvest or donate any surplus to create positive social changes 

    • Economic aims - to earn profit (or surplus) and to reinvest 

    • Social aims - to provide benefits to people in society such as job opportunities in the local community and to support less-advantaged members of society 

    • Environmental aims - to protect the planet by operating in environmentally responsible ways

• Public sector companies 

  • State-owned enterprises run in a commercial way 

    • Formed by government through legal means and regulated as they participate commercial business activities for financial gain 

    • Help to raise government revenues and provide essential services to society that may be inefficient and undesirable if left solely to the private sector 

• Cooperatives - for-profit social enterprises owned and run by their members, such as employees or customers, with the common goal of creating value for their members by acting in a socially responsible way 

  • Consumer cooperatives- owned by the customers who buy the goods and/or services for personal use, ex: credit union 

  • Worker cooperatives -set up, owned, and organized by employee members 

  • Producer cooperatives - cooperatives that join and support each other to process or market their products 

• Non-governmental organization - private organizations that pursue activities to relieve suffering and promote interest of the poor 

  • Operational NGOs - established from a given objective or purpose 

  • Advocacy NGOs - an aggressive approach to promote or defend a particular case 

• Charities: NOT for-profit social enterprises 

1.3: Business Objectives

• Vision statement- an outline of an organization's aspirations in the distant future: focus on the long term

• Mission statement- simple declaration of the underlying purpose of an organization's existence and its core values; focus on the  medium to long term; clearly defined and realistically achievable. 

• Objectives- to measure control, to motivate, to direct the goals or targets an organization strives to achieve. 

• Strategies- plans of action to achieve the objectives of an organization; medium to long term goals that are expressed significantly

• Tactics- methods used to enact strategies of an organization (short-term)

• Corporate social responsibility- helps a company assess and address its impact on society and the environment 

1.4: Stakeholders

• Stakeholder: any individual, group, or organization with a direct interest in and/or is affected by the activities of the business.

  • Internal Stakeholders

    • Employees

    • Managers + Directors

    • Shareholders

      • Objectives of Shareholders: 

        • Maximize dividends 

        • Achieve capital gain in the value of shares - (make share price go up)

  • External Shareholders: not part of a business but still have a direct interest

    • Customers: care about quality, service, and value.

    • Suppliers

    • Financiers: Financial institutions and individual investors who provide sources of finance for a firm.

    • Pressure groups: a group of people w/ a common interest who seek to place demands on organizations to gain influence and change behavior. Interest of a pressure group depends on the purpose of said group.

      • Possible actions taken by pressure groups

        • Boycotting - refusal to buy certain products because of conflicts, ex starbucks boycott bc of gaza.

        • Lobbying - using influential figures, or the group’s own influence to influence laws, companies, people. Usually done through questionable incentivization and persuasion.

        • PR - getting positive publicity about a specific opinion or cause; ex: using celebs as ambassadors.

    • Competitors

      • Why are competitors interested in my business?

        • Innovation

        • Competitive threats

        • Comparing and benchmarking performance

    • Government: big influence on companies

      • They assure accurate tax reporting, fair business practices, employee safety and health rights, and consumer protection laws.

• Stakeholder conflict - the inability of an org to meet all stakeholder demands at once. All stakeholders have some varying needs.

  • Ex: laying off employees reduces costs, increases profit and at times efficiency helping the company and its shareholders, however employees are hurt and scared.

  • Issues to consider:

    • Type of organization - different priorities

    • Aims and objectives

    • How powerful is each stakeholder, when and why do they matter.

• Stakeholder mapping

  • Influence + Interest 

  • High + High = Top priority

  • High + Low = Needs care

  • Low + High = Need assistance to participate

  • Low + Low = Low priority

1.5: Growth & Evolution

• Economies of Scale

  • The average costs of production decrease as the organization increases the size of its operations 

• Various Tools

  • Average Cost

  • Average Fixed Cost

  • Average Variable Cost

  • Optimal Level of output

    • The point where a company has the lowest cost as well as the greatest amount of output for that low cost

• Internal Economies of Scale

  • Technical Economies 

    • Using sophisticated capital and machinery to mass produce

  • Financial Economies

    • Being able to borrow large sums of money especially as you get larger

  • Managerial Economies

    • Assigning different roles to allow for faster and more efficient production

  • Specialization Economies

    • The division of labor and their special jobs

  • Marketing Economies

    • Benefiting from a lower average cost by selling in bulk

  • Purchasing Economies

    • Being able to buy in large amounts thus lowering prices

  • Risk-Bearing Economies

    • Spreading risk across several different sectors

• External Economies of Scale

  • Technological Economies

  • Transportation Economies

  • Regional Specialty Economies

1.6 Multinational Companies

• Multinational company: an organization that operates in two or more countries. Benefits due to economies of scale. 

• Transnational corporation: A company with regional head offices rather than 1 international base. 

• Host Country: Country that allows the company to set up headquarters (Use common sense to know the positives and negatives of having HQ in a different country)

3.1: Intro to Finance

• Capital Expenditure: Finance spent on assets. Items used repeatedly in the long term to generate sales revenue

  • Furniture

  • Machines

  • Intellectual property

  • Mergers

• Fixed Assets: Assets purchased for long-term use, such as property, buildings, and equipment.

• Collateral: Financial guarantees for a lender.

  • Asset(s) pledged by a borrower to a lender as security for a loan, ensuring the lender can recoup their investment if the borrower does not repay.

• Revenue Expenditure: Finance spent on the daily running of a business

  • Advertising

  • Insurance

  • Raw materials/supplies

  • Wages & salaries.

3.2 Sources of Finance 

• Role/Sources of Finance: Internal and external

• INTERNAL

• Retained Profits: the value of profits that a business keeps to use within the organization 

• Sale of Assets: existing businesses can sell their dormant assets such as selling obsolete machinery and old computer equipment. 

• EXTERNAL

• Share Capital: the made from selling shares in a limited liability company

  • IPO: When businesses first go public and put their shares on the stock exchange for the first time 

  • Share issue: existing publicly held companies can raise further finance by selling more shares

• Loan Capital: refers to medium-long-term sources of finance from lenders

  • Mortgages: Secured loans for the purchase of property 

  • Business development loan: These highly flexible loans are catered to meet the specific needs of the borrower to develop aspects of their business. 

  • Debentures: long term loans 

• Overdrafts: financial service that allows a business to temporarily take out more money than they have on their account. 

• Trade Credit: source of finance that allows a business to postpone payments or to buy now and play later 

  • Creditors offer trade credit and payed by debtors

• Trade Credit:

3.3: Costs and Revenues

• Not included: price, cost, fixed costs

• Set-up Costs: The items of expenditure needed to start a business

• Running Costs: Ongoing costs of operating a business

• Fixed Costs (FC): Costs of production that a business has to pay regardless of how much it produces or sells

• Variable Costs (VC): Costs of production that change in proportion with level of output or sales

• Total Costs (TC): Sum of variable and fixed costs 

• Direct Costs: Costs specifically attributed to the production or sale of a particular good or service

• Indirect Costs (Overheads): Costs that do not directly relate to the production or sale of a specific product

Cost Formulas

Key: Q = Quantity (or Level of Output)

Note: These formulas are not given for the exam. 

• Sales Revenue: The money coming into a business, usually from the sales of goods and/or services

• Profit: Exists if there is a positive difference between total revenues and total costs

Revenue Formulas

Key: Q = Quantity (or Level of Output)

Note: These formulas are not given for the exam. 

• Revenue Streams: Refers to the various sources of revenue for a business

  • Membership fees

  • Subscriptions

  • Royalties

  • Interest

  • Dividends

3.4: Financial Accounts

• Two financial accounts- profit and loss account and balance sheet

1. Profit and loss account (income statement) 

• Profit- positive difference between a firm’s revenues and costs 

• Revenue- the inflows of money from ordinary trading activities charges to customers and royalties

• Costs- outflows of money from a business arising from its operations such as wages, salaries, rents, and purchase of stocks

• Three sections to an income statement- trading account, profit and loss account, appropriation account 

2. Balance sheet

• Assets- items of monetary value that are owned by business such as cash, stocks, and property (fixed and current) 

• Liabilities- a legal o of a business to repay its lenders or suppliers at a later date 

4.1: Introduction to Marketing 

• Needs: essentials that all humans must have to survive 

• Wants: human desires (things that people would like to have) 

• Marketing: the management process involved in identifying, anticipating, and satisfying consumer requirements profitability 

• Market orientation 

  • Will look to the market to see what consumers need and want (outward looking)  

  • A firm will produce products to fulfill  those needs and wants

• Product orientation 

  • Will look at what they can make instead of making products that they can sell 

  • Firms focus on making a product that they hope will be demanded by the market 

• Market share: an organization's share of the total value of sales within a specific industry 

  • Formula: firm’s sales revenue/industry/industry sales revenue x 100

• Market growth: refers to the rate at which the size of a market is increasing 

  • Formula: current market size-original market size/organization market size x 100

4.2: Marketing Planning 

• Marketing plan: outlines a firm’s marketing objectives and the marketing strategies used to achieve these objectives 

• Marketing audit: break down of a business's market standing 

• Market planning: the systematic process of devising marketing objectives and appropriate marketing strategies to achieve these goals 

• Premium products: high price, high quality 

• Economy products: low price, low quality 

• Bargain products: low price, high quality (short-term use) 

• Cowboy products: high price, low quality 

• Repositioning: overcome undesirable customer perceptions 

• Niche marketing: targets a specific and well-defined market segment 

  • A market segment is  distinct group of customers with similar characteristics (age and gender) and similar needs and wants 

    • Demographic factors 

    • Pyschographic factors 

    • Geographic factors 

• Mass marketing: targets multiple market segments to maximize sales 

• USP: unique selling point - any aspect of a business product or brand that makes it stand out from competitors 

• Differentiation: the act of distinguishing a business or it's products from rivals in the industry 

4.4: Market Research 

• Market Research: marketing activities designed to discover the opinions, beliefs, and preferences of potential and existing customers

  • Ad-hoc research: takes place on “as when necessary basis” (specific marketing problems or issues) 

  • Continuous research: regular and ongoing basis 

• Primary research: involves gathering new data first-hand for a specific purpose 

  • Surveys 

  • Interviews 

  • Focus groups (small discussion groups to gain insight and opinions) 

  • Observations 

• Secondary research: involves the collection of second-hand data and info that already exists 

  • Includes both internal sources (gathered by the organization itself) external sources (gathered outside of the business) 

  • Market analyses 

  • Academic journals 

  • Government publications

  • Media articles 

4.5: Place

• Place (distribution): refers to business activities that make the product available to consumers 

• Channel of distribution:  the means used by firms to ensure customers gain access to their product 

  • Intermediation - the process of using intermediaries in the distribution channel between the manufacturer and consumers of a product 

  • Intermediaries - are agents or other businesses (distributors) that act as a middle person in the distribution channel 

  • Zero-level channel: leaves out any intermediaries; the producer sells directly to the customer 

  • One-level channel: has one intermediary, such as retailers, agents, or distributors being used to sell a manufacturer's products to customers 

  • Two-level channel:use two intermediaries such as the use of wholesalers and retailers get products to consumers 

• Wholesalers: businesses that buy large quantities of a product from a manufacturer and then break the bulk into smaller units for resale, mainly to retailers 

• Distributors: independent and specialist businesses that trade in the products of only a few manufacturers 

• Agents: negotiators who act on behalf of buyers and vendors (sellers) of a product 

• Retailers: sellers of products to the final consumer 

• Specialty channels of distribution: any indirect way to distribute products that do not involve retails 

  • E-commerce: trading via the internet 

  • Vending machines: specialist machines that stock products for sale

  • Mail order: involves a business sending promotional material such as a catalogue, via the postal system, to entice customers to buy a firm’s products 

    • Direct mail: the use of unsolicited advertising media sent to prospective clients via the main 

• Multi-channel distribution strategy: when businesses use a range of channels to distribute their products 

4.5: Product 

• Product: refers to any good or service that serves to satisfy the needs and wants of customers 

  • Consumer products: purchased by private individuals for their personal use 

  • Producer products: purchased by businesses to use in the production process 

• Product Life Cycle 

1. Research and Development 

   1. Companies invest a lot of money developing a new idea into a product 

2. Launch (introduction) 

   1. Procuts are introduced to the market

   2. Sales increase slowly 

   3. Intensive promotion takes place, products are not profitable 

   4. Buyers here are known as innovators 

3. Growth 

   1. Rapid increase in sales due to the increased consumer awareness 

   2. More channels of distribution 

   3. Strong profits 

   4. Buyers here are known as early adopters

4. Maturity 

   1. Dales increasing at a slower rate and peak 

   2. Economies of scale are possible 

   3. Product lines are extended (with more product versions and variations) 

   4. Buyers here are known as the majority 

5. Decline 

   1. Sales and profits fall 

   2. Demand is low due to changing fashion and tastes 

   3. Buyers in this stage are known as laggards 

• BCG Matrix: 

• Saturation: where there are too many competitors in the market and sales revenues have peaked or started to fall 

• Branding: promotion of a product or company through advertising and distinctive design 

• Trademark: a word, phrase, symbol, design, etc. that identifies goods and services 

• Brand awareness: measures the extent to which potential customers, or the public, recognize a particular brand

• Brand development: the marketing process of improving and enlarging the brand name 

• Brand loyalty: customers buy the same brand time and time again over other brands 

• Brand switching: customers turn to alternative brands 

• Customer loyalty schemes: form of sales promotion used to entice customers to stick to the brand by rewarding devoted customers 

• Brand value: the premium that customers are willing to pay for a brand name over the value of the product itself, advantages: 

  • Higher market share: indicator of the level of brand development and loyalty 

  • Premium prices: increased brand value allow a business to change high prices for products because customers feel they are paying for value added that brand carries 

  • Higher barriers to entry: brand value makes it more difficult for new businesses to enter the market and compete 

  • Logos: gain value and appeal with increased brand value 

• Global brands: the same product is sold with exactly the same or similar marketing strategies used overseas 

• Glocalized: global brands that cater for local preferences whilst retaining the core elements of the global brand 

• Marketing myopia: when business become complacent about their product strategy and fail to keep up with the market 

• Multi-brand strategy: a business developing two or more brands in the same product category 

• Product cannibalization: when brands from the same business directly compete 

4.5: Promotion

• Promotion: methods of communicating messages to the market; usually with the intention of selling a firm's goods

FIVE GOALS:

• Remind

• Attract

• Persuade

• Inform

• Develop

Types of Promotion:

• Above the Line Promotion: Any form of paid-for promotional method through independent mass media sources

  • Television Advertising

  • Radio Advertising

  • Cinema

  • Newspapers

  • Magazines

  • Outdoor (billboards)

*For the advantages and disadvantages, consider the location, costs, focus, and amount of reach it gets.

• Below the Line Promotion: The use of non-mass media promotional activities allowing the business to have direct control

  • Direct Marketing

    • Promotional activities that aim to sell straight to a customer

  • Personal Selling

    • Promotional activities that rely on sales reps directly persuading customers to buy

  • Sales Promotions

    • BOGOF

    • Free Gifts/Commodities

    • Discount Coupons

  • Point of Sales Promotion

    • Promotion of a product where the customer buys it

  • Publicity

    • Process of promoting a business and it's products by getting media coverage without paying for it

  • Trade Shows

    • Enable exhibitors to conduct live demonstrations to demonstrate and promote products

  • Sponsorships

    • Business provides financial funds/resources to support an event for publicity and advertising space

  • Word-of-Mouth

    • Spreading information through verbal communication (CHEAP)

  • Guerilla Marketing

    • Unconventional but creative methods of promotion designed to make the audience unaware that they are being targeted

  • Packaging

    • Presenting products in a good way

*For the advantages and disadvantages, consider the location, costs, focus, and size of business.

• Public Relations: Marketing activities aimed at establishing and promoting the desired image of an organization

  • Launch parties

  • Press conferences

  • Book signing

• Point of Sales: The hardware and software merchant use to process payments and purchases

• Impulse Buying: Attracting customers to buy products that they are not necessarily interested in

4.5: Price 

• Price - the amount paid by a customer to purchase a good or service 

• Cost-plus (mark-up) pricing - involves working out the average cost per unit of a product and then adding apercentage mark-up 

  • Mark-up (profit-margin) - the revenue a company makes after paying the cost of goods sold. The retail price for a product mminus it's cost 

  • Advantage of mark-up pricing - simplistic and easy to calculate 

  • Disadvanatge of mark-up pricing - Does not consider the needs of customers