GCSE Business PDF

GCSE Business Business Activity Consumers Definition: Are the final users of goods and services. They are at the end of the Providing Goods and...

GCSE Business Business Activity Consumers Definition: Are the final users of goods and services. They are at the end of the Providing Goods and distribution channel. Services Services Definition: Things you cannot touch; they Needs are non-physical intangible items. Sectors of Industry Definition: Items that you have to have in Examples: hairdressing, taxi service, education Primary: Where the raw materials are order to survive. produced, e.g. farming, mining, forestry. Personal Services: Services provided for individuals.They Examples: Food, Water, Warmth, Clothing, Shelter include services for personal grooming, house maintenance, Secondary: Where the raw materials are car repair etc. manufactured into goods, e.g. factory. Wants Commercial Services: Services that provide mainly to Tertiary: Businesses in this sector provide businesses such as transport and warehousing, but they may a service, e.g. retailer, hotel, school. Definition: Items that you would also be available to individuals such as insurance and banking. like to have but are not necessary to your survival. Chain of Production: This process links They enhance your lifestyle. the primary, secondary and tertiary Markets sectors together in the production Examples: TV, mobile phone, holidays, cars process. Definition: Where buyers and sellers meet in order to exchange goods and services, often for money. PRIMARY SECONDARY TERTIARY Goods Definition: These are tangible items that you can physically touch. FRESH CRIS PS EGGS! LETTUCE CARROTS CRISPS Consumer Goods: Goods which are produced for the final consumer. Retailers Examples: cars, food, clothes Definition: Sells goods to consumers. Small retailers buy their Factors of Production Producer (Capital) Goods: Goods which are produced stock from wholesalers but large-scale retailers buy directly for other businesses to be able to produce other goods from manufacturers. Land: The natural resources that are and services. needed to produce goods. Examples: vehicles, computers, Functions of a Retailer: robots, furniture & fixtures Display goods Labour: Physical and mental element that Promote goods is needed to produce goods and services. Durable: Are consumer goods which Sell to consumers / sell goods and services are not used at once and do not have to be bought Give customers advice / provide customer service Capital: The money (working capital) and frequently because they last for a long time. Deal with faulty goods / complaints fixed capital that is needed to produce Examples: TV, mobile phone, washing machine Distribute goods / deliver goods goods and services. Buy from wholesalers / manufacturers / suppliers Non-Durable (Single Use): are goods which Break bulk / buy in large quantities and sell in small Enterprise: These people have the ideas are immediately consumed or which have quantities to start a business and organise the other a lifespan of less than three years. Closer to consumer / Local 3 factors of production. Can offer credit  GCSE Business Business Activity Business Planning, Revenues and Costs The Business Plan Fixed Costs £ Definition: Helps in decision-making by showing Definition: Costs which always stay the same the aims and objectives of a business and the no matter how many goods are produced. strategies and requirements needed to achieve these. It also provides information to banks and Examples: other possible providers of finance to persuade Rent for the shop these to grant loans and other monies to the Monthly lease on equipment and machinery business. Payment of business rates on premises Why draw one up?: It will be needed by banks before lending Variable Costs money Turnover (Revenue) It shows how the business will be run Definition: A cost that changes with the number of It shows the business has been researched Definition: The value of sales/income/revenue goods produced / sold / output and thought through of a business/money made from selling goods or It shows opportunities and problems services. Examples: Raw materials Contents of the business plan: Calculation: Selling Price × Quantity Sold Electricity and gas Aims of business / mission statement ➔ give the business direction / goal ➔ motivate Ways to improve turnover: workers / management Increase price ➔ make more revenue per item Cash flow forecast / projected sales / sold Total Costs projected costs ➔ banks / suppliers can Reduce price ➔ may create demand / sell more see if business can pay them back ➔ T O T AL goods to increase total revenue Definition: Is the full amount of money C O ST management / owners can make decisions Increase promotion / advertising ➔ may attract spent by a business when producing £ VAR I AB LE from them more customers / sales the goods sold in a particular period. It C O ST S Owners CV ➔ identify if they have the skills / F I XED C O ST S is calculated by adding its fixed costs to experience to make business work its variable costs. U N ITS Type of ownership ➔ assess the liability v assess the advantages and disadvantages for the running of the business Calculation: Fixed Costs + Variable Costs Marketing ➔ outline the marketing mix /how the business will set price / product/ range/ TIME attract customers / market research Location / premises ➔ to assess suitability Profit £ in relation to main factors / examples Financial information ➔ how much is Definition: Is the difference between the needed ➔ cash flow ➔ balance sheet / assets total revenue of a business and the total P ROFIT and liabilities ➔ profit and loss account costs of a business, when revenue is / profit ➔ anticipated sales / revenues / greater than cost. earnings ➔ any reference to costs /e.g. MONEY wages ➔ available / alternative finance e.g. Calculation: Total Revenue – Total Costs personal savings ➔ existing debt  GCSE Business Business Activity Public sector Private sector Provides Public goods Profit incentive to be Business Ownership efficient Unlimited Liability Public Sector Not affected by recession Entrepreneurs create jobs Definition: Means that the owners of a business are where needed responsible for all of the debts of a business. Personal Definition: Organisations owned and belongings may need to be given up to pay the debts of controlled by the government. Gov’t jobs to protect Less bereuacracy and the business. environment scope for corruption Examples: NHS, Police, Education, Armed Forces Helps reduce inequality in Doesen’t require taxes to DE society fund RISK Aims & Objectives: BT 1. Provide a service REWARD 2. Improve accessibility to others 3. Avoid wasteful duplication of resources Private Sector Sole Trader NHS Definition: Businesses run by private individuals Definition: Businesses owned by one person who has Examples: sole traders, partnerships, Ltd.’s and Plc.’s unlimited liability. Other people can be employed but there is only one owner. Advantages: Advice available to Start Up businesses ☑ Profit ➔ can keep all profit / no need to share ☑ Making decisions ➔ without consulting others / will There are many places that people can go to when thinking of starting up a business. Examples include: be speedy ➔ e.g. of decision ☑ Own boss ➔ free to choose / any example Business Wales ☑ Independence ➔ can work at own pace etc. https://businesswales.gov.wales/ ☑ Easy to set up ➔ few formalities ➔ therefore This is a government run website-based information resource, for those individuals who are thinking of cheaper to set up starting a business or wanting to grow their business and are seeking information, advice and guidance. ☑ Have a job ➔ may not be able to find one elsewhere Commercial Banks Disadvantages: Many of the high street banks offer a dedicated service to small businesses and offer advice on how to ☒ Unlimited liability ➔ responsible for debts of the construct a business plan and gain financial approval. business ☒ More responsibility ➔ relies heavily on their own The Princes Trust ability to make decisions ➔ may work long hours and https://www.princes-trust.org.uk/ have limited holidays, as there is no one to cover They work with 18 to 30-year-olds to turn big ideas into a business reality through their Enterprise them programme and offer training and mentoring support to funding and resources. ☒ Limited sources of resources British Chambers of Commerce UR http://www.britishchambers.org.uk/ O m Sta bu y o rt They provide continued advice and support for local businesses. The BCC is a strong campaigning voice Y BOSS sin wn E ess B WN ye ? for the interests of business, delivers services that help business grow and is the premier private sector no s source of advice and support for international trade. O  GCSE Business Business Activity Deed of Partnership Definition: A legal document which Partnerships is an agreement between partners that sets out the rules of the VS Features: partnership, such as how profits will A business that is owned by between be divided and how the partnership 2 and 20 people will be valued if someone wants to A business that is owned/run by at leave. Why Move From A Sole Trader to a least 2 people Partnership? An unincorporated business It contains: A business with unlimited liability Names of partners Arguments in favour of a partnership: How profits are to be shared ☑ Potentially more capital ➔ ideal for example Advantages: Suggests how it can help overcome partnership if the business needs to find new premises as ☑ Raise more capital than sole traders ➔ individuals problems the current one is becoming too small may not be able to raise sufficient capital alone Shows proportion of ownership to determine ☑ A new partner brings new skills ☑ Extra skills / expertise in business ➔ may be able to distribution of profits ☑ Possibility of specialisation specialise in aspects of business to provide a better Shows duties/responsibilities of partners ☑ More ideas/problems can be shared service indicating who does what ☑ Share workload ➔ presents an opportunity ☑ More people to make decisions ➔ more considered Conditions for end of partnership to show to reduce working hours/take holidays. approach to running the business ➔ more ideas which distribution of assets ☑ Avoids need to employ somebody ➔ a risk may lead to success Liability of partners in case of business debts ➔ new staff need training ➔ not sure of their ☑ Shared responsibility and more flexibility ➔ reduce capabilities pressure on individuals such as duties / working hours ➔ able to take time off ➔ debts / losses can be shared Suggest and explain two advantages to Arguments against forming a partnership ☑ Easy to set up ➔ may involve no legal requirements ➔ (staying as a sole trader): Deed of Partnership possible Sam and Mary of being in a​ ☒ Original sole trader will lose their business partnership​ independence Disadvantages: ☒ Will need to share profits ➔ though possible ☒ Partners may disagree ➔ time used up in discussion Suggestions comparing with sole trader might to generate more ➔ decisions take longer include: ☒ Could result in disagreements/quarrels. ☒ Profits will be shared ➔ compared to a sole trade extra money to invest ➔ more people in Though many family businesses are where the owner can keep all profits to themselves business successful others end in acrimony ☒ Some partners may not work as hard as others ➔ more skills/specialisation ➔ partners can do ☒ Decision making potentially slower ➔ need may demoralise/ lead to arguments tasks for which best suited to consult/less flexibility ☒ Continuity ➔ also applies to sole trader ➔ but effect share workload ➔ share ideas ➔ two heads ☒ By employing a new worker the original sole on surviving partners if one leaves better than one trader could retain their independence and ☒ The owners will still have unlimited liability ➔ the can cover ➔ for holidays/illnesses etc. also reduce their own working hours partners will be held responsible for the debts of the share risks/losses ➔ each can input own ☒ If after a short time the new partner finds business resources they want to leave the partnership, then the original sole trader is back to square one PARTNERSHIP Suggestions comparing with limited companies might include: business affairs kept private ➔ no need to publish accounts PROFIT RISK LOSS less chance of takeover ➔ no one can buy in without owner’s permission COLLABORATION PERFORMANCE PLAN TEAMWORK SYNERGY SUCCESS WIN-WIN  GCSE Business Business Activity Public Limited Companies [Plc] STOCK Definition: Are businesses EXCHANGE which are owned by Social Enterprises Limited Liability shareholders who have limited / Co-operatives liability. Their shares are Definition: When the owners of a business are not available to others by selling to Social Enterprise: Are businesses which operate responsible for the debts of a business. Personal the general public often on the for the benefit of the community, or its workers, or belongings will not need to be given up to pay the Stock Exchange. They are generally recognised with as a charity. debts of the business. The owners however will lose plc after the business name. the money they invested in the business if it fails. Co-operative: A business organisation that is Advantages: owned by its customers / workers / producers / ☑ Limited liability ➔ liable only for money invested members ➔ they have a common purpose or aim ➔ ➔ if business fails ➔ the owner will not lose they receive dividends ➔ they share /are consulted Private Limited Companies (LTD) personal possessions in decision-making ☑ Continuity ➔ business will not end if one of the Definition: Are businesses which are owned by shareholders / owners leave Examples: Big Issue, Eden Project, shareholders who have limited liability. Their ☑ More capital ➔ by selling shares on the stock Co-operative, Devine Chocolate shares are not available to others except with the exchange ➔ may be easier to get bank loans agreement of other shareholders. They are generally ☑ Specialised management ➔ shareholder/owners Advantages: recognised with Ltd after the business name. /managers can do the work they are skilled at ☑ Community interested company ☑ Divorce of ownership and control possible ➔ ☑ Positive Public Relations Advantages: the owner may not spend all time managing ☑ Benefits society ☑ Limited liability ➔ liable only for money invested ☑ Invited shareholders ➔ able to maintain control ➔ if business fails ➔ the owner will not lose personal possessions Disadvantages: SCALE I N N O VAT I O N ☑ Continuity ➔ business will not end if one of the ☒ Cost of setting up ➔ with documents ➔ must SOCIAL R E V E NUE SO C IAL E A R NE D TRAD ITIO NAL R E S P O N S IB IL IT Y TRA DI TI ON A L have £50,000 share capital ENTERPRISE NO NPRO FIT B US I N E S S shareholders / owners leave I N V E S T ING I MPAC T ☑ More capital ➔ by selling shares ➔ may be easier ☒ Need to share profits ➔ with shareholders T RIPL E VENTU R E P HIL A NTHR OP Y SUSTAINABILITY B O T TO M ☒ Affairs not kept private ➔ need to publish CONVER G ENCE L IN E to get bank loans ☑ Specialised management ➔ shareholder / accounts ➔ more expensive to produce owners / managers can do the work they are ☒ May lose control/may need to share decision Charities skilled at making ➔ if another shareholder gains majority ☑ Divorce of ownership and control possible ➔ control Definition: Organisations  the owner may not spend all time managing ☒ Limited capital available ➔ unable to use stock set up to provide help and ☑ Invited shareholders ➔ able to maintain control market/ reduced investors available raise money for those ☒ Restriction on share ownership ➔ shareholders disadvantaged in society. Disadvantages: have to agree on sale of shares ☒ Legal procedure in setting up takes time and They are not established to make costs money profits but they can earn surpluses. ☒ Having to disclose the accounts ➔ financial information filed with the Registrar can be looked Charities can often have a narrow focus (single at by the public/competitors Dividend DI V I DE N DS issue) in what they are trying to achieve. ☒ Profits have to be shared with the other shareholders Definition: The term for the share of Charities raise the majority of their finances ☒ Slower decision-making ➔ especially if all the profits of limited companies and through voluntary donations, but more and more shareholders have to be consulted Co-operatives. charities now operate retail outlets as well.  GCSE Business Business Activity Factors to Consider when locating a business Business Location Positive Factors to think about when deciding on a business location: Discuss the possible effects that a retail Location and Site park shopping centre might have had on Cost of rent ➔ rent for out of town sites is often cheaper ➔ less than other sites the nearby traditional local shopping area. Definition: Location is a geographical area where e.g. in town centre businesses may be found whilst the site is a specific place Transport links ➔ close to main road ➔ Positive Effects: within a geographical area. motorists will find location easily ➔ as ☑ More customers attracted to area by the retail park will delivery vehicles shopping centre ➔ may want to visit traditional area Factors to consider when deciding where to locate a Easy access for customers ➔ is the ☑ Lower rents in traditional area ➔ may be lower business: entrance off a main road making it easy prices for customers ➔ new businesses attracted Cost to find ➔ close to bus stops ☑ Less congestion in traditional area ➔ may attract Availability of shop Car parks ➔ enough space ➔ less new customers ➔ better environment for locals Suitability of shop / size of the premises / state of congestion than town centres ➔ usually ☑ New businesses may open ➔ selling different premises / facilities free parking in out of town sites products ➔ greater consumer choice Infrastructure Easy access for delivery ➔ does not ☑ Locals may have greater range of goods ➔ lower Closeness of shop to market / plenty of customers disrupt car parks/customers prices Ease of access for customers / for deliveries Competition ➔ shops selling similar ☑ Employment opportunities ➔ may provide higher Passing trade / footfall goods close by ➔ might attract wages than local shops customers looking for variety Other businesses ➔ people shopping Negative Effects: close by might be attracted to the ☒ Increased competition ➔ many businesses already in business the retail park shopping centre Common services ➔ such as security, ☒ Centre larger ➔ greater range ➔ lower prices waste disposal ☒ May lead to closure of businesses ➔ empty shops appearance of traditional area ➔ more loss of custom Negative Factors to think about when ➔ locals may need to travel deciding on a business location: ☒ More congestion on local roads ➔ more difficult for Footfall locals ➔ more difficult for businesses Competition ➔ similar businesses may ☒ Employment losses ➔ workers lost to new centre ➔ Definition: The number of people passing close to the be well known ➔ may have wider range need to retrain business. These are potential customers of that business of goods ➔ lower prices ➔ people may go to the town centre No Effect: Congestion ➔ with variety of businesses No loss of custom ➔ consumer loyalty ➔ service Why locating near a competitor is not always ➔ many people using centre ➔ car provided by local businesses ➔ village shops closer Traditional area not close to main road ➔ no effect a good thing parks full ➔ customers previous bad on traffic volumes experience Distance to travel for customers Different goods sold/speciality shops Similar businesses may be well known ➔ likely to have loyal customers ➔ who will not switch ➔ may be too far ➔ cost to travel ➔ Similar business may have wider range of goods ➔ availability of transport customers more likely to visit competition Maybe more expensive ➔ than other A T I ON Similar business may have lower prices ➔ steal locations LOC A T ION customers ➔ could start a price war Must conform to standards of other LO C Potential for low sales ➔ difficult to attract businesses ➔ e.g. design of shop A T I ON LOC customers  GCSE Business Business Activity Business Growth External Growth How can the size of a business be Definition: Involves increasing the size of a business by Why do some businesses decide to grow? buying other businesses. measured? Value of sales ➔ the value of a firm's sales Increase market share ➔ increase number 1. Merger ➔ When two or more businesses join is also called its revenue or turnover ➔ the of customers in comparison to competition ➔ together to form a new business. bigger the turnover, the bigger the business increase sales revenue 2. Takeover (or Acquisition) ➔ When one business Value of the business ➔ how much is the Increase sales ➔ potential to increase profits gains control of another. business worth ➔ has the value of the share Potential economies of scale ➔ reduces costs ➔ price increased? increase profit ➔ examples such as purchasing, Number of employees ➔ how many technical, financial and marketing employees do they employ ➔ has this number Gain competitive advantage ➔ example of how increased? the business may gain an advantage such as; reducing costs, extensive advertising, access to more resources, etc. Opportunity to spread risk ➔ selling a wide range Effect of a Takeover on Various of goods/services to wider market Advantages: Stakeholders ☑ Faster growth ☑ Speed of access to new products or markets Workers: Internal (Organic) Growth ☑ Increase market share and market power Loss of jobs ➔ if closure of factories/offices ➔ ☑ Economies of scale redundancies Definition: Where the business grows by increasing ☑ Make use of the strengths of each business New skills may be needed ➔ need to retrain the size of a business by increasing its sales, revenue, ☑ Invest in fast growing emerging markets Higher incomes ➔ larger firm ➔ more profits and workforce. responsibility posts ➔ promotion Disadvantages: Relocation ➔ need to move to keep jobs ➔ Advantages: ☒ The merger or takeover does not always work ➔ it e.g. problems of relocation ☑ Less risk than external growth (e.g. through is difficult to make two different businesses work Re-apply for jobs ➔ application forms/CV’s mergers and takeovers) as one ➔interviews ☑ Can be financed through internal funds (e.g. ☒ A takeover can result in creating a bad feeling retained profits) between the new workforce ➔ some takeovers are Customers: ☑ Builds on a business’ existing strengths (e.g. hostile (where the business being taken over does Bigger business ➔ economies of scale ➔ lower brands, customers) not want to be) ➔ the takeover can often result in costs ➔ lower prices ☑ Allows the business to grow at a more sensible redundancies Less choice ➔ possible reduction in outlets ➔ rate in the long run ☒ The cultures of the two businesses may be very higher prices different ➔ it will be very difficult to agree on the Less development/innovation Disadvantages: new culture of the business ☒ Can take a long time ➔shareholders may prefer Shareholders more rapid growth of revenues and profits Economies of scale ➔ lower costs ➔ increased ☒ Requires the owners to reinvest profits into the Diversification revenue ➔ greater profits business Higher dividends ➔ higher share value ☒ Growth achieved may be dependent on the Definition: Allows a business to enter a different Error in takeover ➔ may lead to lower profits growth of the overall market market in addition to the one they are already involved Fall in share value ➔ lower dividends ☒ Hard to build market share if business is already a in. This enables the business to spread its risks should Increased market share ➔ resulting in larger leader the original business fail. profits  GCSE Business Business Activity Types of Integration Internal Economies of Scale Vertical Forwards Integration Definition: Are the benefits a business gains as a result of being large. All Occurs when a business takes over another costs can be spread between the large number of goods produced so the business to control the direct distribution of a cost per good is lower than for smaller businesses. Conglomerate businesses’ products. Integration Risk Bearing ➔ selling the product to wider / more markets ➔ if one C O F F E E SH O P Occurs when a business market fails then they can still get sales from other markets joins with another COFFEE Financial ➔ can borrow large sums of money ➔ can negotiate lower in a different type of rates of interest ➔ obtain more investment reducing costs and production process. Horizontal Integration The buying or merger increasing profits of other businesses Managerial ➔ As a business increases its output there is a need for ELECT RONICS C O M P A N Y producing the same or large administrative / hierarchy / specialist departments so can spread similar products. cost over all goods sold / produced. Technical ➔ can use machinery 24/7 ➔ efficient costs spread over all goods produced so cost of each good produced is lower Marketing ➔ as a business increases its output it can afford more expensive advertising campaigns e.g. on TV which are seen by more people, so sales increase or cost of advertising can be spread over more goods so the cost per view is lower Purchasing/Bulk Buying ➔ the more goods bought the lower the average cost of each good / cost per unit COMPETITIOR C O FFE E FAR M I N T E RN A L E C O N O M I E S O F S C A L E Vertical Backwards Integration Occurs when the suppliers of a business are taken over by that RE A LLY RIS K business. FUN F I N A N C IA L Benefit from owning businesses at different stages of production MU M S M A N A GE R IA L Control over production ➔ type e.g. petrol or diesel ➔ quality and quantity ➔ can decide on how much to produce ➔ control over costs TRY T E C HN IC A L Control over sales ➔ where to sell ➔ type of advertising ➔ amount of advertising ➔ price ➔ based on competition or market Take money at each stage of production ➔ added value ➔ earn greater profits MA KI N G M A R K E T IN G Economics of scale ➔ lower unit costs, example in context Rationalisation PIES P U RC HA S IN G Diversification ➔ reduced risks  GCSE Business Business Activity Franchisee Definition: Is a business which pays royalties for the right to sell goods or services using established FRANCHISE processes and under the name of another business. HEADQU ARTERS Franchise Advantages: Definition: Is the right given by one ☑ Business model ➔ well-known name ➔ more FRANCHISE business to another to sell goods or customers for franchisee based on reputation of OPERATORS services using its name. They should franchise be seen as a method of growth ☑ Training received ➔ franchisor able to pass on CU STOMER for the franchisor and a business knowledge / skills to franchisee ➔ to give quality LEVEL opportunity for the franchisee rather of service than a type of business organisation. ☑ Advertising by franchisor ➔ sometimes on national scale ➔ franchise becomes better Expanding via Franchising or Opening known Own Stores ☑ Well known name ➔ means more customers for Franchisor franchisee ➔ based on reputation of franchise Benefits of expansion through franchising: ☑ Equipment provided by franchisor ➔ to have many businesses already have a large number Definition: Is a business which allows a franchisee to quality / corporate image of franchises ➔ evidence suggests that they are sell using their processes, experience and name in ☑ Advice ➔ from franchisor with experience in the successful return for royalties. business receipt of royalties ☑ Finance may be provided ➔ sometimes at no need to find finance to set up ➔ role of Advantages: favourable interest franchisee ☑ Enables growth ➔ with less risk to franchisor ☑ Exclusive area ➔ so franchisee does not face no need to find sites ➔ role of franchisee ➔ becomes more widely known ➔ quicker than competition from similar business able to expand the market and sales quickly internal growth ☑ Goods to sell bought from franchisor ➔ so no expansion can be achieved relatively cheaply ☑ Franchisor receives money ➔ as franchisees pay need to find supplier ➔ common standard employees are responsibility of franchisee royalties ➔ start up fees ☑ Process of making ➔ as efficiently as possible/ can take advantage of enthusiasm/ ☑ Franchisee must buy stock from franchisor ➔ expertise commitment of franchisees increased revenue/profit for franchisor do not suffer losses of individual outlets ☑ Franchisee may be more enthusiastic than do not have effort/cost of running individual company manager ➔ benefits sales ➔ profits ➔ outlets reputation ➔ of franchisor spreading of risks ☑ Franchisee organises outlet ➔ finds location/site statistics tend to suggest that franchise ➔ planning permission ➔ pays rent ➔ pays for businesses generally do well fittings/decoration ➔ so costs lower ☑ Franchisee organises workforce ➔ recruits ➔ pays Disadvantages: Benefits of expansion through opening of own wages ➔ complies with employment law etc. ☒ Set up cost paid to franchisor ➔ to be able to shops: join franchise retain independence and in control of Disadvantages: ☒ Monthly royalties / fee paid to franchisor ➔ expansion ☒ Franchisor pays some costs ➔ training ➔ may reduce profits will keep all profits advertising ➔ design ☒ Little freedom to operate ➔ as area ➔ and if set up franchises less control over quality ➔ ☒ Less control over franchised outlet ➔ as run by goods sold chosen by franchisee need to monitor franchisee ☒ May suffer from bad reputation of other operations of franchisees ☒ Franchisor may suffer ➔ badly run by franchisees franchisees ➔ who may provide bad service avoids training and administration associated ➔ bad publicity for one affects all ☒ Difficult to go through qualification ➔ selection with setting up franchises process can reap benefits from economies of scale  GCSE Business Business Activity Suggest and explain one benefit and one problem the business MEASURE has from owning its own shops rather than selling through shops owned by other businesses. SUCCESS Benefits might include: How can the success of a business be measured? ☑ Control over how products are sold/ displayed ➔ marketing /image ☑ Control over selling price ➔ customers not being charged too much ➔ or being Profits / profit and loss account ➔ compared with previous time period charged too little ➔ against targets ➔ compared with competitors ➔ is net % profit ☑ Maximise profit ➔ made from sales ➔ as well as production greater ☑ Immediate feedback from customers ➔ on what is required ➔ on what is sold Increase in sales/turnover/rate of turnover ➔ due to improved ☑ Staff trained ➔ on specific products ➔ and will promote own products marketing ➔ was cost worth it? Increase in the number of customers ➔ indicating greater customer Problems might include: satisfaction ☒ Fewer customers ➔ fewer selling opportunities Increase in scale of production ➔ growth ➔ more workers ➔ organic/ ☒ Extra costs of setting up ➔ renting/buying shop ➔ fixtures/fittings internal ➔ acquisitions ➔ possibly leading to economies of scale ☒ Problems in finding premises ➔ suitable location ➔ planning permission Ask customers opinions ➔ customer satisfaction/customer feedback ☒ Staff training ➔ expertise ➔ cost ➔ recruitment Compare financial results with targets ➔ is business performing better ☒ Owners skills ➔ in production rather than retailing ➔may not be so efficient than expected ➔ Increased market share ➔ how much of the total ☒ Leftover stock ➔ problem for producer market does business supply ➔ has it increased? ☒ Selling costs borne by manufacturer ➔ e.g. rent/electricity/business rates, Low staff turnover ➔ employer loyalty ➔ job satisfaction promotion costs Meet objectives IF YOUR BUSINESS MEASURE GOAL THIS: IS THIS: SALES LEADS CONVERSIONS B U SI NESS SOCIAL GOOGLE P A RT N E RSH I P AWARENESS SHARES RANKING THOUGHT WHITE PAPER RETWEETS LEADERSHIP DOWNLOADS  GCSE Business Business Activity Business Enterprise Definition: The formation of a new business or development of a new good or service to be introduced to the market. The Motives of Entrepreneurs Why do people want to set up Business Enterprise Financial their own business? Generate a profit Personal ambition / satisfaction ➔ always wanted to do it ➔ building your Provide employment for self own business may help individuals Entrepreneur Financial security for self and family reach higher goals in life ➔ challenge ➔ Definition: Is a person who sets up a business by taking opportunity Non-financial on the financial risks in the hope of making a profit. Interest ➔ may be passionate about the Self satisfaction/challenge product or service they provide They are responsible for bringing together the other Be own boss To keep a family business running ➔ factors of production, land, labour and capital, to create a Fill a gap in the market taken over from family member business. ABILITY Create employment for others Reward for own efforts ➔ to make profits This involves: EXPERIENCE GROWTH ➔ earn income Social/community Can exploit an opportunity/identify a gap Initiative ➔ Taking TRAINING SKILL Social enterprises are those whose prime objective is action in the market to increase wealth to do good in society rather than to make a profit Innovation ➔ Idea COMPETENCE Provide a service to local community/ for a new good or Surplus revenue is used to support a specific cause social enterprise service LEARNING KNOWLEDGE e.g. a children’s charity or community group Use skills ➔ learnt in previous job / Identifying experience / interests / hobbies ➔ knows opportunities ➔ Spotting a gap in the market own strengths/weaknesses REWARDS of being an RISKS of being an Organising resources ➔ Planning and using a range Entrepreneur Entrepreneur Be own boss / to be in control ➔ this will of resources e.g. raising finance, employing staff, The potential personal The potential personal and give greater flexibility than employment ➔ buying materials and financial gains of financial losses facing an to be able to make own decisions being an entrepreneur entrepreneur. No work available ➔ to get a job ➔ may Functions of an Entrepreneur: be no similar business locally ➔ high Be their own boss Financial loss of income and unemployment in area They set up a business Flexible working hours money invested / they are the business Pursue an interest Low sales Use qualifications ➔ gained in school / owners / they run (manage) START-UP Unexpected costs e.g. rise college or in previous job Good customer feedback the business ➔ survival / in rent Encouragement by external/government success depends on their efforts Earn more money (profit) agencies to set up own business ➔ Unexpected events e.g. new They have the idea / show the initiative / innovation Dissatisfaction with competitor support and advice offered by agencies ➔ e.g. GO Wales, Career Wales, Princes Trust They take the risks / face the uncertainties / suffer current job Potentially long hours and the consequences of failure ➔ of e.g. not selling / low Greater work life balance stress To use redundancy pay to take demand ➔ particularly with unlimited liability advantage of the opportunity to set up a Self- esteem from building Loss of security business Qualities / characteristics of an entrepreneur ➔ something new determined / organised Pressure on friends and Easy to set up ➔ no qualifications needed Self- satisfaction family ➔ no formal documentation ➔ may need They invest / put money into the business Provide employment for Damage to reputation if fail limited finance ➔ site available They earn the profits / earn an income ➔ to fund their self and others lifestyle ➔ to further invest May lose home etc.  GCSE Business Business Activity Why do some businesses decide to remain small? Business Aims and Objectives Some business owners do not want to grow / are content to operate as I N T ER N A L EXTERNAL STAKEHOLDERS Aims and Objectives a small business ➔ without all the S T A KE H O L D ER S SUPPLIERS stresses and strains associated with a SOCIETY Aims: Is the long term objective of the business. Its aim might be growing business ➔ examples such as; EMPLOYEES to become the biggest business in its sector. financial limitations, access to resources, GOVERNMENT management etc. Aims should be SMART: MANAGER COMPANY Small businesses can survive on a M A CREDITORS S R T relatively low cost structure ➔ may OWNERS operate from home ➔ have no stock holding costs etc. SHAREHOLDERS CUSTOMERS Some serve niche markets and there is SPECIFIC MEASURABLE ACHIEVABLE REALISTIC TIMED no scope for growth ➔ the market may not be possible to expand Stakeholders Specific – Measurable – Attainable – Realistic – Time Manageable Many services can be delivered more effectively on a small scale ➔ e.g. Definition: Are individuals and organisations Objectives: Is a short or medium term target of a business needed hairdressers, personal trainers, etc. who are affected by the decisions and actions to reach its aim. An objective might be to increase sales by 20% in of a particular business the next 5 years. Some consumers like to purchase goods from specialist suppliers and outlets Customers ➔ best quality / design / Aims of For Profit Organisations: AIMS / small stores ➔ they may provide material from products bought ➔ may not Survival something unique / provide a personal buy the product Profit maximisation service which some larger organisations Workers ➔ fair treatment / pay / conditions Increase sales revenue / sales maximisation struggle to achieve ➔ may not be able to find employees ➔ Increase market share / gain more customers / customer base hard working ➔ skilful Growth / expansion / diversification / multinational Small businesses can adapt quicker The government ➔ payment of taxes / Improve reputation / increase brand awareness than large businesses ➔ adapting to keeping to various laws may add to costs Improve quality / satisfy customers change quickly such as technology, Pressure groups ➔ ethical source of Environmental / ethical aims fashion ➔ more able to satisfy customer materials / treatment of workers / the Provide jobs / community aims needs effectively than a cumbersome plc environment ➔ may effect way business is seen / costs / profits Aims of Not-For Profit Organisations: Local community ➔ pollution / congestion To serve the community / ethical aims / environmental / social ➔ effect on demand objectives/ provide jobs Suppliers ➔ prompt payment / ethical To provide services treatment ➔ may not be willing to supply To avoid wasteful duplication of resources where a natural SMALL BUSINESS Lenders / investors ➔ repayment of debts monopoly exists, such as rubbish collection and beach / interest ➔ may call in debts ➔ closure of cleaning. - N IC HE M A RKET business To control strategic industries. - O P ERA T E FRO M HO M E Owners ➔ decision making effects on the To prevent exploitation by monopoly suppliers. - A DA P T Q U IC KER business/examples To help people in need. Competitors ➔ price wars  GCSE Business Marketing Promotion Why Might a Business Charge Higher Digital Adverts Promotion Prices? Definition: Using internet technologies to provide a range of Definition: Involves information and techniques used advertising including using email, social media messages and Higher costs / better ingredients / higher rent / by businesses to make consumers aware of products banner advertisements on mobile phones and websites. cost plus and to persuade them to buy those products now and Wants more exclusive market / customers in the future. willing to pay higher price Search Engine Advertising May be well known / quality brand ➔ people Reasons for promotion: willing to pay higher prices Definition: A form of online marketing which places Create or increase awareness High marketing costs ➔ need to be regained advertisements on web pages showing the results from Inform/remind customers about the product from sale of product search engine queries. Create or change the image of the product Persuade customers to buy the product Pop-up Adverts Advantages of using pricing strategies Promotional Mix Definition: These are a form of online marketing which place to maintain the sales of their new browser windows on computer screens. Definition: The combination of promotional materials products used by a business to communicate with its customers. Right strategy will increase sales ➔ increase revenue ➔ profits will rise Prices can be applied to specific niche ➔ market segment Prices can reflect the market for the product ➔ skimming may work in some markets i.e. high 1 2 income and penetration in others Prices can take into account actions of PRODUCT PRICE THE PROMOTIONAL PUBLIC competitors ➔ stopping switching etc. MIX: RELATIONS Disadvantages of using pricing 3 4 DIRECT MARKETING PERSONAL SELLING strategies to maintain the sales of PLACE PROMOTION ADVERTISING SALES Social Media their products PROMOTION Definition: Involves websites and applications which allow Competitors may follow pricing strategy ➔ so users to create and share information, ideas and interests no effect ➔ no increase in sales with other individuals, communities and networks. Competitors may not follow pricing strategy ➔ customers not attracted Need for expensive advertising to promote Advertising Media Blogs pricing strategy ➔ so profits not as expected Some segments may not be happy with pricing Definition: The various places where advertisements Definition: Provides information and allows discussion on strategy ➔ allowing less well off to afford may be found such as television, newspapers, or the the internet with other users producing their own entries or expensive products internet. posts.  GCSE Business INVITE FANS/ Marketing FOLLOWERS INVITE SUBSCRIBERS PROVIDE A QUALITY CONTENT LINK TO USE SOCIAL Above the line Promotion MEDIA POST APPS MARKETING ON THE INTERNET Should A Business Spend Most of its Definition: Paid for communication such as BLOGGER RECOMMEND REGULAR UPDATES ON Advertising Budget on Newspaper or advertising on television, in newspapers, or on the PAGE CONTENT internet. SEO RUN A on Television Advertising? PROVIDE EXCLUSIVE CONTEST OFFERS FOR FANS ADVERTISING ON Advantages of newspapers: Examples include: SOCIAL MEDIA ☑ Relatively cheap ➔ particularly local ☑ May be kept for some time ➔ readers can be (Regional) television Below the line Promotion reminded ➔ keep for reference ☑ reaches large audience ☑ Much information can be provided ➔ e.g. sizes, ☒ but expensive Definition: Where the business has direct control over prices, where available, contact details (Local) newspapers the target or intended customers. ☑ Can be in colour ➔ memorable ☑ can be kept ☑ Can include promotions ➔ discount coupons ☒ but may be ignored (Local) magazines Examples include: Disadvantages of newspapers : ☑ targeted ➔ colour ➔ kept long time Website / internet ☒ Small readership ➔ decline in sales with ☒ but limited coverage ☑ cheap to operate ➔ wider market internet (Local) radio ☒ may be expensive to set up ☒ Temporary ➔ thrown away after use ☑ cheap broadcast media Direct / junk mail ☒ Limited display ➔ no sound, movement ☒ but limited coverage ➔ limited audience Posters ☑ may be targeted S ☒ easily ignored PROPECIA ☑ will provide detail ➔ cheap to produce MO L Point of sale displays TIO Advantages of television: ☒ but limited coverage N ☑ close to customer ☑ Big coverage ➔ nationwide ➔ at extended hours Billboards ☒ may not be seen by customer ☑ Various promotional devices ➔ psychological ☑ eye catching Shop window methods to sell ☒ but easily missed in busy traffic ☑ relevant to shop ➔ passing trade ☑ Use of sound ➔ movement ➔ colour Online ☒ But this may be limited ☑ Can have shortened reminder adverts ➔ to ☑ can be targeted reinforce message ☒ will not reach those who are not online Other examples: ☑ Can be aimed at specific markets / times ➔ e.g. Cinema during specific programmes ☑ local/captive audience ☒ can be ignored Special events e.g. food festival, Christmas market Buy one get one free / multi-buy Disadvantages of television : Loyalty cards ☒ Expensive to make ➔ and show ➔ particularly Sales or special offers / discounts / vouchers / at peak times coupons ☒ People used to / do not like TV adverts ➔ may ABOVE Parking refunds be ignored / avoided THE LINE Services e.g. free delivery / after sales service / ☒ Technology makes adverts easier to avoid ➔ MARKETING interest free credit recorders / catch up TV Sponsorship TY Public relations AL D LO R Y Free gifts CA BELOW Competitions PRO THE LINE MO MARKETING  GCSE Business Marketing Brand Definition: Unique design, sign, symbol, and/ Product or words used in creating a unique image that identifies a product and differentiates it from its Why Sell High Quality Products? competitors. Product Definition: Any good or service offered for sale Branded products tend to be: High levels of customer satisfaction / customers will be to customers. They are trusted by consumers happy with the products ➔ repeat purchasing Products usually have a high price / Differentiates the goods from rivals ➔ more competitive premium price Increase sales / market share ➔ attract customers with Product Portfolio Products are unique / differentiated / stand better products / retain existing customers out / recognised Improve image ➔ good publicity from quality ➔ use in Definition: The collection/range of all the Customers are loyal to the brand ➔ and promotion goods and services offered by a business. repeat purchase Charge higher prices ➔ increase sales revenue ➔ bigger margins / increase profit Why do businesses brand their product? Less complaints / returns ➔ reduce costs of providing new / It differentiates products from rivals ➔ replacement products VS unique ➔ rivals cannot use same brand ➔ copyright ➔ associated with business ➔