UNIT 1 - STARTING A BUSINESS

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UNIT 1 - STARTING A BUSINESS

• AQA GCSE Business Studies

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ENTREPRENEUR

• DEFINITION

• QUALITIES

• A person who has an idea for a new business and
  is prepared to take risks to make the business
  work.

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REASONS FOR STARTING A BUSINESS
EMPLOYMENT
Starting your own business is one way of making
sure you are employed and earning a living.
PROFIT
Starting your own business allows you to keep all
the profits rather than working for owners who
keep the profits.
OWN BOSS
Starting your own business allows you to make
your own decisions rather than being accountable
to someone else.
FLEXIBILITY
Starting your own business allows you to choose
your own hours of work.
INTEREST
Starting your own business allows you to earn a
living pursuing a hobby/interest.
GAP IN MARKET
Starting your own business allows you to take
advantage of a gap in the market no other
business like it in the market
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REDUCING RISK OF BUSINESS FAILURE
Write a business plan
Help with organisation. Help monitor/evaluation
business success.
Save rather than borrow
Reduces debt and amount of interest paid on loans.
Carry out market research
Able to identify gap in market, customer
needs/wants and competition.
Choose a limited company
Limited liability only lose what you invest if
business fails.
Start a franchise
Established brand, support/training from
franchisor and marketing costs shared.
Get advise
Get advise
Find a partner
Can provide advise, expertise and finance.
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BUSINESS ACTIVITY
Businesses offer products and services for sale
to consumers.

• GOODS
• Items that can physically seen and touched e.g.
  car, furniture.

Some businesses offer both e.g. we choose a
restaurant for the atmosphere and environment (a
service) as well as the food (a good).
SERVICES A service is intangible i.e. you cannot
physically touch it.
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GAP IN THE MARKET

• BENEFITS

• DEFINITION

• Business produces a product or identifies a
  service which is not yet available on the market
  for consumers to purchase.

• Charger higher price for product/service less
  competition.
• Increased sales less competition.
• More customers selling unique product/service.

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BUSINESS SECTORS
PRIMARY SECTOR Made up of organisations in first
stage of production. Extract raw materials. Land
is used to grow items.
SECONDARY SECTOR Made up of organisations in the
second stage of production. Primary sector
resources are used to manufacture products.
TERTIARY SECTOR Made up of organisations that
sell products and provide services.
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CHANGING TRENDS
PRIMARY SECTOR
Numbers employed has decreased
Less natural resources to extract. Land taken for
housing/business developments.
SECONDARY SECTOR
Numbers employed has decreased
Cheaper to manufacture abroad. More
machinery/robotics used in production process.
TERTIARY SECTOR
Numbers employed has increased
More demand for products and services.
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FRANCHISE

• A franchise occurs when a franchisor sells an
  existing business idea to a franchisee. A
  franchisor is the seller of the franchise. A
  franchisee is the buyer of the franchise.

ADVANTAGES DISADVANTAGES
Good chance of success name already established/well known. Franchisee cannot make many decisions must be run according to the rule of the franchisor.
Advise and assistance (e.g. training, marketing) given franchisor will have experience. Franchisee will never feel business is there own has been established by franchisor.
Reduced marketing costs - franchisor responsible for market research, product development and promoting the business Costly way to run a business fees, royalties ( profits) and expensive stock must be paid for by the franchisee.
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BUSINESS OBJECTIVES

• DEFINITION

• OBJECTIVES

• An objective (or aim) is a target that is set for
  a business to achieve.

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BUSINESS OBJECTIVES

• WHY SET?

• EFFECTIVENESS

• Helps with decision making and establishing
  priorities.
• Helps investors understand the direction of the
  business.
• Provides a target so that actual results can be
  compared with planned results.
• Can motivate everyone connected with the business
  because they know what they are trying to do.

• To be effective, an objective must clearly state
• What the target is e.g. increase profit by 20
• When it has to be achieved e.g. within 2 years
• Who is to achieve it i.e. who is in charge of
  making sure the target is hit
• How to achieve it i.e. what is and what is not
  acceptable behaviour

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MARKET SHARE

• DEFINITION

• CALCULATING

• Market share is used by
• businesses to
• determine their
• competitive strength in
• a sector. Market
• share is measured by
• sales revenue or sales
• volume (number of
• products sold).

• sale of product x 100
• total market sales
• Zone4Sports
• 28 x 100 35 market share
• 80

Total sales m
Zone4Sports 28
Kinetics 20
RyderZee 16
Harringtons 16
Total market sales 80
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SOCIAL ENTERPRISE

• A social enterprise is a business which trades to
  tackle social problems, improve communities,
  peoples lives or the environment. Profits are
  re-invested to benefit society, instead of
  keeping it for private gain.

The Big Issue Magazine - Offers homeless people
the opportunity to earn a living by selling it
Eden project in Cornwall Focuses on
environmental concerns
Fairtrade As it says in the image above
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STAKEHOLDERS

• DEFINITION

• EXAMPLES

• Are groups of people that are involved in
  business activity either directly (internal) or
  indirectly (external).

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STAKEHOLDER INTEREST
STAKEHOLDER INTEREST
OWNERS Wants to make maximum profit from the business.
CUSTOMERS Wants a business to sell quality products and provide good customer service.
EMPLOYEES Wants the business to do well so there is job security, chance for promotion and to earn a good wage.
LOCAL COMMUNITY Wants the business to behave responsibly e.g. employ local people, reduce noise and traffic congestion.
GOVERNMENT Wants business to succeed. Successful businesses will employ more people and pay more tax.
SUPPLIERS Wants to be paid on time.
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STAKEHOLDER CONFLICT
Conflict
MANAGER Wants to raise selling prices to maximise
profits
CUSTOMER Will not want to pay more for their goods
OWNER Wants to re-invest profits into the business
SHAREHOLDER Will want the profits shared out to
them
OWNER Wants to pay lower wages to their employees
to maximise profits
TRADE UNION Trade unions who represent the
employees will not be happy with this
OWNER Wants to buy stock from suppliers at
minimum prices
SUPPLIER Will want to make maximum profits.
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BUSINESS PLAN

• DEFINITION

• SECTIONS

• A document setting out what the business does at
  present, plus what it intends to achieve in the
  future and how this will be accomplished.

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BUSINESS PLAN

• BENEFITS

• DIFFICULTIES

• Helps a business get a bank loan.
• Helps keep a business organised.
• Allows success to be monitored and improvements
  made.
• A business can plan contingencies.

• Lack of experience people starting a business
  may not have required skills to plan ahead.
• Uncertainty not always easy to look ahead and
  predict what is going to happen in the market.

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LEGAL STRUCTURES

• SOLE TRADER
• Business owned and managed by one person.

PARTNERSHIP Business owned and run by 2 to 20
people.
LTD Owned by shareholders. Shareholders tend to
be family members or friends.
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SOLE TRADER

• HOW TO SET UP

There are no legal requirement to set up a sole
trader business.
ADVANTAGES DISADVANTAGES
Quick and easy to set up no complicated forms or procedures to follow. Unlimited liability if the business fails may have to sell personal possessions to cover debts.
Decisions can be made quickly do not have to get agreement from anyone else. Difficult to raise money to expand seen more of a risk by lenders.
Keep all the profits no one else to share them with. Lack of continuity if sole trader dies the business ends as well.
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PARTNERSHIP

• HOW TO SET UP

Partners must draw up a Deed of Partnership.
Outlines who is part of the partnership, how much
capital each partner has put in, how profits are
shared, duties of each partner and how can join
and leave the partnership.
ADVANTAGES DISADVANTAGES
Easy to raise extra capital all partners can contribute. Partners have unlimited liability see earlier definition.
More expertise individual partners can specialise in different areas. Decisions can take longer partners may disagree about the running of the business.
Less pressure for each partner problems and ideas can be shared. Profits must be shared this can cause resentment if one partner feels they have contributed more to the business.
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LTD

• HOW TO SET UP

Memorandum of Association sets out the name of
the company, purpose, where it is registered and
statement of firms activities. Articles of
Association sets out voting rights of
shareholders, how profits are distributed, how
directors are elected and duties/powers of
directors.
ADVANTAGES DISADVANTAGES
Limited liability if the business fails shareholders will only lose the amount they invest. Personal possessions will not be at risk. Difficult and more expensive to set up complicated paperwork.
Business can continue if a shareholder dies shareholders shares can be transferred to someone else. Cannot sell shares on the Stock Market limits the amount of capital can be raised.
Easy to raise extra capital to expand more shares can be sold in the company. Accounts must be checked by an independent accountant expensive.
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FACTORS INFLUENCING LOCATION

• RETAIL

• MANUFACTORING

• Water and power supply
• Climate (if needed for growing)
• Availability of government grants
• Transport and communication links
• Closeness to raw materials
• Availability of land and labour
• Closeness to other manufactures/suppliers

• Cost of rent
• Available premises
• Crime/security
• Customer parking
• Competition
• Transport links
• Communication links (internet access)
• Type and number of shoppers
• Availability of labour