Priestlands

1. Business Activity GCSE Business Studies

Business Enterprise
Business Enterprise: The formation of a new business or development of a new good or service to be introduced to the market
Why do people set up their own business? Can exploit an opportunity/identify a gap in the market; Be own boss; Interest;
Personal ambition
Entrepreneur: A person who sets up a business by taking on the financial risks in the hope of making a profit
Functions of Entrepreneurs; have an idea; set up business; invest money; take risk
The Motives of Entrepreneurs
Financial; Generate a profit; financial security
Non-financial; Self-satisfaction/challenge; Be own boss; Fill a gap in the market
REWARDS of being an Entrepreneur; Be own boss; Flexible working.
RISKS of being an Entrepreneur; Low sales; Unexpected cost

Providing Goods and Services

Consumers: The final users of goods and services. They are at the end of the distribution channel
Services: Things you cannot touch; they are non-physical intangible items
Markets: Where buyers and sellers meet in order to exchange goods and services, often for money
Wants: Items that you would like to have but are not necessary to your survival. They enhance your lifestyle
Needs: Items that you have to have in order to survive
Goods: These are tangible items that you can physically touch
Consumer Goods: Goods which are produced for the final consumer. Examples: cars, food, clothes
Producer (Capital) Goods: Goods produced for other businesses to produce other goods and services e.g., vehicles, computers
Durable Goods: Consumer goods not used at once, not bought frequently as they last for a long time e.g., TV, mobile phone
Non-Durable (Single Use) Goods: Goods which are immediately consumed or which have a lifespan of less than three years.
Retailers: Sells goods to consumers. Small retailers buy their stock from wholesalers but large-scale retailers buy directly
from manufacturers
Functions of a Retailer: Display goods, promote goods, sell goods, distribute goods
Factors of Production Land: The natural resources that are needed to produce goods.
Labour: Physical and mental element that is needed to produce goods and services.
Capital: The money (working capital) and fixed capital that is needed to produce goods and services.
Enterprise: These people have the ideas to start a business and organise the other 3 factors of production

Business Ownership
Public Sector: Organisations owned and controlled by the government e.g. NHS, Police, Teachers
Private Sector: Businesses run by private individuals
Unlimited Liability: owners of a business are responsible for all of the debts of a business.
Limited Liability: owners of a business are not responsible for the debts of a business. Personal belongings will not need to be
given up to pay the debts of the business.

Sole Trader: Businesses owned by one person who has unlimited liability. People can be employed but there is only one owner
Disadvantages: Unlimited liability; More responsibility
Advantages; Keep all profit; Making decisions without consulting others; Own boss

Partnerships: Business that is owned by between 2 and 20 people; unincorporated business ; A business with unlimited liability
Advantages: More people to make decisions; Raise more capital than sole traders
Disadvantages: Partners may disagree; Profits will be shared

Deed of Partnership: A legal document which is an agreement between partners that sets out the rules of the partnership

Private Limited Companies (LTD): Businesses which are owned by shareholders who have limited liability. Their shares are not
available to others except with the agreement of other shareholders.
Advantages: Limited liability; Continuity – business will not end if one shareholder leaves;
Disadvantages: Profits have to be shared with the other shareholders; Slower decision-making

Public Limited Companies (Plc): Businesses which are owned by shareholders who have limited liability. Their shares are
available to others by selling to the general public often on the Stock Exchange
Advantages: Limited liability; More access to capital; More likely to be leant money by banks
Disadvantages: May lose control/may need to share decision making; Affairs not kept private; very expensive to set up

Social Enterprises / Co-operatives: Operate for the benefit of the community, or its workers, or as a charity.
Advantages: Community interested company; Positive Public Relations; Benefits society
Charities: Organisations set up to provide help and raise money for those disadvantaged in society
 Priestlands
1. Business Activity GCSE Business Studies

Aims and Objectives

Aims: Is the long term objective of the business. Its aim might be to become the biggest business in its sector.
SMART: Specific – Measurable – Attainable – Realistic – Time Manageable
Objectives: Short/medium term target needed to reach its aim. E.g. increase sales by 20% in the next 5 years.
Why do some businesses decide to remain small? niche markets so no scope for growth; Small businesses adapt quicker
Stakeholders: Individuals and organisations who are affected by the decisions and actions of a particular business

Business Location
Footfall: The number of people passing close to the business.
Location and Site: Location geographical area businesses found; site is a specific place within a geographical area
Factors when deciding where to locate a business; cost of rent; transport links; car parks; competition; ease of customer access

Business Planning, Revenues and Costs

Business Plan: Showing the aims and objectives of a business and strategies and requirements needed to achieve these.
Why draw one up? needed by banks to lend money; helps foresee potential problems; It shows the business has been
researched and thought through
Contents of the business plan; Aims of business; Cash flow forecast; Owners CV; Type of ownership; Marketing

Business Growth
Why do some businesses decide to grow? Increase market share; Increase sales ➔ potential to increase profits; Potential
economies of scale

Internal (Organic) Growth: Business grows by increasing the size of a business by increasing its sales, revenue, profits and
workforce
Advantages: Less risk than external growth; Allows the business to grow at a more sensible rate in the long run
Disadvantages: Can take a long time; Requires the owners to reinvest profits into the business

External Growth: Involves increasing the size of a business by buying other businesses.
Merger ➔ When two or more businesses join together to form a new business.
Takeover (or Acquisition) ➔ When one business gains control of another.
Advantages: Faster growth; Economies of scale; Increase market share and market power
Disadvantages: bad feeling between the new workforce; The cultures of the two businesses may be very different

Franchise: The right given by one business to another to sell goods or services using its name

Franchisor: A business allows a franchisee to sell using their processes, experience and name in return for royalties
Advantages: Enables growth; Franchisor receives money; Franchisee organises outlet
Disadvantages: Franchisor pays some costs; Less control over franchised outlet

Franchisee: Business pays royalties for the right to sell goods/services using established processes and under the name of
another business.
Advantages: Training received; Advertising by franchisor; Advice
Disadvantages: Monthly royalties; Little freedom to operate

Expanding via franchising or opening own stores

Expansion with franchising benefits: royalties; no need to find sites; no losses of individual outlets; enthusiasm of franchisee
Expansion through opening own shops benefits: retain independence; keep all profits; avoids training/admin

Types of Integration

Backward integration: When a business buys one of its suppliers.

Forward integration: When a business buys a company to which they previously sold their products.
Horizontal Integration: The buying or merger of other businesses producing the same or similar products
Owning shops or selling through shops owned by other businesses (Benefits); Control over how products are sold/ displayed;
Control over selling price; (Problems); Extra costs of setting up; Staff training
How can the success of a business be measured? Profits / profit and loss account; Increase in sales; Ask customers opinion;
lower staff turnover