C1 Business Studies

Needs + Wants

• Needs= human requirements, met survival. Limited e.g food, healthcare, education, clothing.
• Wants= human desires, unlimited. Not essential survival. e.g mobile phone, luxury cars.
• Scarcity- wants unlimited, limited resources + money provide for them
• Scarcity= unlimited wants + limited resources
• Scarcity- not everyone have what want, choices made e.g buy new car or holiday.
• Opportunity cost= benefits sacrificed from next best alternative forgone when making choice between alternatives
• Opportunity cost= cost not choosing next best alternative/ what given up to make that choice

Entrepreneurs

• Entrepeneur- someone starts + runs business. Successful as identify need/want in market that not currently exploited by business already in market
• Financial motives
• 1) Financial reward- earn more owning firm + receive all profit than wage/salary
• 2) Lack employment opportunities- redundant/ unable find work, more incentive explore owning own firm to receive income
• 3) Government incentives- government sometimes offer these to encourage small firm start ups
• Non-financial motives
• 1) Independence- flexibility dictate own working hours + choose what type work do or don't undertake
• 2) Personal satisfaction- some wish pursue given interest/passion + therefore pursue work enjoy as well as giving satisfaction building own firm
• 3) Some prefer work themselves opposed being part organisation where have work with others or team. Some entrepreneurs feel stifles creativity
• Characteristics + skills of entrepreneurs
• 1) Risk taker- not always about new products/ideas. Do things better than done before. Risk capital + own time to create profits. Remortgage house, borrow friends + family, give up well-paid jobs to make success out of business idea.
• 2) Taking initiative + being proactive- don't panic/ allow events overwhelm them- proactive + able change as needed
• 3) Being effective organiser- ability organise effectively= central running firm effectively. Entrepreneur undertake wide range activities e.g hire labour + buy inputs such as raw materials.
• 4) Having creativity + being innovative- creativity= ability come up with innovative concepts + ideas or develop better way doing things
• 5) Being hard working- hard work leads to successful entrepreneurs. In Uk estimated work around 52 hrs average per week
• 6) Being determined + having perseverance- need be determined as new firms have low success rates. Must also have considerable perseverance + be willing keep trying if initial ideas fail

Entrepreneurs continued

• Primary sector- involves extraction + production raw materials e.g coal, wood + steel
• Secondary sector- Involves transformation raw materials into goods e.g manufacturing steel into cars
• Tertiary sector- Involves provision services to consumers + businesses e.g cinema + banking
• Importance entrepreneurs to UK economy
• 1) Innovators- bring new ideas to market + drive forward new technologies
• 2) Wealth creators- boost economic growth by providing new products which can be sold thereby boosting demand + spending in economy
• 3) Job creators- as build business, need employees so jobs created- higher levels employment in UK economy
• 4) Society builders- often give back to society. Charitable giving or work with local community e.g- schools or hospitals
• 5) Exports- if products/services sold abroad= revenue in UK economy
• 6) Taxes- all firms pay some form of taxation. Sole traders + partners liable for income tax + limited companies pay corporation tax
• Impact for businesses
• 1) Identify opportunities in market- allows new businesses developed
• 2) Have vision + willingness take risks- drive business forward
• 3) Entrepreneurs important as innovative- can provide better ways doing things- lead to new business- increase profit for firms + stakeholders
• Impact for economy
• 1) Help economy by creating new jobs. Government benefit from taxation on profits of firm + employee's income
• 2) Help boost economy by providing new products. Without entrepreneurs- economy not benefit from boost give from added business ideas + wealth creation
• 3) Increasing exports- help balance of payments

Stakeholders

• .Stakeholders- individual/ group which is affected by business + has interest in its activities
• .Shareholders- owners of limited company. Want long- term growth, giving both capital gain + increasing income. Require high dividends
• .Directors + managers- want to achieve long-term objectives of firm. Some managers want to protect their position. Senior managers- maximise salary + benefits
• .Employees/workers- receive wage + sometimes fringe benefits e.g-pension. Concerned about job security
• .Customers- vital- satisfy needs= financial success to satisfy other stakeholders. Want efficient service + quality product at competitive price. Achievement of immediate profit comes ahead long-term customer satisfaction. Like to feel needed + respected. Maintaining good public relations- vital
• .Suppliers- depend on firm success for their sales + firm depends on them to carry on their operations. Want fair price for products whilst firm wish minimise costs. Unfortunately power in market rests with buyer
• .Government- benefits from firm success as = increased tax revenue, higher employment + lower benefit payments. However- increased pollution, increased traffic + loss greenfield sites by development
• .Local community- employment opportunities, increased regional wealth, improved facilities + infrastructure. But conflicts between community + firms operate close to them- pollutions, environmental damage + loss open space. Heavy transport moving 24/7 can affect community peace + quiet

Business Structure

• .Private Sector= organisations owned by private individuals or shareholders e.g- sole traders, partnerships, co-operatives + limited companies. Mainly for profit organisations e.g- virgin, Tesco. Can also be not-for-profit organisations e.g- charities, churches.
• .Public Sector= organisations + activities owned/funded by national or local government e.g- NHS, leisure centres, libraries.
• .Public sector aims: 1) Provide quality service. 2) Provide value for money. 3) Provide for consumers needs. 4) Don't waste taxpayers money
• Why we need public sector- 1) Non-excludable- individuals cannot be prevented enjoying benefits of provision of public goods or services. e.g- street lights provided by local authority, all benefit, nobody excluded from benefits
• 2) Non-rivalry- one person gaining consumption of good or service doesn't prevent others from gaining from good or service
• Merit goods= goods + services supplied by private + public sectors, if left to private quantity supplied likely to be much less than level of provision which most efficient for economy. e.g- education + healthcare. Merit goods have positive externalities- consumption these goods will have positive effects on individual that consumes + society in general
• Public sector core role= create fair + just society + efficient economy
• Private sector aims: 1) Make profit. 2) Increase shareholder value. 3) Survival. 4) Growth/ gaining market share. 5) Ethics
• Evaluation:
• private sector-
• .Answer to shareholders/business owners who mostly motivated by profit. Forces organisation more efficient + cut waste.
• .Find easier raise capital when required than public sector. Vital in terms of investing in modernisation
• .Not directly influenced by political factors
• .Even when can't make profit, private sector charities provide necessary services to community e.g- health + education
• Public sector-
• . Provide merit goods, if left to private sector under provided e.g healthcare + Education, some can't afford. Improve quality of life
• .Private cannot charge people for use of public goods, so not provide as difficult + impossible collect money from individuals for use certain public goods e.g- street lighting

Types of ownership

• 1) Soletrader- owned by one person, owner runs business + employ any number staff to help. No legal formalities, once turnover reach 81K register for VAT + unincorporated business.
• Advantages: a) No lengthy setting up procedures or expensive administration costs- quick + easy set up as sole trader b) Profit after tax, kept by owner + don't share with partners . c) Owner complete control + free make all decisions without interference- flexibility to choose work hours
• Disadvantages: a) Unlimited liability- legally responsible debts incurred . b) Difficult raise finance as small + so risky, money for expansion from profits or savings . c) Independence= immediate pressure . May prefer share decision making, limited range skills in firm
• 2) Partnership- Partnership Act 1890- "The relation between persons carrying on business with common view to profit". 2-20 people own business + share responsibility running business + share profits. No legal formalities, but DEED OF PARTNERSHIP- states partners' rights in event of dispute
• Advantages: a) Fewer legal formalities complete when setting up as partnership compared to limited company b) Wider range skills available- each partner specialise- improve running of firm c) More finance raised than sole trader as each partner financially contribute to firm d) Partners can share workload + cover during illness + holidays
• Disadvantages: a) Unlimited liability for individual partners- equally liable for debts. Partners legally responsible for decisions + debts incurred by other partners