Business Studies Unit 1

Starting a Business
1. Why Start A Business?
  1. Pursue an interest or a hobby
  2. To escape an uninteresting job
  3. To be their own boss
  4. To make the most of a business opportunity
  5. To have a big business one day
  6. To work from home
  7. To use new technology
2. Franchise
  1. Advantages
    1. Able to sell and already recognised product
    2. Take advantage of the experience of
    3. Benefit from central services such as marketing and training
  2. Disadvantages
    1. Some of the revenue is paid to the franchisor
    2. Lacks complete ownership
    3. Could lose the franchise
  3. Why?
    1. Don't have a specific idea
    2. Less failure rate
3. Business Objectives
  1. Examples
    1. Sales growth
    2. Making a profit
    3. Survival
    4. Increase market share
    5. Social objectives
      1. ETHICS - basis on which decisions are made to impact the business
    6. OBJECTIVES MUST BE CLEAR
  2. Measuring Success
    1. PROFIT = REVENUE - COST
    2. TURNOVER - the value of sales made during a trading period, also called revenue
  3. BUSINESS AIM - a stated target for the future
  4. BUSINESS OBJECTIVE - a clearly defined target for a business to achieve over a certain amount of time
  5. STAKEHOLDERS - an individual or group with an interest in a business
    1. Influence
      1. Have an opinion of the success of the business
      2. As a result, it could affect how the business is run
      3. Maybe move location, for example
4. BUSINESS PLAN - a statement showing how a business sets out to achieve its aims and objectives
  1. Missions/aims
  2. Objectives
  3. Market environment
  4. Competition
  5. Product/service
  6. Marketing
  7. Distribution
  8. Funding
  9. Forecasts
  10. Resources
  11. Timescale
  12. Sole trader
    1. Benefits
      1. Simple and quick to set up
      2. Inexpensive to set up
      3. All profit kept by owner
      4. Owner has complete control
      5. Hours can be suited to the owner
    2. Drawbacks
      1. Unlimited liability
      2. Hard to find financial support
      3. Decisions made by one person who may not have the expertise
      4. Reliant on well being of owner
5. Risks
  1. General
    1. Business failure
    2. Loss of earnings
    3. Loss of market share
    4. Personal risks
  2. Functional
    1. Marketing
    2. Sales
    3. Operations
    4. Finance
    5. Human resources
6. Partnership
  1. Benefits
    1. Very few procedures to set up
    2. Expertise of a number of people combined
    3. More sources of finance
  2. Drawbacks
    1. Unlimited liability
    2. Profits shared
    3. Decisions shared (arguments)
    4. Maximum of 20 people
    5. Ends when 1 person leaves
7. Locating the business
  1. Cost of buying or renting a place
  2. Infrastructure (transport links, accessible)
  3. The market (how close to customers and competition)
  4. Other factors (laws, owners lifestyle, availability of premises)
Marketing
1. Market research
  1. Benefits
    1. Knowing customers needs
    2. Estimating likely demand
    3. Knowledge the size of the market
    4. Finding out about competitors
  2. Drawbacks
    1. Primary research
      1. Not asking enough customers, wrong result
      2. Too many people from same age could be biased
      3. Poorly designed questionnaire
    2. Secondary research
      1. Information out dated
      2. Information might not be exact
      3. Some sources of evidence may not be reliable
2. Market research methods
  1. Internet research
  2. Telephone survey
  3. Questionnaire
  4. Focus group
  5. Customer feedback
  6. Supplier feedback
3. Product
  1. PRODUCT RANGE - the collective term given to all products sold by the same business
  2. PRODUCT DIFFERENTIATION - attempting to make your products stand out from rivals
  3. Increase sales
  4. Increase customer loyalty
4. Price
  1. Lower the price, more products sold
  2. Make the product so good that the consumer will want to buy yours
  3. Low price = high demand
  4. Prices charged by competitors
  5. Larger business = lower cost for making the product
  6. New business = penetration pricing
5. Promotion from textbook
6. Place
  1. Wholesalers means that you can buy things in bulk so it is chaper
  2. Retailers offer a good environment for customers to buy the products
  3. E-commerce is better as it is quicker and used on a worldwide basis
  4. The right channel will balance the need to cut costs
  5. Product getting to the customer so they can access it when and where they want
  6. Bulkier items will use the most direct route
  7. Smaller items will go through a few stages
Finance
1. REVENUE = NUMBER SOLD X SELLING PRICE
2. PROFIT (or loss) = REVENUE - COSTS
3. NET CASH FLOW = RECEIPTS - PAYMENTS
  1. CLOSING BALANCE = NET CASH FLOW + OPENING BALANCE
4. CASH FLOW FORECAST
  1. It allows owner to check they will have enough cash available over the next few months to keep the business going
  2. It allows the owner to reduce future outflows of cash so that the business can avoid going out of cash
  3. It may help persuade the bank to lend the business money or give is an overdraft
  4. The forecasted numbers can be used as targets for the owner to aim at and check if the business is meeting these targets
5. CASH FLOW PROBLEMS
  1. Make payments to the supplier at a later date
  2. Encourage receipts to be paid earlier which encourages the customer to pay quicker
  3. Use a source of finance such as a loan
  4. Cut payments by finding ways of reducing costs
People in business
1. Recruitment
  1. Full Time
    1. Fewer staff in total will be needed as they will work more hours
    2. Lower recruitment and training costs
    3. Easier to manage to control fewer staff
    4. Workers will feel more secure and motivated having a full time job
    5. If a worker has two part time jobs, their loyalty may be divided
  2. Part Time
    1. The number of customers may not justify a full time worker so a part time worker could save on wages
    2. Two workers will be more flexible
    3. Part time workers can be asked to work at busy times of the day
    4. Some workers may prefer part time emplyment
2. Rewarding employees
  1. Monetary
  2. Non-monetary
    1. Vouchers
    2. Car
    3. Private health scheme
    4. Free mobile phone
3. Motivating Staff
  1. MONETARY TECHNIQUES - can motivate staff to work harder to get more money, but can cost the business a lot of money
  2. NON MONETARY TECHNIQUES
    1. Maybe hard to motivate staff without money
    2. Training programmes
      1. Training a member of staff further can benefit them and their skills but also the business
      2. The worker will feel special that they have been chosen to take part in the training programme so could feel special and an asset to the business
      3. Job satisfaction
    3. Offer responsibility
      1. The workers are shown that they are being trusted which will make their work life more interesting and they will feel a sense of achievement
4. Protecting staff through legislation
  1. Equal pay act 1970
  2. Minimum age act 1998
  3. Discrimination legislation
  4. Employment act
  5. Health and safety act
Operations management
1. Production methods
  1. Job Production
    1. Advantages
      1. One off product or service allows specific requirements to be met
      2. High prices can often be charged as customers may be prepared to pay extra for specially designed products
    2. Disadvantages
      1. Production costs can be high and it can take a long time to make the product
      2. Labour costs can be high as skilled workers are usually needed
  2. Batch production
    1. Advantages
      1. The cost of each unit is likely to be lower than job production as it is a lot more efficient to make a lot of similar items
      2. Different consumer tastes can be supplied by producing different products in different batches
    2. Disadvantages
      1. Consumers could be prepared to buy similar goods
      2. It can take a long time to switch from making a batch of one product to a batch of a different type of product
      3. Stocks of finished goods from each batch may take some time to sell
2. Operational efficiency
  1. Advantages
    1. If a business lowered its prices it may even force another business to make a loss if it reduced its prices too. This could drive a business out of business altogether
    2. If an entrepreneur expands their business other staff, they will want them to work as efficiently as possible and achieve a high quality of service to be as competitive as possible
  2. How can one firm be more operationally efficient than another?
    1. More efficient machinery
    2. More highly motivated workers can work a lot quicker and well
    3. Minimum wastage
    4. More efficient management using faster production methods
3. Production and quality
  1. Advantages
    1. More satisfied customers
    2. A better reputation
    3. Lower costs as wastage is reduced
  2. How can it be achieved?
    1. It achieves high-quality products the first time round, not just inspecting for poor quality
    2. Reducing the chances of faulty products
    3. Customers should be more satisfied and complain less
    4. Workers are involved in reaching good quality standards , which is more motivating
    5. Components, materials, and services bought into the business are checked at the point of arrival
4. Customer service
  1. Reliability
  2. Pre-sales service. Product advice on the range of options available
  3. Service at time of purpose. Product meets customers demands and they know how it works
  4. After sales service. The business can provide a helpline or web service to answer important queries

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