Post on 14-Apr-2018
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BUSS 1
Entrepreneurs are people who:
Take a calculated risk
Passionate and has belief in enterprise
Good planning and leadership skills.
Can identify good opportunities
Responds to market conditions
Understands that the early days can be tough
Bad entrepreneurs:
Lazy
Take uncalculated risk
No trust or investment
Ignore risk
Rush to make big changes
Nave
of all business start-ups fail.
Motives of an entrepreneur:
1. Control over working life
2. Spotted an opportunity
3. Building on experience
4. Made redundant
5. To make lots of money
6. Couldnt find a job
Why make a business in the UK?
Long term; low interest loans
Government assistance
Stable government
Wealthier people in the UK
Increased affluence
Attitudes towards enterprise:
Risk is the chance of loss or damage.
Business could fail and lose investment
Unlimited companies are liable for debt
Harder to find work or start again if the
business were to fail.
Many entrepreneurs are over optimistic
Many competitors can be aggressive
Start ups fail because of inefficient customerdemand; poor execution of idea and economic
change.
Government support
Boosts a countries economy and productivity
Reduces taxes
Uncomplicated the tax system
Reduces he barriers to investment for small
businesses
Improves support for small business such as
business link
Promotes a change in the UKs enterprise
culture.
As business productivity and demand increase
and therefore the costs decreases
proportionally, the extra money is spent on:
Expanding the business
Lowering price
Increase the range of goods.
This increases competition and makes for a happygovernment.
External finance:
Bank loans/overdraft/mortgage
Friends and family
Joint venture/partnership
External investor (business angel, capital
investment, venture capitalist)
Venture capitalist: high risk; high reward
investment.
Internal finance:
Personal savings
Retained profit
Selling shares
Selling assets
Sell and lease back
Financial advisors:
Advice on where to invest savings (e.g. stocks,
property, in business or wine and art)
Analyse situation and give advice:
Cut back or increase income
Financial planning
Profit=revenue costs
Revenue=selling price x volume
Costs=Variable costs + fixed costs
Unit contribution=price costs per unit
Contribution=revenue variable costs
BEP=Fixed Cots/Unit contribution
Demand for a product depends on:
Price
Income Fashion and trend
Competitor action
Social and demographic influences
Seasonal changes
Changes in technology
Government policy
Factors that affect how much a business can
charge for a product or service:
Price of competitor
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Customer loyalty
Quality
Product availability
Economic climate
Other purchases from the customer
A business can forecast cost and revenue by:
Looking at previous sales data
Market research
Loyalty programmes
Forecast cost and revenue (cash flow forecast)
Break even chart
Business success:
Profit
Customer loyalty
Reputation
Business growth
Why are budgets set?
To gain financial support
To avoid overspending
Establish priorities
To motivate staff
To assign responsibility
To improve efficiency
To measure success
Profit budget=income budget-expenditure
budget
Methods of generating business ideas:
Spotting trends and anticipating their impact.
Identifying a market niche (niche market is a
smaller part of a large market e.g. fishing
magazines; low demand but high price).
Copying ideas from other companies/countries.
Inventing a product and taking it to the market.
Ways of spotting an opportunity:
Thinking about changes to the society and the
economy.
Small budget research such as market
mapping.
Intellectual Property:
Intellectual property is the term given to assets
that have been made by human creativity.
Governments encourage this as otherwise
there is no financial incentive to create a
product in their country.
Copyright (song, book, movie)
Trademark (logo or slogan)
Patent (engineering/invention)
These prevent other companies stealing an
idea and making a profit from it.
It allows the inventor to regain the initial
investment costs.
Primary Businesses:
Farming/Mining
Factories and food producers will by their
product.
Limited contact with the final customer.
Low importance of brand image but product
quality.
Almost impossible to identify brands in this
industry e.g. carrots.
Industry has to be where the raw materials can
grow/be found.
Secondary Businesses:
Manufacture
Car dealerships, supermarkets and retail
outlets would by their produce.
More contact with the consumer than the
primary but less than the tertiary.
They must create a high brand image so that
retail outlets stock their product.
Can differentiate between brand e.g. cars.
Chose location based on a skilled work force
and location to ports. Locate near the primary
provider.
Tertiary Sector
Supermarket chain, retail outlet
Customers are the general public.
High contact with the final customers.
Advertising campaigns, staff in the stores.
High brand image in order to attract
customers. This is usually done in the retail
industry by lowering the prices.
Can easily differentiate between the brands:
staff uniform, store logo and colours.
Chose location based on the demand from the
consumer.
An unlimited company means that the owner is
liable for its debts. A limited company means
that the owner is not liable for the companys
debts. If the business is unincorporated, the
owner is seen as part of the business and istherefore unlimited. An incorporated business
means that the owner is not seen as part of the
business and is therefore limited.
A sole trader:
Owned and managed by one person.
Unlimited and unincorporated.
All profits go to the owner.
They are their own boss and therefore
decisions are quick. Quick to fill a market
niche.
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Will be difficult. Will have to work many hours.
Unlimited liability so they are responsible for
their debts.
Partnership:
Owned and managed by 2-20 people.
Unlimited and unincorporated.
Profits are shared by pre-agreed terms.
The company can benefit from everyones
strengths.
There can be a conflict of interest and thus
decisions can be slow.There is unlimited
liability.
Private Limited Company (LTD.):
Managed by a board of directors and owned by
share holders. These are often friends and
family.
Limited and incorporated.
Profits shared to the board of directors and the
investors.
Not vulnerable to hostile take over. Protected
as it is limited.
Maybe unwilling to do business as it may be
unlikely for you to pay debt.
Public Limited Company (PLC):
Owned by shareholders and managed by a
board of directors.
Must have a board of directors.
Limited and incorporated.
Shares are sold publicly when 50,000 has
already been sold in shares.
They make lots of money by selling shares.
The business is not owned by the management
therefore they are not in complete control.
At risk from hostile takeover.
Interdependence is the relationship between the
3 sectors and understanding that they all need
each other to operate.
Companies add value to a product so that they
can sell it for more than it cost them to buy it.
This can be done by:
Transformation processes e.g. manufacture.
Factors of production e.g. qualityof staff and
equipment.
Marketing Customer service
Packaging
Improve technology
Location e.g. Singapore more expensive
Franchise:
A franchisor allows another business
(franchisee) to use its idea/name.
2 fees: basic/initial buying fee and % of
revenue.
There is instant brand recognition.
Advertisements are already paid for.
Lower chance of failure
Product is cheaper due to purchase in
economies of scale.
Support from franchisor.
Training for your staff.
Disadvantages: Lack of responsibility therefore
not self fulfilling.
The actions of other branches might affect you
reputation.
No individuality
Always risk of franchisors cancelling the
agreement.
Business Plans:
Crucial attempt to raise finance from external
sources.
Defines aims and objectives.
To encourage investment.
To identify weaknesses. To set targets.
To identify strengths, opportunities and
threats.
To calculate business projections.
Benefits:
It creates a plan of action and therefore the
start up is organised.
Creates a positive reputation.
Find out if the business is feasible.
Reasonable financial predictions.
Sets a time frame and targets.
Negatives: Things can change e.g. economic downturn.
Lack of expertise and experience can result in
a false plan.
Can be difficult to account for competition.
Cannot account for demand.
A company plans for:
Marketing
Objectives
Organisation
Finance
Non-Profit Organisation (NPO):
Run as a business but all of the profit is
reinvested into the business.
NGOs: act away from the government to
benefit those of society.
Charity: set up to support a cause that is
beneficial to society.
Pressure group: established by individuals to
address the interest of the group e.g. animal
rights protestors.
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Factors that affect the location of a business:
TECHNOLOGY: this would allow the owner to
work from home using ICT. High technology
means that the location is of low importance.
COSTS: land costs and labour costs e.g. India
and china are preferable as labour costs are
much cheaper.
INFRASUCTURE: the network of the country e.g.
roads, bridges, ports and rivers.
THE MARKET: convenience and access forcustomers i.e. footfall (the number of potential
customers that walk past the shop), proximity
to complimentary business; desirability of the
area.
QUALITATIVE FACTORS: preference to the
owner themselves e.g. home town.
Random Sampling: Randomly choosing people to
take a survey.
Quota Sampling: Choosing your questioners is
proportion to the market.
Stratified sample: Only interviewing people who are
relevant to your product.
A business to business (B2B) is where one
business sells a product to another business:
In these businesses they often have
experienced sales staff as the customer is
often knowledgeable in the area.
Business to consumer (B2C) markets is where
the business sells directly to the consumer.
Types of markets: Local
National
Physical (can go in an look at stuff)
Electronic
Factors that affect demand are:
INCOME: higher income means higher
disposable income and therefore higher
demand.
TASTE AND FASHION: changes in fashion will
affect the demand of certain clothes.
PRICE OF OTHER GOODS: if the price ofsubstitute goods falls then customers may
switch.
MARKETING: Endorsements, sponsorship and
promotions.
SEASON: no demand for hats, gloves and
scarves in the summer.
GOVERNMENT INTERENTION: They may
influence the demand through taxes and
legislation e.g. the smoking ban lowered the
demand for pub alcohol.