Business AS unit 1

Enterprise- Process in which new businesses are formed and new products and services are produced and services created and brought to the market. They are lead by Entrepreneurs.

Entrepreneurs- Individual that have an idea that they develop by setting up there own business. Take risks but can receive huge profits, others may not.

Characteristics of a successful entrepreneur:

• Determination/ Persistence.
• Passionate about the business.
• Ability to spot and take good opportunities.
  
• Relevant skills and expertise.
• Creativity.
• Motivation.
• Willingness to take risks.
  

• Lack of finance.
• Poor infrastructure.
  
• Skills Shortages.
• Complexity of regulation or red tape.

Opportunity cost: The real cost of taking a particular action or the next alternative forgone.

Example: the 'real cost' of an evening spent revising could be the missed opportunity of attending a concert.

Motives for becoming an entrepreneur:

• Long term interest rates that make it easier to borrow money to start a business.
• Change in political climate so that the government supports enterprise and the entrepreneurial spirit.
• Increasing affluence, this means that people start to look for meaning in there lives (maybe fulfilling a dream).

Government support entrepreneurs by:

• reducing business taxes.
• improving support to businesses.
• introducing legislation to promote competition.
• giving financial support to not for profit orgainisations.

Franchising: when a business (the franchisor) gives another business (the franchise) the right to supply its products or services.

Benifits of a franchise:

• Involve the least risk due to the fact that they have already got an established name
• financing the business is easier because banks are more willing to lend money to someone with a good reputation.
• Franchisors are going to offer training

Disadvantages:

• may fail due to lack of market research
• costs may be higher than expected
• Have to approved by the franchisor
  

Protecting business ideas

Copyright- legal protection against copy for authors, composers and artists.

Patent- an official document granting the holder the right to be the only user or producer of a newly invented product or process for a specified period.

Trademark- signs, logos or words displayed on a companies products or on its advertisement including sound and music which distinguish its brands from those of its competitors.

Transforming resournces into goods and services

Resources (inputs) - the elements that go into producing goods or services.

Factors of Production - the four elements Land, labour, capital and enterprise.

Land - all the natural resources used in making your product.

Labour - the physical and mental effort involved in production.

Capital - goods that are made to help produce other goods e.g. machienery.

Improving the effiency of the FOP

• improving the fertility of the land

• using renewable / recycled resources

• greater education and training of the work force

• increase the level of investment in capital equipment

• improvements in entrepreneurial skills

Production: the process wherby resources are cnverted into a form that is intended to satisfy the requirements of potential customers

Outputs: the finished products resulting from the transformation process.

Main outputs:

• Natural resources.
• semi-finished / finished goods.
• services.

3 Types:

• Primary production. (farming, fishing, forestry etc.)
• Secondary production.
• Tertiary production. education, restaurants hairdressing.

The process of increasing the worth of the resources by modifying them.

Other services such as marketing also add value by:

• creating a Unique Selling point.
• Identify an attractive mix of design, function, image and service.

Value added.

Sales revenue - cost of materials of brought in materials.

Unique selling point- a feature product or service that allows it to be differentiated from other products.

Purpose of a business plan:

• important part of a business plan.

Business plan: A report describing the marketing stratergy, operational issues and finanicial implications of a business start up.

Benifits:

• useful in helping entrepreneurs to clarify there objectives.
• you know exactly what needs to be done.
• essential document in persuading lenders to invest capital into the business.

Drawbacks:

• needs to be very accurate and realistic.
• many underestimate how much this business will cost.
• many overly optimistic on the potential business and sales.

Content of a business plan:

• Details of the business.
• personal information.
• objectives.
• marketing plan.
• production plan.
• fixed assets (premises and equipment).
• financial forecasts.
• details of finance needed and repayment.
• collateral offered (offering personal assets as security).
• Long term plans.
• SWOT analysis.

Marketing: anticipation and satisifying customers wants in a way that delights customers and also meets the needs of the business.

Marketing research: the systematic and objective collection, analysis and evaluation of information that is intended to assist the marketing process.

Purpose of marketing research:

• Achieving objectives (target sales figure).
• identifying trends.
• comparisons.

Primary research: the collection of information first-hand for a specific purpose. e.g. questionnaires.

Secondary research: the use of information that has already been collected for a different purpose.

Qualitative market research: the collection of informatin about the market based on subjective factors such as opinions and reasons.

Benifits:

• get a greater insight into what it needs to do to appeal to its consumer and new customers.
• can highlight issues the business was not aware of.

Drawbacks:

• Hard to interpret data.

Quantitative data- the collection of info about the market based on numbers.

Random sampling: a group of respondants in which each member of the target population has an equal chance of being chosen.

Quota sampling: a group of respondants comprising several different segments, each share a common feature (e.g. Gender). The number of interviews in each classification is fixed to reflect their percentage in total target population, but their interviews are selected non-randomly by interviewer.

Stratified sample: a group of respondants selected according to particular features.

Problems with sampling:

• may not be representative
• may be bias.
• difficult to locate suitable respondents.

Factors influencing sampling method:

• cost and avaliability of finance
• time.
• importance of market segmentation.
• whether business targeting a specific group of customers.

Understanding Markets:

What is a market? A place where buyers and sellers come together

Geographical classification

based on area targeted by businesses. such an area maybe local, national and international.

• price
• competitors action
• consumers incomes
• success of businesses' marketing.
• Seasonal factors.

Types of market segmentation:

1.) Demographic segmentation- age, sex, income

2.) Geographic segmentation - regions, cities and neighbourhoods.

• advertising can be targeted at specific market segments so that advertising spend is more effective.

• the most profitable and least profitable customers can be identified.

• least profitable markets can be avoided

• it becomes easier to identify new products

• helps the firm improve exsisting products and customer service.

Market size - this is the total value or volume of sales in the market. it can be measured in money terms.

Market size =.

number of units sold X price.

market growth =.

change in size of market / original size X 100.

Market shares=.

Company sales/ market sales X 100.

• Economic growth.
• nature of product.
• change in taste.
• social changes.
• fashion.

Unincorporated and incorporated businesses

Private sector

• unincorporated.
• sole trader.
• partnership.

• incorporated.
• Private limited company.
• Public limited company.

Limited liability: a situation in which the liability of the owners of a business is limited to the fully paid-up value of the share capital.

Unlimited liability - businesses are liable for all the debt they may get into.

Sole trader- business owned by one person.

Partnership - businesses with 2 or more people to operate.

Private limited company - small to medium sized business that is usually run by family or small group of individuals who own it.

Public limited company - A business with limited liability. a share capital of over £50,000, at least 2 share holders.

Advantages of sole trader:

• easy and cheap.
• independence.
• more privacy.

Disadvantage:

• unlimited liability.
• limited skills.

Ownership - providing finance and therefore taking risks

Control - managing the orgai