business studies

• a business is an organisation that aims to make profit by providing goods or services
• the main purpose of businesses is to satisfy the needs and wants of customers through the production and sale of goods and/or services
• sole trader - one person who owns the business and has complete control over it
• the main types of businesses are sole traders, partnerships, limited companies and public limited companies
• A need is a good or service essential for living
• A want is a good or service which people would like to have, but which is not essential for survival
• The economic problem is when people have unlimited wants but there are limited resources to satisfy them. This creates scarcity
• Factors of production: Land, Labour, Capital, Enterprise.
• Factors production are resources needed to produce the product, the cost of production, the demand for the product and goods and services
• Scarcity is the lack sufficient resources to meet all wants and needs.
• land is the area where all the raw materials are extracted from to produce goods and services, and is the source of raw materials for the economy
• Labour is the man power needed to produce goods and services. Labour can either be skilled or unskilled.
• Capital is the money that is invested in a business, which is used to buy assets. The finance, machinery and equipment needed to manufacture goods
• Enterprise the risk taking ability to combine the other 3 factors of production and start the business with the objective of making a profit
• Opportunity cost is the next best alternative that is foregone when a decision is made.
• Specialisation is when people and businesses focus on one product or service, so they can become experts in that area
• Specialisation is common because:

  1. specialised machinery & technology are now widely available
  2. Increasing competition means that businesses have to keep costs low
  3. Most people recognise that higher living standards can result from being specialised
• Demand is the amount of a good or service people want to purchase at different prices over time
• Supply is the quantity of a good or service producers are willing to sell at different prices over time
• Division of labour is splitting up tasks into smaller jobs, allowing workers to specialise in their own job role
• Goods are tangible products such as food, clothing and cars
• Services are intangible things like education, healthcare and entertainment
• Added value is the difference between the selling price of a product and the cost of bought in materials and components
• Added value is important because sales revenue is greater then the cost of materials bought in by the business.
• A business can increase Added value by

  1. Increasing selling price but keeping the cost of material the same.
  2. Reduce the cost of materials but keep the price the same
• Entrepreneur is a person who organises,operates & takes the risk for a a new business venture
• Benefits of being an entrepreneur: Being your own boss, having control over your own destiny, being financially independent, having a sense of achievement,able to put own ideas into practice,able to make use of personal interest and skills
• Disadvantages of being Entrepreneur: High risk, long hours, little security, no guaranteed income, no job security,have to use their own money to put in capital,lack of knowledge and experience,lost income from not being an employee of another business
• Characteristics of entrepreneur: Innovative, creative, risk-taker, self-confident, decisive, and persistent,hard working, optimistic, independent, effective communicator
• Why do governments support business startups:

  • Reduces unemployment
  • Increases competition
  • Increase output
  • Benefit society
  • Can grow further
• Business plan: A document that outlines the businesses objectives, how it will achieve them and how it will be financed
• Uses of business plan: To raise finance,To help with decision making To help with marketing, helps reduce risks
• Business plan tells us:

  1. which products to produce
  2. the cash flow
  3. the business cost
  4. the location
  5. the resources required
• The main types of business ownership are sole trader, partnership, private limited company (Ltd), public limited company (plc)
• Businesses are supported by government because they create jobs, pay taxes, contribute to economic growth, reduce poverty, improve living standards, promote innovation and competition, encourage exports, attract foreign investment, boost local economy
• Government supports businesses through tax breaks, grants, loans, training schemes, advice services, subsidies, free land or buildings, reduced rates on utilities such as water and electricity.
• Sole traders have unlimited liability which means they can lose all their personal assets if the business fails.
• Partnership is when two or more people run a business together. They share profits and losses equally unless agreed otherwise.
• Private Limited Company (LTD) has limited liability meaning owners only stand to lose what they invested into the company. It also allows for easier expansion as new investors can buy shares.
• Sole traders have no legal status as an entity separate from its owner(s) and is not recognised as such under law.