Business Handout 1

• A business can be defined as any organisation that works to fulfill a common purpose.
• An SME has a turnover less than £50m.
• small enterprises are considered to have less than 50 employees.
• Whilst medium sized enterprises have less than 250 enterprises
• SME's make up 99.9% of the Uk's business population, and therefore very important to the Uk economy.
• An entrepreneur is someone who starts and runs a business, providing a product or service available to the public.
• Needs are a human requirement for survival and are often limited, examples being food, warmth and shelter.
• wants are human desires that are unlimited, as they are not essential to survival, such as luxury items.
• goods are physical items that the business produces to sell, they can be durable or non-durable, examples being cars, clothes, food, etc.
• services are intangible business activities that people are prepared to pay for, such as hairdressing, banking and leisure services.
• The Roles of an entrepreneur in creating, setting up, running and developing a business:

  1. Setting up and owning/leading a business
  2. Organisation, managing and planning
  3. Risk taking
  4. Decision-making
  5. Acting as an innovator
  6. Securing finance
• Financial motives or entrepreneurs include:

  1. Financial reward
  2. Lack of employment opportunities
  3. Government incentives
• Non-financial motives of entrepreneurs:

  1. Independence
  2. Job satisfaction
  3. Working alone
• Characteristics and skills of entrepreneurs:

  1. Being a risk taker
  2. Taking the initiative and being proactive
  3. Understanding the market
  4. Being an effective organiser
  5. Having creativity and being innovative
  6. Being committed, determined and motivated
  7. Be a good judge of people
• Primary sector: The production of raw materials, such as food, fuel and fibre. 10% of the UK GDP
• Secondary sector: Involves the transformation of raw materials into goods such as manufacturing steel into cars. 10% of the UK GDP
• Tertiary sector: involves the provision of services to to consumers and businesses such as cinemas, banking and gyms. 78% of the UK GDP
• The importance of entrepreneurs/SME's to the UK economy:

  1. Wealth creators: enterprise is vital to boosting economic growth by providing new products
  2. Job creators
  3. Society builders
  4. Exports: If products are sold abroad this brings revenue into the Uk economy
  5. Taxes
  6. Innovators
• Importance of SME's to UK economy:

  1. SME's create jobs: the employees pay tax and spend income on other products and services that go into the economy.
  2. SME's create demand for products that in turn creates more jobs and other business.
  3. SME's pay tax to the government; which is used on hospitals, police and schools.
  4. SME's introduce new technology and innovation to the market, encouraging exports
• Limitations:

  1. SME's are small scale and more likely to fall in times of recession and hardship.
  2. SME's by their nature place smaller orders and therefore do not obtain economies of scale as larger businesses do.
  3. Less recognition and harder to compete with larger businesses and big profits.
  4. Smaller budgets: do not have the funds to compete with larger organisations to put into advanced technology, marketing and promotions.
• stakeholders in a business are any individual or group which is affected by the business and so has an interests in it's activities
• The next part is on main interests and conflicts.
• the business is its own legal entity, the business wants to repeat sales, customer loyalty and market growth.
• however the cost of long term growth stratergies might reduce profits in the short run.
• since shareholders are the owners of a limited company, they should all share the common objective of sustained long term growth, giving both capital gain and increasing income.
• however, institutional shareholders require high dividends and strategies to achieve short term growth from the business they have invested in.
• directors and managers in large organisations focus their efforts on achieving the objectives of the organisation.
• however for some businesses, the main long term objective is the protection of their position, with the idea of self preservation, it leads to the establishment of whole layers of heirachy
• employees work from middle management down receive a wage and possibly fringe benefits.
• with many businesses seeking to incorporate technology, and reduce the size of the workforce, the clear conflict is job security.
• customers are an increasingly important stakeholder, satisfying their needs lead to financial success.
• however, the achievement of of immediate profit comes ahead of long term customer satisfaction.
• Suppliers depend on the success of businesses for their sales, and business depend on their suppliers to carry on their operations.
• however, unfortunately for suppliers, the power in the market often rests with the buyer.
• the government benefits from business success as it results in increased tax revenues, higher employment and lower benefit payments.
• however, that same economic success leads to pollution, increased traffic and loss of greenfield sites through development.
• in regards to the local community, there are loads of benefits recieve from businesses such as: employment, tax revenue, improved infrastructure
• conflicts that can occur between the two can involve pollution, environmental damage, loss of open space, and heavy transport 24/7 disturbing the neighbourhood.
• A business plan is a statement that outlines the way that the business will achieve its aims and objectives.
• Key elements of a business plan:

  • Overview or executive summary: the entrepreneur describes the business idea and sets out the overall aims
  • Marketing plan: includes primary and secondary research, potentially establishing customer needs and the size of the market
  • Operations plan: includes details of the business location, production methods, and any necessary equipment
  • Human resources plan: outlines the numbers of employees, and the skills, experience, and qualifications needed
  • Financial plan: includes sales forecasts indicating potential revenues, and a cash flow forecast for the first year