Understanding Business

• Sectors of Industry

  The primary sector involves the business extracting natural goods from the earth, such as farming
• Sectors of Industry

  The Secondary Sector involves the business manufacturing and assembling goods, such as construction.
• Sectors of Industry

  The tertiary sector does not provide good but instead provides services, such as hairdressing.
• Sectors of Industry

  The quaternary sector is the support sector, it is knowledge based, such as accountancy.
• Changing employment patterns in the sector - reasons for decline

  Such as, decline in manufacturing, steel factories, shipbuilding.
• Changing employment patterns in the sector - reasons for decline

  Global threats such as increased competition abroad.
• Changing employment patterns in the sector - reasons for decline

  The tertiary sector has grown considerably
• Changing employment patterns in the sector - reasons for decline

  More disposable income for services such as beauty.
• Sectors of economy

  Businesses in the private sector are controlled by private individuals (board of directors) and run by them (shareholders). They have invested their money, ideas and time into the business and they want to make a profit.
• Sectors of economy

  Businesses in the public sector are owned and control by the Government, they provide services to the public, they are financed by taxpayers.
• Sectors of economy

  Businesses in the third sector are not run to make a profit, but instead they are run to raise money to a cause. They are owned by members, run by a Board of Trustees and financed by donations.
• Organisations in the private sector

  • A private limited company ltd is owned by shareholders, controlled by a board of directors.
  • Shareholders invest money into the business by buying shares, any profit they receive is a dividend.
  • They cannot sell to the general public.
• Advantage of a private limited company

  Control of the company is not lost to outsiders. More finance can be raised from shareholders and lenders. The Board of Directors brings significant experience to aid decision making. They have limited liability.
• Disadvantages of a private limited company

  Profits shared amongst more people. Shares cannot be sold to the general public. Must abide by the companies act.
• Organisations in the private sector

  Public limited company plc is owned by shareholders and controlled by a board of directors. There is a minimum of 2 shareholders and a share capital of £50,000. They can be bought on the stock exchange. They have limited liability.
• Advantages of a public limited company

  A huge amount of finance can be raised by selling shares. Plc's often dominate the market. It is easy to borrow money due to their huge size. They have limited liability.
• Disadvantages of a public limited company

  Their set up costs can be high. There is no control over who buys shares. They must publish their annual accounts. They must abide by the companies act.
• Advantages of a franchiser

  A franchise is a fast method of expanding without a heavy investment. It provides a steady cash flow from royalty payments. There is a shared risk between franchiser and franchisee.
• Disadvantages of a franchiser

  They only receive a share of the profit. A poor franchisee can damage the company's reputation. A weak franchisee may not provide much return profit.
• Advantages of a franchisee

  They have reduced marketing costs. There is a reduced risk as the brand is already established. The franchiser may provide training and administration duties.
• Disadvantages of a franchisee

  Their products, prices and layout of the store may be dictated. A royalty payment must be payed, this is often a percentage of the revenue. The initial cost is expensive.
• Features of a multi-national enterprise

  They will have a distinct 'home' base and then have branches in their host countries. They are a global brand. They can often dominate across many countries.
• Advantages of multinationals

  They can secure cheaper premises and labour, giving greater profitability. They can avoid or minimise the amount of tax which has to be paid. They can be given grants to encourage location in a specific country. Also, becoming larger may minimise the risk of takeover. They can achieve economies of scale which may reduce unit cost. They can avoid restrictions on imports into a country. They can have access to a wider country which increases revenue and market share.
• Disadvantages of multinationals

  Legislation may be different in other countries which may mean the product or service has to be altered. Cultural differences will mean that organisations have to be sensitive when conducting their business. Different languages mean that organisations have to employ specialists to work with the organisation.
• Features of a social enterprise

  They must have a clear social and/or environmental aim. The majority of the profits made are invested into meeting the aim of the social enterprise. They operate using employees or volunteers.
• Advantages of a social enterprise

  They help to deal with social cause they have chosen. Attracts customers and staff who want to help the social cause. Some funding and grants are only available to them (social enterprises). They can sell shares to raise finance if they are a limited company.
• Disadvantages of a social enterprise

  They have to compete in a commercial market so they have to face the same challenges and risks of all the business. Staff in a paid role usually earn less than if they worked in the private sector. They usually depend on unpaid volunteers and the generosity of the community.
• Business Objectives - Private

  • maximise profits
  • to expand and grow
  • survive (break-even)
  • maximise sales
  • managerial objectives - managers pursuing their own individual aims
  • satisficing - to keep shareholders satisfied
• Business Objectives - Public

  • Making good use of taxpayers money
  • Cut costs
  • Work within budgets given
  • Serve the public interest
• Business Objectives - Third

  • To provide support for a worthy cause
  • To raise awareness for the cause
  • Fund research into medical conditions
  • Relieve poverty
  • recruit more volunteers
• Business Objectives - all

  • Provide a good quality service
  • Be socially responsible
• Features of Corporate and Social Responsibility

  Paying staff a rate above the national minimum wage. Providing staff with opportunities to improve physical and mental health. Ethical marketing of products. Supporting charities and the local community. Reducing waste by recycling and reducing packaging. Raw materials from sustainable sources. Ensure processes does not cause pollution. Reducing carbon footprint by using local suppliers. Participating in Fairtrade.
• Advantages of showing positive CSR

  This improves their public image. It also helps to ensure survival in the long term. It helps to achieve market growth. Businesses could exceed Government targets and improve their reputation.
• Disadvantages of poor CSR

  They would have bad publicity and reputation. They could have interference from pressure groups. Customers may boycott products. Investors may be unwilling to invest.
• Why grow a business? ( Growth )

  • To avoid being a takeover target.
  • To reduce the risk of a business failure.
  • To increase market share and become the market leader.
  • To increase over all sales and potentially increase profit.
  • To remove a competitor.
  • To be able to take advantage of economies of scale.
• Ways of growing organically

  • Open new branches.
  • Develop new products.
  • Advertise to increase sales.
  • Hiring new people.
• Advantages of growing organically

  There is no loss of control as the business is not integrating with another. It can be less risky than taking over another business. It can be financed through internal sources so no having to borrow. Opening new physical branches means that the business can reach a new market. Hiring more staff will bring in new ideas to the business. Increased production captivity by investing in new capital to make products themselves. Increased product range so there are more products to sell which will increase sales.
• Advantages of inorganic growth

  They would get the other profits off the business. Also, they could be more financially secure. They would have an increase in their market growth. They would also have a bigger market share.
• Disadvantages of inorganic growth

  There is a risk factor as the main business may be harmed. It will also take time to merge the 2 different systems. Also, a large financial investment is needed.
• Which method of integration?

  Horizontal integration occurs when firms producing the same products combine together.