1.4 Making the Business Effective

• What is a sole trader

  Person who owns and runs a business
• Advantages of a sole trader:

  • Full control over decisions
  • Keeps all profits
  • Financial information is private
• Disadvantages of being a sole trader:

  • Unlimited liability (personal assets at risk)
  • Harder to raise finance
  • Heavy workload and long hours
• What is a Partnership

  A business owned by two or more people
• Advantages of a Partnership:

  • Shared decision-making
  • More capital available
  • Shared responsibilities and expertise
• Disadvantages of a Partnership:

  • Unlimited liability
  • Profits are shared
  • Potential for disagreements
• What is a Private Limited Company (Ltd)

  
  

  A company owned by shareholders, but shares are not available to the public.
• Advantages of a Ltd:

  • Limited liability (personal assets are protected)
  • Easier to raise capital
  • Business continues if shareholders change
• Disadvantages of a Ltd:

  • More complex to set up (legal requirements)
  • Must publish accounts
  • Less privacy (some financial information is public)
• Factors affecting on a Business’s Location

  Proximity to: Market, labour (workers),materials, competitors
• The marketing mix

  Promotion

  Place

  Price

  Product
• Product:

  • Meeting customer needs
  • Features of adding value, quality, design, branding etc
• Price:

  • Competitive pricing: Setting prices similar to rivals
  • Penetration pricing: Low prices to enter the market
  • Skimming pricing: High prices for new, innovative products
• Place3

  • Retail: Selling directly in shops
  • E-commerce: Selling online
  • Wholesalers: Selling in bulk to other businesses
• Promotion:

  • Advertising: TV, radio, online
  • Sales promotions: Discounts, special offers
  • Sponsorship: Promoting through events or teams
  • Social media: Direct interaction with customers
• Importance of marketing mix:

  • Helps to attract and retain customers
• Purpose of a Business Plan:

  • To set objectives
  • To plan finances
  • To assess risks
  • To secure investment
• Contents of a Business Plan:

  • Business aims and objectives(SMART)
  • market research
  • cash flow forecast
  • Target Market
  • Sources of finance
  • Location
  • Marketing mix
  • Revenue forecast
  • Projected cost and profit
• What are stakeholders?

  Stakeholders are individuals or groups with an interest in the operations and decisions of a business. Different stakeholders have different objectives, and they can be internal or external to the business.
• Different stakeholders often have competing interests. A business must balance these conflicting interests when making decisions, such as setting prices, choosing suppliers, or deciding whether to relocate.
• How can stakeholders influence a business

  • Providing resources (owners/investors give capital, employees give labour, suppliers provide stock)
  • Making purchasing choices (customers can support or boycott)
  • Creating pressure (e.g. strikes, protests, campaigns)
• Types of Stakeholders

  Owners (Shareholders)

  Employees

  Customers

  Managers

  Pressure Groups

  Government

  Local Community
• • franchise - the right given by one business to another to sell goods using its name
• • franchisee - a business that agrees to manufacture, distribute or sell branded products under the licence of a franchisor
• • franchisor - a business that gives franchisees the right to manufacture, distribute or sell its branded products in return for a fixed sum of money or royalty payment
• Some advantages of setting up a franchise

  • the franchisee gets access to free training and marketing
  • the franchisee is part of an established business
  • it can be easier to make money
  • it is lower risk for a new entrepreneur than setting up a new business
• Some disadvantages of setting up a franchise

  • the franchisee has to pay a percentage of its profits to the franchisor. This is known as royalties
  • it can be expensive to set up
  • the franchisee cannot make individual business decisions without consulting the franchisor
  • other franchises can be set up locally, which can cause competition for customers
• Unlimited liability means that the business owner or owners are personally responsible for all of the debts of the business, no matter what the value.
• Limited liability means that the business owner or owners are only responsible for business debts up to the value of their financial investment in the business. This means that a creditor can only take assets or finances belonging to the company. Limited liability only applies to certain types of business, such as private limited companies.
• Nature of Business Activity

  Retail Businesses

  • Need to be close to customers.
  • Often located in busy shopping areas, high streets, or malls.
  • Footfall (how many people walk past) is very important.
  • Examples: clothing shops, supermarkets, cafes.

  🏭 Manufacturing Businesses

  • Need large spaces for machinery and production lines.
  • Often located in industrial estates or outskirts of cities where land is cheaper.
  • Important factors: access to transport links, cost of land, availability of skilled/unskilled labour.

  💼 Service Businesses

  • Depending on the service, may be based in town centres, home offices, or online.
  • Examples:
  • Hairdressers need footfall.
  • Accountants may not need a prime location.

  📦 Storage and Distribution (Logistics)

  • Need access to good transport links (motorways, ports, rail).
  • Often located near motorways or distribution hubs.
  • Less concern with being near customers.
• Impact of the Internet on Location Decisions

  E-commerce Businesses:

  • Can sell online, so don’t need expensive city-centre premises.
  • Can locate in cheaper areas with good transport links for deliveries.
  • May still need:
  • Warehouses for storing goods.
  • Office space for customer service or admin.
  • Example: Amazon locates warehouses near major roads, not in city centres.

  Advantages of Online Business:

  • Lower fixed costs (rent, utilities).
  • Can reach a global audience.
  • Can be run from home or remote offices.

  Disadvantages:

  • Customers can’t physically see or try products.
  • High competition online.
  • Delivery times and costs need to be managed well.
• Impact of the Internet on Location Decisions

  The rise of the internet, especially e-commerce, has reduced the need for businesses to be in high-footfall areas.