Business in the real world UNIT 1

• What is the primary sector?


  The primary sector refers to the sector of the economy that involves the extraction and production of raw materials, such as agriculture, mining, and fishing.
• What is the secondary sector ?

  Manufactured goods, they turn raw materials into finished goods.

  (building and construction).
• What is the tertiary sector?

  Provides services for businesses and consumers
• What's Enterprise?


  Involves identifying new business opportunities and then taking advantage of them. Can also involve starting up a new business or helping an existing one expand by coming up with new ideas.
• Whats an entrepreneur ?

  Someone who starts their own business or ventures and takes on financial risks in the hope of profit.
• Reasons why someone might become an entrepreneur ?

  Independence- can be their own boss - flexible working hours

  Keeps all profit

  Dissatisfied with current job

  Want to follow a passion or interest
• What qualities does an entrepreneur need ?

  Hardworking

  organised

  inninnovativeotiave

  willingness to take a risk
• What are the four factors of production?

  Land, labor, capital, enterprise
• Whats opportunity costs?

  is the value of the next best alternative that's been given up.

  (its the idea that money or time spent doing one thing is likely to mean missing out on something else )
• What are the advantages of soletraders ?

  1. they're easy to set up
  2. get to be your own boss
  3. you decide what happens to profit
• What are disadvantages of being a soletrader ?

  • might have to work long hours and not get many holidays
  • unlimited liability
  • may be hard to get a loan
• What are advantages of partnerships ?

  • Get to share the work
  • More owners means more capital can be put into the business so it can grow faster
  • More owners means more ideas and a greater range of expertise and skills
• What are disadvantages of parnerships ?

  • Each partner is legally responsible for what all the other partners do
  • Most have Unlimited liability
  • More disagreements
  • Profits are shared
• Advantages of a private limited company (Ltd)

  • Limited liability
  • Easier to get a loan or mortgage than it is for a sole trader/partnership
  • Owners keep a lot of control over how the business is managed and how many people get to share the profits
• What are disadvantes of a private limited company? Ltd

  • More expensive to set up
  • Legally obliged to publish its account (doesn't need to be made public)
• What are the advantages of a public limited company (PLC)?

  • Much more capital can be raised by a plc than by any other kind of business.
  • That helps the company expand and diversify.
  • Limited liability and incorprated
• What are the disadvantges of being a public limited company (PLC)

  • Can be hard to get lots of shareholders to agree on how the business is run.Each shareholder has little say (unless you have lots of shares)
  • easy for somone to buy enough shares to take over the company
  • Accounts have to be made public so competitors can see if business is struggling
  • More shareholders means theres more people wanting a share of the profits.
• Whar are some business aims ?

  • growth
  • increase market share
  • achieve customer satisfaction
  • maximise profit
  • survival
  • increase shareholder value
  • do whats right socially and ethically
• Why do business's have objectives ?

  • to help achieve their aims
  • can be used later to measure whether a firm has been successful or not .
• Different factors that affect the objective of a business ?

  • Size
  • Level of competition
  • the type of business-e.g not-for-profit
• What are different stakeholders ?

  Employees

  Local community

  customers

  Owners

  government

  suppliers
• What's the equation for revenue ?

  Sales x price

  revenue is the income earned by a business.
• Examples of fixed costs

  Rent

  insurance

  fixed salaries
• What are variable costs ?


  are costs that will increase as the firm expands output.

  examples are raw materials and factory labour.
• Whats the equation for total costs ?

  Total Costs = Fixed Costs + Variable Costs
• Whats the equation for average unit cost ?

  Total costs / by output (number of products made)
• Whats the equation for profit ?

  Revenue - costs
• Why do business have business plans ?

  • Help managers decide what objectives need to be set up to achieve their aims
  • To see what resources it needs and how the business will be organised
  • to see if the business is a bad idea
• Business plan


  • Executive summary
  • Personnel details
  • Mission statement
  • Objectives
  • Product description
  • Production details
  • Staffing requirements
  • Finance
• Executive summary


  A brief overview of the business plan
• Mission statement


  A broad description of the company's aims
• Objectives

  Specific goals that the business aims to achieve
• Product description


  Details of the market, competitors, unique selling proposition (USP), marketing strategy, and market research
• Production details


  Information about how the firm will make its product or provide its service, including equipment and location
• Staffing requirements


  Details about the personnel needed, including the number of people, job descriptions, and wage bill
• Finance


  Information about the amount of money needed to start the business
• What are the drawbacks of a business plan ?

  • Takes a lot of time and money
  • Might not sell as much as predicted if the lack exprience
• What are the 5 main factors that influence a business location?

  1. Location of raw materials
  2. cost
  3. Labour supply
  4. competition
  5. location of the market
• What are the benefits of being a large business ?

  • Benefit from economies of scale
  • make more products and make more money than smaller businesses.
• 2 Reasons why economies of scale happens ?

  1. PURCHASING ECONOMIES OF SCALE- these happen when a large firm buys its supplies in bulk and so gets them at a cheaper unit price than a small firm.
  2. TECHNICAL ECONOMIES OF SCALE- occurs because a large firm can afford to but more advanced machinery.