Business paper 1

• Businesses


  • Operate in dynamic markets
  • New opportunities arise
  • New businesses and business ideas are created
• Entrepreneur


  Takes the chance to meet a need with a new business venture
• Changing technology


  • New business opportunities arise
  • Can improve products and services to make them more desirable
• How new technology can improve products and services

  • Make them faster
  • Make them smaller (more compact)
  • Make them cheaper
  • Make them easier to use
  • Make them safer
• Obsolescence


  Products and services can become obsolete very quickly
• Causes of changing consumer needs

  • Changes in fashions
  • Changes in the economy
  • Changes in national demographics
  • Changes in lifestyle, such as the way consumers spend their leisure time
  • Changes in technology
• Many products are designed to only last a short time, and consumers are encouraged to buy newer and improved versions of these products
• Planned obsolescence


  The introduction of new technology and the changing nature of consumer needs means that products and services can become obsolete very quickly
• Enterprise and entrepreneurship


  Starting and running a business
• Risk and reward


  Considering the risks and rewards associated with a business venture
• Some businesses may be considered higher risk than others, but they may also offer greater rewards to their owners
• Risk


  The probability of a negative outcome occurring and the impact of the negative outcome
• Starting any business will involve taking a risk because there are so many unknown factors that affect long-term business success
• Rewards of business success

  • Personal satisfaction
  • Excellent products/services
  • Business growth
  • Awards and recognition
• Profit


  Revenue exceeds costs over a period of time
• Independence


  Many business owners will value the freedom of working for themselves over working for someone else
• How to reduce risk

  • Carry out detailed market research
  • Produce a business plan
  • Ensure the business is competitive
  • Raise sufficient start-up finance
• Risks of starting a business

  • Business failure through poor cash flow, fall in sales revenue or the action of competitors
  • Financial loss - an owner may lose the capital they invest in the business if it fails, including their personal belongings if the business has unlimited liability
  • Lack of security - no guaranteed income, sick pay or holidays
• What makes some businesses riskier than others

  • Seasonal demand
  • A small market
  • A highly competitive market with lots of competitors
  • An owner who knows little about the product or market
• Business or enterprise


  A person or organisation with the purpose of producing goods and services to meet the needs of customers
• What businesses do


  1. Buy from suppliers

  2. Produce goods

  3. Sell to customers/consumers
• Supplier


  A business that sells (supplies) products to another business
• Production


  Using raw materials, labour and machinery to make products
• Customers


  A person or organisation that buys the product or service
• Consumers


  The person that uses (consumes) the product
• The purpose of all products and services is to meet the needs of customers, often in order to make a profit
• Adding value


  Successful businesses will be able to add value to their products and services by lowering variable costs or adding something that will make customers willing to pay a higher price
• Ways to add value

  • More convenience
  • Unique selling point
  • Better design
  • Greater speed of service
  • Branding
  • Improved quality
• Adding value


  Important to a business for a number of reasons
• How a business adds value


  • Deciding how best to combine the features of its products
• Benefits of adding value

  • The added value of a product goes towards paying off a company's fixed costs
  • The higher the added value, the sooner costs can be paid off and the quicker a business will make a profit
  • The more value a business can add to its products, the more chance the business has of success, survival and long-term growth
• Most products


  • Combine a range of features to add value and improve competitiveness
  • The most successful products are the ones that are able to keep costs down as they add new features or benefits
• Unique selling point (USP)

  • Another way to add value to a product
  • Helps a business compete
• Developing a USP


  1. Understanding customer needs

  2. Market mapping
• Entrepreneur


  A person who owns and runs their own business
• Extrapreneur


  Risk-takers who have an initial idea and the willingness and confidence to see it through
• What entrepreneurs do


  • Take a risk
  • Establish and grow a business
  • Make decisions
  • Bring people together
• Invention


  Creating new products through research and development
• Innovation


  Creating new products through research and development
• Entrepreneurial innovation


  1. Research and development

  2. Potential products and processes

  3. Products ready to sell to customers