business paper 1

• Business idea


  What makes a successful business?
• Factors that move a successful business

  • Hard work
  • Good ideas
  • Good products
  • Loyal customers and workers
  • Trial and error
• Purpose of a business

  • Produce or sell a good
  • Provide a service
  • Produce or sell a good and provide a service
• Sectors of the economy

  • Private sector
  • Public sector
  • Voluntary sector
• Private sector


  • Owned by entrepreneurs
  • Can be a large or small business
  • Provide a service, sell goods or both
  • Make profit
• Public sector


  • Run by central and local government
  • Not run for profit
  • Funded by taxes
• Voluntary sector


  • Charities and non-profit social enterprises
  • Raise funds through donations
• Scale of business


  • Global
  • National
  • International
  • Local
  • Regional
• Size of business


  • Micro
  • Small
  • Medium
  • Large
• Micro business


  1. 5 employees
• Small business


  1. 99 employees
• Medium business


  100-249 employees
• Large business


  250+ employees
• Sales turnover and value of goods sold per year

  • Small business up to £1 million
  • Medium business up to £10 million
  • Large business over £10 million
• Entrepreneur


  A person who starts a business
• Entrepreneurs


  • Create jobs
  • Create products/services
  • Pay taxes to the government
• What entrepreneurs do


  1. Have an idea

  2. Organise resources

  3. Employ people

  4. Make business decisions

  5. Establish and grow a successful business
• Risks of being an entrepreneur

  • Business idea failing
  • Not making enough sales/losing money
  • Wasting time
  • Not finding customers to sell to
  • Running out of energy
• Rewards of being an entrepreneur

  • Money
  • Successful business
  • Name known worldwide
  • Self-esteem and confidence boost
  • Power and control
  • Independence
  • Financial security
• Successful entrepreneurs


  Gain money and profit
• Unsuccessful entrepreneurs


  Lose money and gain debts
• Sole trader


  A business run by 1 person who controls the business, employs who they want, and works the hours they need
• Advantages of being a sole trader

  • Financial independence
  • Being your own boss
  • Keeping all the profit
  • No one telling you what to do
• Disadvantages of being a sole trader

  • Unlimited liability - may have to sell possessions to pay debts
  • May not know where to get advice from
  • Banks see you as a higher risk in terms of lending money
  • All the skills needed to be successful
• Objectives of a sole trader

  • Survival
  • Break even
  • Make a certain level of sales and profit
  • Produce a specialised service
  • Produce a quality product or service
  • It's their hobby and they want a challenge
• Partnership


  When 2-20 people come together to run their own business
• Advantages of a partnership

  • Shared workload
  • Flexibility
  • Easier to grow the business
• Disadvantages of a partnership

  • Decisions made by all partners
  • Banks see you as a higher financial risk
  • One person's actions affect the whole partnership
• Similarities between sole trader and partnership

  • Unlimited liability
  • Seen as a risk to banks
  • Both want to survive and break even
  • Both move profit
• Differences between sole trader and partnership

  • Shared profits
  • Owners share risk
  • Shared workload
• Private limited company


  A company where owners (shareholders) have limited liability and don't have to sell personal possessions to pay company debts
• Advantages of a private limited company

  • Owners (shareholders) have limited liability
  • Can control who becomes a shareholder
  • Seen as less of a risk by banks
  • Accounts have to be sent to Companies House and the stock market
• Disadvantages of a private limited company

  • Harder to sell
  • Decisions made by directors, not owners
  • Profits are shared between shareholders, which can cause conflict
• Objectives of a private limited company

  • Survival and break even
  • Maximise profits and sales
  • Increase market share
  • Provide a quality product or service
• Product differentiation

  Adapting a product to meet the needs of the customers to maximise sales
• Ways a business uses product differentiation

  • Packaging used to get product to customer
  • Name captures interest
  • Design, formulation, function + different features the product will have
  • Differentiation across the value chain - each stage of the chain of production adds value
• Design mix

  What dictates the type of design mix used by firms
• Factors that dictate the design mix

  • Unique selling point and competitive advantage
  • Products used by competitors
  • Environmental issues
  • Market research to find out what customer wants
  • Ethics
  • Rules and regulations
• Market segmentation

  To sell the right products to the right people
• Aims of market segmentation

  • Find your target audience/customers
  • Make the right products for the target people
  • Maximise sales
  • Wide range of differentiated products