Paper 1

• Goods


  a physical product
• Service

  something that can't be held

  e.g a haircut
• Entrepreneur skills

  Risk taker

  Hardworking

  Creative

  resilient
• Dynamic business

  One that constantly adapts to respond to changing customer wants and needs
• Obsolescence

  Process of a product/service becoming obsolete or outdated
• Factors of production

  Land

  Labour

  Capital

  Entrepreneurship
• ways to add value

  Improve feature

  Improve branding

  Making it more convenient for customer
• 3 risks of owning a business

  Financial losses

  Loss of stable job

  Failure
• 3 rewards of owning a business

  Profit

  Being your own boss/ pursuing an interest

  Choosing your own working hours
• How business ideas come about

  Thinking about how to improve existing products

  Pursuing interests

  Discovering a gap in the market that has demand
• Customer needs

  Price

  Choice

  Convenience

  Quality
• Price and Quality

  These are linked because a higher quality will mean a business can charge a higher price.
• Ways to segment the market

  Age

  Gender

  Income

  Location
• Primary research


  Market research conducted by the business for a specific reason
• Secondary research 


  Market research that has already been conducted - online reports/government documents
• Qualitative data


  Opinions

  A business uses this to identify flaws in their product/service
• Quantitative data 


  Numbers

  It is fast, focused and scientific
• Methods of differentiation

  Product design

  Marketing

  Packaging

  Pricing

  Branding
• Market maps


  Used to identify gaps in the market where there is no competition, and possibly a demand
• Social media and market research

  Linked because social media can track data related to numbers of shares or like on posts from its target audience
• SMART targets


  specific

  measurable

  achievable

  realistic

  time based
• Examples of financial aims

  Make a profit

  Get back investment
• Examples of non-financial aims


  Being your own boss

  Social responsibility

  Customer satisfaction
• Fixed costs 


  Costs that don't change with output

  Examples; rent
• Variable costs


  Costs that do change with output.

  EXamples; amount of raw materials bought
• Businesses setting aims and objectives


  because it gives the business direction and provides a purpose for what the business does each day.
• Short term sources of finance

  Overdraft

  Trade credit
• Break even formula


  (Fixed costs/Contribution)

  contribution = selling price-unit cost
• Difference between profit and cash

  Profit is made from sales

  Cash comes from multiple sources > interest on savings
• Ways to improve cash flow


  Cut costs

  Raise prices
• Long term sources of finance


  Loan

  Crowdfunding

  Venture capital

  Retained profit
• Sole traders


  Benefits; profits, being own boss

  Drawbacks; unlimited liability, loss of stable income
• Partnerships

  Benefits; more skills, more investment money

  Drawbacks; unlimited liability, share profits
• Companies

  Benefits; limited liability

  Drawbacks; higher start up costs
• Franchising

  Benefits; already established

  Drawbacks; have to pay upfront fee and royalties
• Limited liability 


  Business assets and personal assets have two separate legal identities. Ownership options; PLC and Ltd
• Unlimited liability 


  Business assets and personal assets have the same legal identity. Ownership options; Sole Trader and Partnership
• Factors affecting location

  Cost/availability of labour

  Competition

  Cost of land
• Contents of a business plan

  Executive summary

  Market analysis

  Management details

  Production details

  Product/service description
• Why businesses write business plans

  Help figure out where they want the business to go and how it will get there