business in the real world (unit1)

• what is an entrepreneur?

  someone who starts their own business, who is willing to take risks to succeed.
• opportunity cost

  measuring the costs of what you purchase in terms of the alternative that you have given up.
• business sectors

  • primary (producing raw materials
  • secondary (manufacturing goods)
  • tertiary (providing services)
• factors of production

  • land
  • labour
  • capital
  • enterprise
• what’s an enterprise?

  another word for business. something that provides a good or service
• sole trader 


  someone who sets up a business on his or her own
• does a sole trader have limited or unlimited liability

  limited liability (only what’s been invested into the business is at risk)
• what’s a disadvantage of a sole trader

  heavy workload
• what’s an advantage of being a sole trader?

  be your own boss and make your own decisions
• asset

  things you own
• unlimited liability

  the owners possessions are at risk of there is any problems with the business
• social enterprise

  a business that exists to improve and serve a social purpose
• a partnership

  • consists of up to 2-20 people
  • formed where a business is started and owned by more than one person
• 2 disadvantages of a partnership

  share profit and can’t make your own decisions
• advantage of a partnership

  wider range of skills
• what are sleeping partners

  business partners who put money into the partnership but do not play an active role in running the business
• 2 facts of sleeping partners

  • limited liability
  • get some profit
• private limited company

  cannot sell shares to the public only family and friends (limited liability)
• public limited company

  shares can be sold to anyone
• why do businesses need investors

  • to expand
  • to develop products / services
  • to start up
  • benefit from expertise
• aims

  the long term goal eg. grow a business
• objectives

  specific, measurable short term targets that turns the aims into something that is easier to measure
• business objectives

  • survival
  • profit maximisation
  • marketshare / sales maximisation
  • growth
• what makes an objective effective

  specific

  measurable

  achievable

  realistic

  timed
• 5 stakeholders

  employees

  customers

  local community

  suppliers

  shareholders
• factors that effect a business location

  • raw materials
  • labour
  • competition
  • costs
  • proximity to the market
• what is outsourcing

  when a company hires another business to do some work for them
• internal growth

  when a business gets bigger by selling more of its products (organic)
• external growth

  when a business gets bigger by joining or buying other businesses
• measuring the size of a business

  the revenue/turnover

  value of the business

  number of employees
• organic growth strategies

  • developing new product ranges
  • opening new business locations
  • launching existing products into international markets
• franchise

  the legal right to use the name, logo and product of an already existing company
• e commerce

  the buying and selling of a product using the internet
• a merger

  two or more firms join to create a new business
• a takeover

  one business buys another
• hostile takeover

  needs 51% of the businesses shares
• economies of scale

  when a businesses unit cost of production falls as its output rises the business expands
• diseconomies of scale

  occurs when the cost per unit increases as a business expands
• business plan

  a written document setting out what a business does and what it hopes to achieve in the future
• how to reduce risks

  • research the market
  • talk to experts
  • plan for variety of outcomes
  • review regularly and update the plan