1.4

• Types of business ownership for start-ups

  • Sole trader
  • Partnership
  • Private limited company (Ltd)
• Sole trader


  A business that has a single owner (although they may still hire employees)
• Sole trader


  • Easy and inexpensive to set up
  • The owner has complete control over the business
  • All profits belong to the owner
  • Simple tax arrangements
• Sole trader


  • Unlimited liability, meaning the owner is personally responsible for any debts the business incurs
  • Limited access to finance and capital
  • Limited skill set of the owner/entrepreneur
• Partnership


  Two or more people join together to form a business
• Partnership


  • Easy to set up and inexpensive
  • Shared responsibilities and decision-making
  • More skills and knowledge are available
  • Increased access to finance and capital
• Partnership


  • Unlimited liability
  • Potential for disputes between partners
  • Profits are often shared equally, regardless of the contribution
  • Difficult to transfer ownership
• Private Limited Company (Ltd)


  The ownership of the business is broken down into a specified number of shares
• Private Limited Company (Ltd)


  • Limited liability, meaning the owners are not personally responsible for the company's debts
  • Access to greater finance and capital
  • Easier to transfer ownership
  • Can have a professional image and reputation
• Private Limited Company (Ltd)


  • More expensive and time-consuming to set up
  • More complex legal requirements and regulations than sole traders
  • Annual financial reporting and auditing are required
  • Shareholders have little control over the company as the founder usually imposes their agenda
• Franchising


  A business model where an individual (franchisee) buys the rights to operate a business model, use its branding and software tools and receive support from a larger company (franchisor) in exchange for an initial lump sum plus ongoing fees
• Examples of food franchises

  • Domino's Pizza
  • KFC
  • Burger King
• Advantages of owning a franchise

  • Centralised advertising: A ready made, well recognised brand name, which will be promoted centrally by the Franchisor
  • Training: The Franchisor provides training such as how to make pizzas properly to ensure the quality and consistency of the brand
  • Supplies are provided: The Franchisor provides equipment and supplies so that the product will be the same, regardless of where it was purchased
  • Exclusive location: The Franchisor provides an exclusive area or market to sell to
  • Support services: Advice, training, use of software systems and problem solving are ongoing and the Franchisor may also provide the Franchisee with loans, insurance etc.
• Disadvantages of owning a franchise

  • Overhead/Startup Cost: This is a fixed sum paid at the start of the franchise for the right to use the business name and resources
  • Royalty costs: Usually paid quarterly and varies according to the level of sales. Often equal to 5 - 10 % of sales turnover
  • Cost of supplies: The Franchisor may sell material or equipment to the Franchisee at inflated prices
  • Quality control management: If the Franchisee does not produce the good/service to the required standard set by the Franchisor, the Franchise rights can be removed from them
• A franchise is not a form of business ownership - it is an alternative to starting up a brand new business from scratch.
• In most cases Franchisors require businesses to operate as private limited companies as this ownership type is considered to have more stability than sole traders or partnerships.
• Factors influencing business location

  • Proximity to market
  • Proximity to labour
  • Proximity to materials
  • Proximity to competitors
• Proximity to market


  The distance between the business location and the target market. Locating near the market reduces transportation costs and increases its accessibility to potential customers
• Proximity to labour


  The availability of qualified and skilled workers in the area. Businesses often locate in areas with a high concentration of skilled labour to ensure that they have access to the necessary workforce to run their operations efficiently
• Proximity to materials


  The availability of raw materials and supplies needed for the business which will help to minimise transportation costs
• Proximity to competitors


  May be desired (or not) to take advantage of a shared customer base or to differentiate themselves by offering unique products or services
• Nature of the business activity

  • Different types of businesses have different requirements in terms of space, infrastructure, and accessibility
  • E-commerce businesses may choose to operate from a fixed location, but their location may not be as critical as it is for traditional brick-and-mortar businesses that rely on foot traffic
  • For businesses that offer a combination of online and in-person services (restaurants or retail stores), location remains an important factor in their success
• Marketing mix (4Ps of marketing)

  A framework for businesses to create and implement successful marketing strategies. The 4Ps represent the key elements: product, price, place, and promotion
• Promotion


  Plays a crucial role in generating customer awareness, interest and desire for a product/service. Helps to build brand awareness and loyalty which can lead to repeat purchases and referrals
• Product design mix


  The combination of elements that make up a product's design, including function, aesthetics, and cost
• Balancing the elements of function, aesthetics, and cost, helps the product design to be both functional and attractive, while also being cost-effective for both the manufacturer and the consumer
• Marketing mix


  It plays a crucial role in generating customer awareness, interest and desire for a product/service
• A business can communicate its value proposition to potential customers and differentiate itself from competitors
• Promotion


  Helps to build brand awareness and loyalty which can lead to repeat purchases and referrals
• Promotion methods


  • Advertising
  • Direct selling to potential customers
  • Public relations
• Product design mix


  The combination of elements that make up a product's design
• Elements of product design

  • Function
  • Aesthetics
  • Cost
• Balancing function, aesthetics, and cost helps the product design to be both functional and attractive, while also being cost-effective for both the manufacturer and the consumer
• Balancing product design elements

  • Fentimans ginger beer is relatively affordable and is packaged in eye catching bottles and the product itself is very good quality
  • Asda's own brand of ginger beer is produced at the lowest possible cost and sold to consumers at a very low price
• Businesses must take care to balance customers' quality expectations with product design elements
• The target market may value quality less than price and will not be prepared to pay a high price for goods even if they are of the highest quality
• Brand


  Can help to differentiate a product or service from those offered by competitors and can help a business to add value as customers are often willing to pay higher prices for brand they recognize and trust
• Pricing


  Can play a significant role in positioning the brand in the market and help a firm to compete effectively
• Place


  Refers to the physical location of the business and/or the journey (distribution) through which the product goes from the business to the end customer
• Choosing the most efficient location or distribution network will result in lowered costs and greater profits