Business paper 1

• purpose of enterprise and entrepreneurship : spotting an opportunity, developing an idea and satisfying customer needs
• characteristics of an entrepreneur : creativity, confidence, risk taking and determination
• financial and non financial risks : if the business does not succeed the risk of losing savings to pay off debts and the health strain of running a business can cause mental and physical illness
• financial and non financial rewards : the potential to make a lot of money and independence, self satisfaction and making a difference
• a business plan is to reduce the risk of failure and to be succesful as possible
• developing a business idea must include the idea, the people , market research , finacne and competitors
• business plan : identify the market for example age gender, identifying the resources needed to operate the business for example workers, type of equipment, identifying the finance needed to start up or grow the business and how this will be achieved for example selling shares, obtaining a loan or overdraft, achieve the business aims and objectives for example making a profit, expected sales
• sole trader : a business owned by one person
• partnership : a business owned by more than 2 people
• private limited company (LTD) : usually a small business it can sell shares to invited people only
• public limited company (PLC) : it can sell shares to anyone who wants to buy
• share : part ownership of a business
• deed of partnership : a document stating who owns the partnership, how much money each partner has invested and their role in the business
• sole trader : easy to set up, the owners make all the decisions and no information about profits must be published however the business stops when owner dies
• Partnership : only needs a deed of partnership, the partners can share decisions and no information about profits must be published however partners may disagree of decisions, the profit must be shared and a new deed of partnership must be needed when a owner leaves or joins
• private limited company : shareholders can restrict who can buy shares, the business continues even if shareholders sell their shares or die however the register requires legal documents which take time to produce, the public can see information about the business
• public limited company : the business continues if if shareholders sell their shares or die however anyone can buy share, the public can see information about the business, the register of companies requires legal documents which takes time to produce
• unlimited liability is the owner of a business is responsible for repaying all the debts of a business same legal identity
• limited liability is the owners of a business can only lose the money they have invested if business fails different legal identity
• sole traders are suitable starts ups that only need a small amount of finance, usually have a low financial risk and require limited or non specialist skills
• a partnership is suitable for business that need larger amounts of finance, have a fairly low financial risk, need a wider range of skills and have owners who want to keep control of the business
• a private limited company is suitable for business that need larger amounts of finance, have an increased or financial risk and have owners who wish to keep control of the business
• a public limited company would be suitable for business that wish to grow, needs very large amounts of finance and have a very high financial risk
• aims of a business is to survive, make profit, frow and provide service
• survival : this maybe an objective for a new business so that it can become established and secure by gaining customers and then aim to make profit in the long term and it may be an objective for a business during a downturn in economic activity or when a market is very competitive
• profit : new business may seek a minimum level of profits to help them survive, established business may want to earn profits to reinvest and to expand a business and good profits encourage new investors to put money in the business helping it grow
• growth : new business may set objectives for the growth of sales or market share to help them survive and established business may want to grow to gain more power in the market reduce competition and increase profits
• providing a service : this will help the business to get a good reputation enabling it to attract new customers as well as retain it is existing customers, sometimes providing a good service can help a business survive or increase it`s profits and some owners get satisfaction from running a business that is useful to it`s customers
• internal stake holders include owners and employees
• external stakeholders include customers, suppliers, goverment and local community
• owners earn profits if the business is successful but may lose money invested in the business if it falls
• employees are employed in a job role within the business and able to earn an income from the business but may be made redundant if the business does not do well or if their job is replaced by automation such as a robot or employment conditions may be unfair, leading to stress
• customers obtain products and services at good prices that satisfy their wants but may be sold poor quality goods and services, many be over charged and may experience poor customer service
• suppliers sell their goods to another business and earn profits from doing this but may lose money if the business does not pay for the goods supplied. cash flow problems in the business may mean that the delay payment to their suppliers
• government receive tax revenue from the owners, workers, suppliers and customers of the business but very large companies can become too big to fail the government may be criticised if the business fails and the government does not step in to help it survive
• local community people in the community can earn money from jobs with the business or because workers in the area have money to spend in their business area but the community can be affected by negative externalities such as pollution and road congestion caused by the business
• business growth may be caused by increasing output, gaining new customers, developing new products and increasing market share
• horizontal growth - the producer is at the same stage e.g. another furniture manufacturer
• diversification - the producer is in an unconnected line of business e.g. perfume manufacturer
• backward vertical growth - the producer is at an earlier stage in production e.g. timber merchant