Theme 1 - Business

• Entrepreneur


  An individual that is willing to take risks with the money they invest to start up a business
• Why new business ideas come about


  • Changes in technology
  • Changes in what the customers need
  • Products and services becoming obsolete
• Changes in technology


  • Businesses must adapt/create their products to keep up with technological progress
  • Example: switch to e-commerce/online shopping means less need for physical stores
• Changes in what the customers need


  • Businesses must create products that complement the changing lifestyles of individuals and their new needs
  • Example: need for more convenience to match with fast-paced lifestyles e.g. next day delivery/Amazon prime
• Products and services becoming obsolete


  • Businesses must keep up with trends as the world is constantly changing
  • Example: nobody uses flip phones anymore
• How business ideas come about


  • Invention (original ideas)
  • Innovation (adapting existing products/services/ideas)
• Invention


  An original idea that did not already exist, often found through personal experiences to resolve a problem
• Invention


  • The lightbulb from the candle
• Innovation


  Adapting an idea that already existed, including adding new features to a product available in the market to improve it or make it better suited to customers needs
• Innovation


  • Adding a touchscreen to a laptop
  • Air pods from wired earphones
• Risk


  Chance of failure
• Risks to an entrepreneur of starting a new business


  • Giving up a fixed wage and secure employment including a fixed wage and holiday pay in the hopes of a higher income in the future
  • Business failure - The business idea might not be good enough to attract customers, so the entrepreneur will not have enough cash from sales to cover their costs of running the business, and might lose the money invested or lose personal assets
  • Financial loss - The business might cost too much to run daily, so outflows (total payments) might be greater than inflows (total receipts), and the entrepreneur might lose their personal belongings to cover the debts (if they have unlimited liability)
  • Lack of security - The business might not generate the same number of sales each month, so the entrepreneur will not have a steady income, might not have enough money to pay their bills or meet their basic needs, and do not get paid holiday or sick pay
• Rewards to an entrepreneur of starting a new business


  • Business success - The business might attract a lot of customers and generate a lot of sales, so the entrepreneur will have a steady income and enough cash to pay the business' bills
  • Profit/wealth - The business might generate enough sales to operate above their break-even point, so inflows (total receipts) might be larger than outflows (total payments), and the entrepreneur can use this profit to reinvest back into the business, reward the shareholders or use it for personal use
  • Independence - The entrepreneur will gain a greater control over their lives, for example they are free to choose their own working hours, so the entrepreneur can get satisfaction from the flexibility involved with running their own business
• Main purposes of businesses


  • To produce goods and services
  • To meet the needs of customers
  • To add value
• Factors of production

  Land, labour, capital and enterprise
• Added value


  Difference between the selling price per unit and the cost per unit
• Methods of adding value


  • Convenience
  • Good branding
  • Improving the quality
  • Improving the design
• Consumers are willing to pay more for a product if they know they won't need to buy it for a long time in the future
• Roles of entrepreneurs


  • Organising resources
  • Making business decisions
  • Taking risks
• Organising resources


  Utilising the other 3 factors of production: workers, land, and capital and using them effectively
• Effective use of the factors of production reduces a business's costs and maximises their profits
• Hiring the right amount of labour helps maximise production but keep costs down
• Taking risks


  Being willing to take risks is a key ingredient to being a successful entrepreneur as entrepreneurs often must give up their job or take financial risk to set up their business
• Main customer needs a business must meet

  • Price: The product should be sold at a reasonable price so that customers are willing to buy it
  • Quality: The product must be durable (last a long time) so that customers are willing to buy it
  • Choice: Customers have different needs; this means that businesses must provide a range of products to cater for a wide target audience. Therefore, customers are willing to purchase at least one of their products
  • Convenience: The product must be easy to access and easy to use so that customers are willing and able to buy it
• Main purpose of market research


  • To identify and understand the needs of their customers
  • To identify gaps in the market
  • To reduce risks
  • To inform business decisions
• Main methods of carrying out market research


  • Primary market research
  • Secondary market research
• Primary market research


  Data that has been collected personally by the business
• Primary market research methods


  • Survey
  • Questionnaire
  • Focus groups
  • Observations
• Survey


  Evaluating a potential customer's experience e.g. Rate your experience of 'x' on a scale of 1 to 10 which can be verbal, written or online
• Questionnaire


  A written document with detailed open and closed questions to individuals
• Focus groups


  Asking a small group (10-15 people) targeted questions and receiving detailed responses back
• Observations


  Watching the actual behaviour of customers. This can be done in-person, watching cameras in-store or by using heat sensors to identify the most popular areas of a store
• Primary market research


  • More accurate/valid
  • You have carried it out yourself and asked questions about your specific products or decisions
• Doing primary research

  The business makes the right decisions such as adapting their products to specific customers' needs
• Adapting products to specific customers' needs

  Increases customer retention and sales
• Disadvantage of primary market research

  • Time consuming
  • You have to take time away from your business/producing products in order to carry out research e.g. ask and analysing a survey
• Doing primary research


  The business being less productive, increasing your total costs which can make it harder to breakeven
• Advantage of secondary research

  Easier to carry out
• Advantage of secondary research


  1. You do not have to take time away from your business as someone else has carried out the research for you

  2. The business remains productive

  3. They can focus on improving the product rather than gathering and analysing the data
• Disadvantage of secondary research


  Less accurate/valid