business paper 1

• Entrepreneur

  A person who sets up their own business and is willing to take a risk
• Characteristics of an entrepreneur

  Creativity, Risk taking, Determination and Confidence.
• Business plan


  A document that outlines the businesses aim and objectives and how they will achieve them.
• Purpose of a business plan

  To obtain finance e.g. A bank loan and to explain how a business intends to achieve its objectives.
• Sole trader


  A business set up by 1 person
• Advantages of being a sole trader:

  Can keep all the profits and can make decisions quickly.
• Disadvantage of being a sole trader:

  No one to develop ideas and has unlimited liability
• Partnership


  A business set up between 2 to 20 people
• Advantages of being in a partnership:

  More ideas and can share the set-up costs
• Disadvantages of being in a partnership:


  Have to spilt the profits and has unlimited liability
• LTD


  A private limited company that sells shares to friends and family.
• PLC

  A public limited company that sells shares on the stock exchange
• Advantage of being a limited company:


  Can gain a high capital and has limited liability
• Disadvantage of being a limited liability:


  Can lose control of your business and is complicated to set up
• Unlimited liability


  When the business bank account and the personal bank account are not separate so the business debts rest with the owner and their personal assets can be taken away.
• Limited liability


  When the business bank account and the personal bank account are separate so all the the debts of the business is limited to the amount that was invested and their personal assets can not be taken away
• What 2 businesses have unlimited liability?


  Sole trader and Partnership
• What 2 businesses have limited liability?


  LTD and PLC
• What are the 5 business objective?


  Survival, Profit, Provide a service, Growth and Increase market share
• Stakeholder


  Different groups of people that have an interest in the business
• Internal stakeholders


  Owners and Employees
• External stakeholders


  Customers, Suppliers, Government and Local community
• Organic growth


  Growing inside the business
• Methods of organic growth


  Increasing output, Gaining new customers, Developing new products and Increasing market share
• Advantages of organic growth:

  Cheaper method of growth and Can stay in control of business
• Disadvantage of organic growth:


  Slow method of growth
• External growth


  Growing externally through merges and takeovers
• Advantage of external growth:

  Quicker way to grow and can access more customers
• Disadvantage of external growth:

  Costly and causes conflict between 2 businesses
• Horizontal growth


  A merger or take over where 2 businesses are involved in a similar operation
• Forward vertical growth


  When a business mergers/takeovers a business that it supplies goods and services to.
• Backwards vertical growth

  When a business mergers/takeovers a business that supplies it with its goods and services
• Diversification


  Is when a business mergers/takeovers a business that is completely different
• Advantage of diversification:


  Reduces risk due to having another market as a back up and helps achieve long-term investment plans
• Disadvantage of diversification:


  Lack of knowledge and expertise of the market which reduces Quality
• What is the purpose of marketing within the business?

  Identifying and understanding its customers. Informing customers and increasing sales
• Primary research


  Research conducted first hand
• 4 examples of primary research

  Questionnaires, interviews, trialling and focus groups
• Advantages of primary research:

  Cheap, reliable and relevant as the information is up to date. Understand different types of customers through focus groups.
• Disadvantages of primary research:


  Costly

  Time consuming

  Difficult to obtain as it is complex