BUSINESS PAPER 1

• Sections in the Business Studies GCSE revision material


  • Business activity
  • Marketing
  • People
• Topics in Section 1: Business activity


  • The role of business enterprise and entrepreneurship
  • Business planning
  • Business ownership
  • Business aims & objectives
  • Stakeholders in business
  • Business growth
• The purpose of business activity and enterprise

  Spotting an opportunity, developing an idea for a business, satisfying the needs of customers
• Characteristics of an entrepreneur


  • Creativity, risk taking, determination, confidence
• The concept of risk and reward


  Risks and rewards involved in starting your own business
• The purpose of planning business activity


  Reducing risk, helping a business to succeed
• The role, importance and usefulness of a business plan


  Identifying markets, help with obtaining finance, identifying resources a business needs to operate, achieving business aims and objectives
• Types of business ownership


  • Sole traders
  • Partnerships
  • Private limited companies
  • Public limited companies
• The concept of limited liability


  The owners (shareholders) are NOT personally responsible for paying the debts of the business
• The suitability of differing types of ownership in different business contexts

  Start-ups and established businesses
• Aims and objectives of business


  • Profit
  • Survival
  • Growth
  • Providing a service
  • Market share
• How and why objectives might change as businesses evolve

  Reasons why different businesses may have different objectives
• Internal and external stakeholder groups


  • Owners
  • Employees
  • Customers
  • Suppliers
  • Government
  • Local community
• The effect business activity has on stakeholders


  The effect stakeholders have on business
• Types of business growth


  • Organic growth
  • External growth (mergers, takeovers - including horizontal, vertical, diversification)
• Businesses exist to satisfy the needs of customers. They provide goods and services at a price that people are willing to pay. In return, the business will be rewarded with profit.
• Enterprise is seeing an opportunity to provide a product or service that people are willing to buy.
• Reasons why people choose to start their own business


  • To be your own boss
  • To pursue your own personal interests
  • To earn an income
  • To do something positive for society
• Needs and wants


  • Needs: Food, Water, Shelter, Clothing, Medicine
  • Wants: A car, An iPhone, A TV, A chocolate bar, A fake tan, Etc...
• Characteristics of a successful entrepreneur


  • Creative
  • Risk taking (calculated risks)
  • Determined
  • Confident
  • Able to learn from past failures
• Risks and rewards involved in starting your own business


  • Risks: Might have invested your own savings, Might have given up a job with a steady income, Might be very stressful / affect your health, Long hours = lack of holidays & strain on personal relationships with friends & family, Changing consumer tastes
  • Rewards: Might be able to sell the business for a profit if it's successful, Being your own boss, The personal satisfaction of being successful, Independence – being their own boss
• Reasons why it is important to create a business plan for a new business venture


  More likely to get investors, Reduces the risk of failure because decisions are based on research, To identify what resources are needed
• Components included in a business plan


  • Aims & objectives
  • Marketing plan
  • Human Resource plan
  • Production plan
  • Finance plan
• The role of a business plan

  Identifying markets, Helping with finance, Identifying resources that a business needs to operate, Achieving business aims & objectives
• Sole trader


  A business owned and run by one person
• Advantages and disadvantages of sole trader


  • Advantages: Low start-up costs, The owner keeps 100% of the profit, The owner makes all of the decisions, The owner can keep their finances private
  • Disadvantages: Unlimited liability, Lack of continuity, A lot of responsibility on one person, Skill shortage, Shortage of capital
• Partnership


  A business owned and run by 2-20 people
• Advantages and disadvantages of partnership


  • Advantages: Low start-up costs, Each partner may have a different speciality / skill, Workload and debts can be shared, Easier to raise finance, Owners can keep their finances private
  • Disadvantages: Unlimited liability, There could be disagreements between partners, Profit has to be shared, Partners have less control, Cannot raise as much capital / finance
• Deed of partnership


  A document setting out the operations of the partnership, including amount of capital to be invested and how profits will be shared
• Sleeping partners


  Provide capital for the business but take no part in the running of the business. Their liability is limited to the amount of capital that they have contributed.
• Limited liability partnerships


  The owners' liability for the debts of the business is limited to the amount of money they put into the business.
• Private limited company (Ltd)


  A business owned by shareholders. Shares are sold privately to friends and family.
• Advantages and disadvantages of private limited company


  • Advantages: Limited Liability, Finance can be raised by selling shares, Continuity, Control over share sale
  • Disadvantages: Profits have to be given to shareholders, The business has to publish its accounts, Higher set-up costs, Cannot sell as many shares as a plc
• Public limited company (plc)


  A business owned by shareholders. Shares are sold to the public on the Stock Exchange.
• Advantages and disadvantages of public limited company


  • Advantages: Limited Liability, Finance can be raised by selling shares to the public, Continuity, The business is run by a board of directors
  • Disadvantages: Profits have to be given to shareholders, The business has to publish its accounts, Higher set-up costs, There is a threat of a takeover
• Main objectives of most businesses


  • To survive
  • To make a profit
  • To expand/Growth
  • Market share
  • Providing a service
• Reasons why businesses should set objectives


  So that all employees are working towards a common goal, To help measure the success of a business at the end of the year
• Private limited company


  • Business continues to exist even if one of the shareholders dies
  • The business is run by a board of directors who normally have experience and areas of expertise
• Disadvantages of private limited company


  • Profits have to be given to shareholders in the form of dividends
  • The business has to publish its accounts every year – meaning that anyone (e.g. competitors) can see the financial state of the business
  • Higher set-up costs than Sole Trader & Partnerships – Memorandum & Articles of Association
  • There is a threat of a takeover if 51% or more of the shares are bought by someone else
• Main objectives of most businesses


  • To survive
  • To make a profit
  • To expand/Growth
  • Market share
  • Providing a service