business

• Flotation


  The process in which a business goes from a private limited company to a public limited company and its shares are listed on the stock market
• Business aims


  • Survive
  • Grow
  • Make as much profit as possible
  • Increase share value
  • Increase market share
  • Be more ethical
• Business objectives


  More specific and measurable goals, often associated with numbers e.g. boost sales by 12%
• Aims


  General statements about what a business wants to achieve
• Objectives


  Specific, measurable targets that a business wants to achieve
• Floatation


  The movement from a private company to a public limited company
• Floatation is covered in both paper 1 and paper 2 of the GCSE business studies exam
• Factors affecting business objectives

  • Size of the business
  • Level of competition
  • Type of business
• Reasons why aims and objectives change

  • New laws
  • Changes in interest rates
  • Changes in the economy
  • Changes in technology
  • Environmental expectations
• Reasons for setting objectives

  • To measure progress
  • To give something to work towards
  • To motivate employees
• Fixed costs


  Costs that don't change
• Variable costs


  Costs that do change
• Examples of fixed and variable costs

  • Fixed: Rent
  • Variable: Raw materials
• Revenue


  Total income from sales, excluding costs
• Total cost


  Fixed costs + variable costs
• Profit


  Revenue - Total cost
• Average unit cost


  Total cost / Number of units produced
• Business plan


  An outline of what a business aims to achieve and how it aims to do it
• Reasons for creating a business plan


  • Something to work towards
  • To convince people to invest
  • Easier to set aims
  • To assess viability
• Contents of a business plan

  • Details of the owner
  • Objectives
  • Product description
  • Finance
• Disadvantages of a business plan

  • Can lead to being too rigid
  • Time and cost to create
  • Can be too optimistic
• Internal expansion


  Growing a business by expanding its own activities
• Ways to achieve internal expansion

  • Opening new stores
  • Outsourcing
  • E-commerce
  • Franchising
• Outsourcing


  Paying another firm to do tasks for you
• Advantages of outsourcing


  • Can be faster
  • Can be done better
  • Saves time
• Disadvantages of outsourcing


  • Can be expensive
  • Outsourcer may prioritize other companies
  • Less control
• Franchising


  A company expanding by letting other companies use their brand in return for a fee or percentage of profit
• Advantages of franchising


  • Extra revenue
  • Boosts market share
  • Boosts market awareness
  • Lower risk
• Disadvantages of franchising


  • Can damage reputation
  • Less control
  • Harder to manage
• 1. commerce


  Buying and selling goods online
• Advantages of e-commerce


  • Can operate anytime/anywhere
  • Larger target market
  • More convenient
  • Cheaper than a physical store
• Disadvantages of e-commerce


  • Expensive to set up
  • Need a good website to avoid bad reputation
  • Returns can be a hassle
• External expansion


  Expanding a business by working with other businesses
• Types of external expansion

  • Mergers
  • Takeovers
• Businesses that can be merged or taken over

  • Suppliers
  • Competitors
  • Customers
  • Unrelated firms
• Disadvantages of external expansion


  • Bad for the business environment
  • Cost cutting
  • Harder to manage
• Economies of scale


  The advantages that come with a larger business size
• Disadvantages of economies of scale

  • Harder to manage
  • Employees feel less significant
  • More complex production processes
  • Slower decision making
• Interest rates


  The amount of extra money that must be paid back when borrowing money
• Low interest rates


  Cheaper to borrow money, leading to more spending and increased demand