BUSINESS STUDIES UNIT 1 KNOWLEDGE ORGANISERS

Transcription

1 BUSINESS STUDIES UNIT 1 KNOWLEDGE ORGANISERS

2 MARKETING 1.1 Part 1 BUSINESS A business is an organisation whose purpose is to produce goods and services to meet the needs of customers. QUALITATIVE DATA opinions, judgements and attitudes. QUANTITATIVE DATA data expressed as numbers and statistics. SUPPLIERS sell to BUSINESS who sell finished goods to CUSTOMER MARKET RESEARCH Finding out what customers want MARKET MAPPING Analysing customers buying habit. Diagram used to position and compare products. PRIMARY information that did not exit before questionnaire High price & high High Price & low surveys PRIMARY experiments Low price & high Low price & low Focus groups observations SECONDARY data that already exits for another purpose MARKET SEGMENTS Groups of buyers with similar buying habits. Sales data News papers SECONDARY internet Age Gender Income Lifestyle Life stage Market reports Government statistics

3 MARKETING 1.1 part 2 COMPETITION Ways to differentiate the goods or services from competitors. WAYS TO DIFFERENTIATE Wider product range, better after sales, service, stronger brand image, better product features, high, better design, more enjoyable experience. BRANDING A named product that customers see as being different from other products, and that they can associate or identify with. ADDED VALUE Increased worth that a business creates. FRANCHISE A right given by one business to other businesses to sell goods or services using its name. FRANCHISOR The business that gives franchisees the right to sell its product or service. FRANCHISEE A business that agrees to manufacture, distribute or provide a branded product, under license by a franchisor. Exclusive area Brand name Training USP What franchisee gets Advertising Equipment convenience Better design Access to goods & services ADDED VALUE BENEFITS DRAWBACKS Speed of service Improved Expensive marketing costs covered by franchise. Brand image/ reputation already established Start up costs can be expensive Royalty payments Branding Access to trial and tested products Possibly an established customer base Higher chance of survival Specific support and training provided Complicated application process Lack of autonomy and control Limited flexibility to make own decisions

4 THINKING CREATIVELY ENTERPRISE Word used to represent the ideas and initiative involved in starting a new business. Entrepreneur: a person who owns and runs a business and takes risks. Enterprise: the initial spark of idea. Enterprises: another word used for businesses. INVENTION AND INNOVATION Businesses have to either come up with new ideas (invention) or adapt existing ones. Both require taking the products through the production processes to see if they will work (innovation). Invention and innovation risk: they are both expensive and time consuming. Patents: right of ownership of invention, design or process. Copyright: legal ownership of books, music or films. Trademarks: logo, symbol, sign or features. THINKING CREATIVELY Success of a business depends on the ability of the owners to come up with new, unique and creative ideas in order to compete and differentiate themselves from competitors. Deliberately creative: intentional creation of new ideas through recognised techniques such as: creating lists; mind mapping; brainstorming, make it bigger/small Blue sky thinking: coming up with as many possible ideas to solve a problem. Lateral thinking: thinking differently to try to find new and unexpected ideas. De Bono s thinking hats is an example of lateral thinking. QUESTIONS ENTREPRENEURS ASK It is vitally important that entrepreneurs ask themselves questions when they start their own business. Questions asked: why; why not; how; where; when; what if? CALCULATED RISK Putting a numerical value or probability on a risk and the likelihood of it coming true. Calculated risk: you can calculate risk through market research and reduce the chance of the risk happening. Making mistakes: entrepreneurs learn from their mistakes. OTHER ENTERPRISE SKILLS A range of skills contribute to an entrepreneur being successful. Planning: identifying a direction and plan of action for the business. Drive: being hardworking and motivated. Thinking ahead: having the foresight to identify potential problems. Determination: being resilient when things go wrong. Seeing opportunities: having the creativity and imagination top do things differently.

5 Good for expansion Good for cash flow problems and buying raw materials FINANCE 1.3 part 1 REVENUE, COSTS & PROFITS REVENUE also known as sales revenue or turnover. Price x quantity sold = total revenue PROFIT AND LOSS Profit is when revenue > costs Loss is when revenue < costs COSTS how much a business has to pay to keep the business running and produce the goods or services. FIXED COSTS do not vary with output. Must be paid for even if no goods are produced. VARIABLE COSTS change directly with the number of products made. Variable cost per unit x number sold = total variable costs PROFIT/LOSS = total revenue total costs WHY WE NEED PROFIT SURVIVAL EXPANSION INVENTIVE SECURITY REWARD EMPLOYEES WEALTH FOR OWNER TOTAL COSTS = fixed costs + total variable costs HOW TO INCREASE PROFIT OBTAINING FINANCE LONG TERM SHORT TERM Lower variable costs Lower fixed costs Increase sales price Increase quantity of sales Share capital Personal savings Venture capitalist Grants Overdraft Trade credit Delayed payment Credit cards WJY IS LOSS BAD? Unable to repay loans Unable to pay bills such as wages Experiencing cash flow problems Unable to survive, leading to business stopping trading Loans Mortgages Retained profit leasing Trade credit factoring BUSINESS PLAN What you plan to do when setting up a business. Often shared with potential investors. INCLUDES Overview objective market research personnel finances production

6 FINANCE 1.3 part 2 CASH FLOW Cash flow is not profit. A profitable business may still have a cash flow problem and go out of business. WAYS TO IMPACT CASH FLOW Cash flow is fluid and changes from month to month. Changes to the inflows and outflows can impact on the overall cash flow. CASH FLOW AND INSOLVENCY Without cash a business would become insolvent. Not pay debts Not repay loans Not pay wages Not buy raw materials Not promote the business Change in sales revenue Change in costs Seasonal sales Business expansion Changes is stock level Credit terms INFLOWS/ RECEIPTS Money from owners, bank loans or cash from sales OUTFLOWS/ PAYMENTS Costs to the business NET CASH FLOW Receipts - payments OPENING BALANCE Amount of money at the start of the month (same as the previous months closing balance) OPENING BALANCE Net cash flow + opening balance SEPT OCT TOTAL RECEIPTS PAYMENTS Machinery Wages Heating TOTAL PAYMENTS NET CASH FLOW OPENING BALANCE CLOSING BALANCE

7 People 1.4 part 1 CUSTOMER FOCUS Understanding what customers need. CUSTOMER SATISFACTION Measure of how much a business meets customers expectations. Being customer focused Identifying needs Anticipating needs Customer focus in practice Questionnaire Pub opening a been garden, anticipating warm weather or clothes shops matching trends from fashion shows IT IS GOOD TO Send orders quickly Be 100% accurate with orders Have excellent after sales care Offer personal service Going further than they need to Offer convenience Be polite and friendly Respond immediately to complaints Meeting customer needs Product Must meet needs of customers & be differentiated from competition Adapting the marketing mix Place The way in which a producer gets the product to the customers Loyalty Charge premium price Improve reputation MARKETING MIX Repeat purchase Benefits Differentiate from other businesses Promotion Communication between the business & customers that makes customers aware of products Price Price must reflect the value customers place on the product. High = high price. Special features = high price.

8 People 1.4 part 2 REPEAT PURCHASE Helps to achieve long term sales START UP LEGAL AND TAX ISSUES There are regulations and tax issues all businesses must adhere to. ENSURE REPEAT PURCHASE BY: Having cheaper prices than competition Easy and convenient service Effective customer service Promotions and special offers Building good relationships with customers LIMITED LIABILITY Legal responsibility of a business towards its debts. UNLIMITED Sole traders are owned by 1 person and have unlimited liability. Owner is legally responsible for all debts and potentially can lose there own personal belongings. LIMITED Private limited companies have limited liabilities. The owner and business are separate. Owner can only loose up to the amount they have invested. WHY Government can track business activity Taxes can be collected Protect businesses from illegal activities Protect customers LEGAL REQUIREMENTS Register to trade under a unique name Keep recorded of sales, purchases and business they have worked with Register with HMRC Her Majesty s Revenue & Customs Pay appropriate tax Income tax income earned by workers National insurance contribution on earnings, linked to benefits Value added tax on value of sales Tax Corporation tax on profits

9 the wider world SUPPLY AND DEMAND The prices of goods and commodities change constantly and are influenced by the relationship between supply and demand. SUPPLY The amount producers are willing to sell at any price. DEMAND The amount buyers are willing to purchase at a given price. Demand Supply Impact EXCHANGE RATES The price of buying foreign currency. FALL IN THE VALUE OF THE POUND Good for UK exporters of goods price of exports fall, so sales increase. Good for UK tourism prices cheaper to foreigners, so tourism increases. RISE IN THE VALUE OF THE POUND Bad for UK exporters of goods price of exports rises, so sales fall. Bad of UK tourism prices more expensive to foreigners, so tourism falls High Low Shortage prices rise Low High Surplus prices fall Good for UK businesses imports more expensive, so people buy more UK goods. Bad for UK importers of materials imports are more expensive, so costs rise. Bad for UK businesses imports cheaper, so people buy fewer UK goods. Good for UK importers of materials imports cheaper, so costs fall INTEREST RATES An interest rate is the percentage reward or payment over a period of time that is given to savers on savings or paid by borrowing on loans. Interest rates Rise Fall Small business Expansion Customers Struggle to repay loans More money available Will not borrow to expand Borrow to expand Consumer spending falls Consumer spending rises STAKEHOLDERS Anyone that has an interest in and is affected by the activities of a business. INTERNAL STAKEHOLDERS Owners/ shareholders; managers; workers EXTERNAL STAKEHOLDERS Customers; competition; local community; government; suppliers