Business Studies
Business activity
Goods: tangibles items that customers can buy
Services: favours that are done for you
Needs: Essential necessities
Wants: Neverending desires
The economic problem:
Unlimited wants + Limited resources = Scarcity
As humans, we have neverending wants but we don’t even have enough
resources to provide for our needs (essentials) causing a huge problem.
This scarcity can limit the choices available to us consumers.
Factors of production:
Land: natural resources (limited)
Labour: work and effort that people contribute to the production of goods
and services
Capital: machinery, tools and buildings used to produce goods and services
Entrepreneurship: a person who combines the other 3 factors of production
to earn a profit
Opportunity cost: The next best alternative that was given up by choosing
the best alternative
Specialization:
When people or a business focus on one thing that they are best at. Division
of labour is when production is split into different tasks and each worker
does a different one of the tasks.
Often used as a result of:
- low availability of machinery and technology
- increasing competition to keep cost low
- higher living standards
Advantages:
- workers (or business) becomes very well trained in that task increasing
efficiency and productivity
,- less time is wasted while moving working stations
- everything is organised
Disadvantages:
- workers (or business) becomes bored
- if a worker is lacking is affects the whole of production
Government support of startups
Reasons why:
- Job creation
- New ideas creating variety
- Greater competition leading to lower prices and higher prices
- To create specialised goods and services that are used in bigger
businesses e.g. electronic chips are
used in Samsung
- They could grow and become huge
- Lower cost (because it is a startup) therefore more people can afford it
How they support startups:
- grants and lower interest on loans
- lower tax on profit
- rent free premises
- support and advice from specialists
Types of business organisation
Public sector: part of the economy that is controlled by the government
Private sector: part of the economy that is owned and controlled by
individuals and companies for profit
Sole trader:
owned by person
Advantages:
- few legal requirements
- own boss; have complete control
- freedom to make decisions and schedules
- close relationship with customers
,- incentive to work hard
- don’t need to give information to anyone except tax office
- easy setup
- don’t need much capital
- keep all profit
Disadvantages:
- unlimited liability: if in debt, debtors can take whatever they want from
your belongings
- no one to discuss issues with
- no one to share expenses with
- sources of finance are limited
- likely to remain small; hard to grow
- business is 100% dependable on owner; no continuity
Partnership:
Two or more people who run a business together
Advantages:
- More capital is available allowing expansion
- Responsibilities shared
- Continuity
Disadvantages:
- Unlimited liability
- Disagreements will be had
- Risky if all parties don’t work hard
- Business growth can be limited due to maximum limit of partners in some
countries
- If a partner decides to leave, the business needs to be reformed
To be successful:
- Partners need to have similar goals, plans and views
- Partners need to all work hard
- Deed of partnership written legal agreement between partners
Limited Partnership: limited liability but no shares can be sold/bought; will
continue after death
, Private limited company:
Owned by people who buy shares (shareholders) who appoint directors to
run the business (majority shareholders) ; Separate legal identity -
incorporated.
Advantages:
- Large amounts of shares can be sold to friends and family (not publicly
exposed) = capital = expand
- Limited liability
- Original owners maintain control (as long as they own the majority of the
shares
Disadvantages:
- Lots of legal requirements
- Shares cannot be sold to anyone without the consent of all other
shareholders
- Can’t sell shares to the public
- Accounts must be sent to the Registrar of of companies and available to
the public
Public limited company:
A company that sells shares to the public; not run by the government
Advantages:
- Limited liability
- Incorporated business
- Possible to raise lots of capital
- No restrictions on the selling/transferring of shares
- Has a higher status making it easier to get suppliers and loans
Disadvantages:
- Original owners could lose control if they don’t own the majority of shares
anymore
- Difficult to manage and control
- Expensive to sell
- Lots of legal requirements and regulations to protect shareholders
- Must publish accounts
- Shareholder’s only power is the election of managers (directors) at the
Annual General Meeting
Business activity
Goods: tangibles items that customers can buy
Services: favours that are done for you
Needs: Essential necessities
Wants: Neverending desires
The economic problem:
Unlimited wants + Limited resources = Scarcity
As humans, we have neverending wants but we don’t even have enough
resources to provide for our needs (essentials) causing a huge problem.
This scarcity can limit the choices available to us consumers.
Factors of production:
Land: natural resources (limited)
Labour: work and effort that people contribute to the production of goods
and services
Capital: machinery, tools and buildings used to produce goods and services
Entrepreneurship: a person who combines the other 3 factors of production
to earn a profit
Opportunity cost: The next best alternative that was given up by choosing
the best alternative
Specialization:
When people or a business focus on one thing that they are best at. Division
of labour is when production is split into different tasks and each worker
does a different one of the tasks.
Often used as a result of:
- low availability of machinery and technology
- increasing competition to keep cost low
- higher living standards
Advantages:
- workers (or business) becomes very well trained in that task increasing
efficiency and productivity
,- less time is wasted while moving working stations
- everything is organised
Disadvantages:
- workers (or business) becomes bored
- if a worker is lacking is affects the whole of production
Government support of startups
Reasons why:
- Job creation
- New ideas creating variety
- Greater competition leading to lower prices and higher prices
- To create specialised goods and services that are used in bigger
businesses e.g. electronic chips are
used in Samsung
- They could grow and become huge
- Lower cost (because it is a startup) therefore more people can afford it
How they support startups:
- grants and lower interest on loans
- lower tax on profit
- rent free premises
- support and advice from specialists
Types of business organisation
Public sector: part of the economy that is controlled by the government
Private sector: part of the economy that is owned and controlled by
individuals and companies for profit
Sole trader:
owned by person
Advantages:
- few legal requirements
- own boss; have complete control
- freedom to make decisions and schedules
- close relationship with customers
,- incentive to work hard
- don’t need to give information to anyone except tax office
- easy setup
- don’t need much capital
- keep all profit
Disadvantages:
- unlimited liability: if in debt, debtors can take whatever they want from
your belongings
- no one to discuss issues with
- no one to share expenses with
- sources of finance are limited
- likely to remain small; hard to grow
- business is 100% dependable on owner; no continuity
Partnership:
Two or more people who run a business together
Advantages:
- More capital is available allowing expansion
- Responsibilities shared
- Continuity
Disadvantages:
- Unlimited liability
- Disagreements will be had
- Risky if all parties don’t work hard
- Business growth can be limited due to maximum limit of partners in some
countries
- If a partner decides to leave, the business needs to be reformed
To be successful:
- Partners need to have similar goals, plans and views
- Partners need to all work hard
- Deed of partnership written legal agreement between partners
Limited Partnership: limited liability but no shares can be sold/bought; will
continue after death
, Private limited company:
Owned by people who buy shares (shareholders) who appoint directors to
run the business (majority shareholders) ; Separate legal identity -
incorporated.
Advantages:
- Large amounts of shares can be sold to friends and family (not publicly
exposed) = capital = expand
- Limited liability
- Original owners maintain control (as long as they own the majority of the
shares
Disadvantages:
- Lots of legal requirements
- Shares cannot be sold to anyone without the consent of all other
shareholders
- Can’t sell shares to the public
- Accounts must be sent to the Registrar of of companies and available to
the public
Public limited company:
A company that sells shares to the public; not run by the government
Advantages:
- Limited liability
- Incorporated business
- Possible to raise lots of capital
- No restrictions on the selling/transferring of shares
- Has a higher status making it easier to get suppliers and loans
Disadvantages:
- Original owners could lose control if they don’t own the majority of shares
anymore
- Difficult to manage and control
- Expensive to sell
- Lots of legal requirements and regulations to protect shareholders
- Must publish accounts
- Shareholder’s only power is the election of managers (directors) at the
Annual General Meeting
