Business Studies - Week 1
Economic Problem
- Unlimited wants
- Limited resources
= OPPORTUNITY COST - The cost of making a choice between one or the other.
Example: Diamonds and Cars
Specialisation
- When people and business focus on what they best at
An architect at a construction site.
Division of Labour
- When the production process is divided into separate tasks
Four factors of production: land, labor, capital, entrepreneurship.
Consumer goods- final products, tangible .
Food, clothes, phones .etc.
Consumer services- non tangible products
Online Banking, Deliveries, Investing
Capital goods- capital goods are used by businesses to produce other goods and services.
Eg. Machinery , Delivery vehicles, Raw Products
Adding product value - making a product cost more by adding value to the products. Eg: for a
clothing company - good packaging, client services, brand name, environmentally friendly.
All these can add value to a product
Added value is not the same as profit - profit increases if u can increase added value without
adding cost. If the cost of added value increases without increasing the cost of adding the
added value you are profiting. Eg: the effort, cost and energy used to increase the added value.
,Ways to increase value:
Advertising - Branding makes people want to / feel like buying the product from that company.
Service Quality - Providing high quality, personalized services can increase the value of a
product or service.
Product Features - Adding features and functions to products will allow producers to charge
higher prices. Eg: smart phones.
Convenience - people live busy lifestyles and are prepared to pay more for convenience.
Economical thinking - look at choices by calculating the benefits and the costs.
Business - Week 2
Enterprise, Business Growth and Size
Entrepreneurs usually:
- Have an idea for new business
- Are prepared to invest their own savings
- Accept risks of failure
- Want to make all decisions about management of business.
Ideas for enterprise:
- A new good or service
- Offering existing good or service in a way that has not been offered
- Offering an existing good or service in a new location
Characteristics of an entrepreneur: (pg29)
- Innovative
- Self-motivated and determined
- Self-confident
- Multi-skilled
- Strong leadership qualities
- Initiative
- Result Driven
- Risk-taker
- Good at networking
(Learn characteristics and definitions for each - shit will be in the fucking exam!!!)
,Business Plans:
Business plan - a detailed written document outlining the purpose and aims of a business which
is often used to persuade lenders or investors to finance a business proposal
Revenue - the amount a business earns from the sale of its products
Business - Includes details of entrepreneur, The Ideas for the Business and the skills and
expertise of the managers / employees.
Business Opportunity - Includes market research. Why customers will buy the product.
Market - current size, potential for growth and competition.
Financial Forecast - Cash flow forecast, Revenue and Profit.
Why and how governments support business start-ups:
Why:
- Job creation
- Entrepreneurs start up new business which bring greater consumer choice in the market
- Competition (results in lower prices and better quality of goods and services)
- Small businesses provide specialist goods and services which larger businesses aren’t
interested in. The products are used by larger business’
- Start-up business become larger corporations which benefit the countries economy
- Start-ups can have lower prices
How:
- Grants and interest-free or low-interest loans
- Lower taxation rates on profits in the early years
- Rent-free premises for a certain period of time
- Free or subsidised training schemes for employees
- Information, advice and support from specialist agencies
Measuring Business Size:
Most common method:
- Capital employed
- Value of output
- Number of employees
- Market share
, - Limitations of methods of measuring business size
Capital Employed -
Value of all long term finance invested in a business. Used to buy the things that a business
needs before it can produce goods and services. Businesses can have different amounts of
capital employed depending on what they are manufacturing.
Value of output -
The amount businesses earn from selling their products is often used to compare the size of the
business in the same industry. It is not good to use to compare businesses from different
industries.
Number of employees -
Larger businesses require more employees while smaller businesses require less employees. If
a business has and uses more machinery.
Market Share -
The larger the share of the total market the larger the business. This method can be misleading.
How to workout market share:
Firm A Firm B Firm C
Market Share % 10 60 6
Total Market Value 500 500 850
Firm B market share = 6x Firm A market share. Firm B is a large business if we look at market
share.
The answer is not in market share but in Total Market value.
Eg: Firm B has 60% of 500
= 300 000
Where as firm c has 6% of 850 000
= 510 000
Market share definition - the portion of the market controlled by a business
Why owners may want to expand their business:
- Increase in profits
- Increase in market share (Products and brand become more widely known.)
- Economies of scale (Benefits in reduced average costs, this can lead to business
lowering its prices and being more competitive on the market)
- Greater power to control the market (Have greater control over their own prices and can
even be able to set the prices for other businesses to follow)
Economic Problem
- Unlimited wants
- Limited resources
= OPPORTUNITY COST - The cost of making a choice between one or the other.
Example: Diamonds and Cars
Specialisation
- When people and business focus on what they best at
An architect at a construction site.
Division of Labour
- When the production process is divided into separate tasks
Four factors of production: land, labor, capital, entrepreneurship.
Consumer goods- final products, tangible .
Food, clothes, phones .etc.
Consumer services- non tangible products
Online Banking, Deliveries, Investing
Capital goods- capital goods are used by businesses to produce other goods and services.
Eg. Machinery , Delivery vehicles, Raw Products
Adding product value - making a product cost more by adding value to the products. Eg: for a
clothing company - good packaging, client services, brand name, environmentally friendly.
All these can add value to a product
Added value is not the same as profit - profit increases if u can increase added value without
adding cost. If the cost of added value increases without increasing the cost of adding the
added value you are profiting. Eg: the effort, cost and energy used to increase the added value.
,Ways to increase value:
Advertising - Branding makes people want to / feel like buying the product from that company.
Service Quality - Providing high quality, personalized services can increase the value of a
product or service.
Product Features - Adding features and functions to products will allow producers to charge
higher prices. Eg: smart phones.
Convenience - people live busy lifestyles and are prepared to pay more for convenience.
Economical thinking - look at choices by calculating the benefits and the costs.
Business - Week 2
Enterprise, Business Growth and Size
Entrepreneurs usually:
- Have an idea for new business
- Are prepared to invest their own savings
- Accept risks of failure
- Want to make all decisions about management of business.
Ideas for enterprise:
- A new good or service
- Offering existing good or service in a way that has not been offered
- Offering an existing good or service in a new location
Characteristics of an entrepreneur: (pg29)
- Innovative
- Self-motivated and determined
- Self-confident
- Multi-skilled
- Strong leadership qualities
- Initiative
- Result Driven
- Risk-taker
- Good at networking
(Learn characteristics and definitions for each - shit will be in the fucking exam!!!)
,Business Plans:
Business plan - a detailed written document outlining the purpose and aims of a business which
is often used to persuade lenders or investors to finance a business proposal
Revenue - the amount a business earns from the sale of its products
Business - Includes details of entrepreneur, The Ideas for the Business and the skills and
expertise of the managers / employees.
Business Opportunity - Includes market research. Why customers will buy the product.
Market - current size, potential for growth and competition.
Financial Forecast - Cash flow forecast, Revenue and Profit.
Why and how governments support business start-ups:
Why:
- Job creation
- Entrepreneurs start up new business which bring greater consumer choice in the market
- Competition (results in lower prices and better quality of goods and services)
- Small businesses provide specialist goods and services which larger businesses aren’t
interested in. The products are used by larger business’
- Start-up business become larger corporations which benefit the countries economy
- Start-ups can have lower prices
How:
- Grants and interest-free or low-interest loans
- Lower taxation rates on profits in the early years
- Rent-free premises for a certain period of time
- Free or subsidised training schemes for employees
- Information, advice and support from specialist agencies
Measuring Business Size:
Most common method:
- Capital employed
- Value of output
- Number of employees
- Market share
, - Limitations of methods of measuring business size
Capital Employed -
Value of all long term finance invested in a business. Used to buy the things that a business
needs before it can produce goods and services. Businesses can have different amounts of
capital employed depending on what they are manufacturing.
Value of output -
The amount businesses earn from selling their products is often used to compare the size of the
business in the same industry. It is not good to use to compare businesses from different
industries.
Number of employees -
Larger businesses require more employees while smaller businesses require less employees. If
a business has and uses more machinery.
Market Share -
The larger the share of the total market the larger the business. This method can be misleading.
How to workout market share:
Firm A Firm B Firm C
Market Share % 10 60 6
Total Market Value 500 500 850
Firm B market share = 6x Firm A market share. Firm B is a large business if we look at market
share.
The answer is not in market share but in Total Market value.
Eg: Firm B has 60% of 500
= 300 000
Where as firm c has 6% of 850 000
= 510 000
Market share definition - the portion of the market controlled by a business
Why owners may want to expand their business:
- Increase in profits
- Increase in market share (Products and brand become more widely known.)
- Economies of scale (Benefits in reduced average costs, this can lead to business
lowering its prices and being more competitive on the market)
- Greater power to control the market (Have greater control over their own prices and can
even be able to set the prices for other businesses to follow)
