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summary of business component 1
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Summaries of every business component 1 topics so your ready for that first exam.
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Business opportunitiesEnterprise
Enterprise- process of starting up a company
Small to medium-sized enterprises (SME’s)
businesses whose personnel level numbers fall to certain level.
Small= less than 50 personnel/ medium= less than 250 people
Survival
can be; experts in niche market, don’t grow just maintain, aid from government and large
margin of profit
2016= 5.5 million businesses in Uk, 99.3% SME and employed 15.7 million accounting for
60% of private sector employment
Sales for SMEs in 2016= £1.8 trillion, 47% or private sector sales.
Create jobs and wider demand for products.
Role of entrepreneurs in business opportunities
Entrepreneur is someone who takes a risk by starting an enterprise
Creation and sets up business with idea and financial capital. Idea may be a want/need in
market that’s not fulfilled locally or new product creates a new market.
Development done through business plans including; cashflow forecast of objectives and
plan of staffing needs or marketing methods.
Runs the business by Providing goods/services that customers need or want creating
revenue
Develops the business by adapting to market changes
Entrepreneurial motives and characteristics
Entrepreneurial motives- reasons that drive a person to set up business. Financial motives
like making a profit pr profit maximisation
Non-financial motives
Satisficing- make sufficient profits to satisfy the entrepreneur
Ethical stance- starting a business with intentions of helping others
Social entrepreneurship- create sustainable, profit-making business allowing benefits in the
community
Independence and home working- entrepreneur wants more freedom to work when/where
they please
Financial motives
Sales maximising
Profit maximising
Profit satisficing
Entrepreneurial characteristics- personality traits/skills than an entrepreneur needs to start and run
a successful business
, Risk taking, creative, resilience, determination, innovative
Entrepreneurs and SMEs on the Uk economy
£1.8 trillion in sale in 2016; 47% of business sales in UK
Generate large amount of direct employment; 15.7 million jobs in 2016
SMEs offer innovative products/services and often grow quicker than larger businesses
meaning more jobs and wealth creation for economy
Largest industries in Uk; retail, manufacturing and vehicle repairs= SMEs account for 46% of
these
Primary sector- organisations that are first stage of production. fishing or farms
Secondary sector- second stage of production by using primary resources and turning them
into goods/services. Car manufacturing
Tertiary sector- final stage of production consisting of retailing or restaurants
SMEs make up large % of these sectors
Stakeholders affected by business
Stakeholder- person, group or organisation that has interest or concern about a business.
Includes; shareholders, employees, mangers, supplies, lenders and community it's in.
Internal stakeholders- groups within a business such as owners or workers
External stakeholders- group outside a business such as community or supplies
Internal; employees, manager, owners
External; suppliers, society, government, shareholders, customers
stakeholder Business effect
workers Growth; New technology means higher
productivity and jobs
suppliers More orders= more profit
Banks More profits= quicker pay back leading to low-
risk loans being given
customers Better quality and service of product
Business plans
Business plan- forecast of business operations, including cashflow forecast, business
objectives and marketing methods
Includes;
A marketing plan- includes market research such as market mapping key competitors or
achieving objectives like higher market share.
An operational plan- shows how product will be produced and delivered to customers in
target market
A Financial plan- predicts businesses income from sales and expenditure from costs over a
period of time. Helps business assess short-, medium- and long-term needs in terms of
finance
A human resource plan- predicts staff needs of the business including level of skills and
numbers of staff needed to business's objectives
, An executive plan- short summary of the main points from detailed plan. such as key
objectives
Importance
Investors and lenders as they want to see detailed forecast of how business will perform
over time. Predicts sales, expenditure ext.
To Obtain finance must be evidence of market analysis and skill set to match their business
plan, see risk of investment
A plan can be set to compare actual progress to see if deadlines and costs are as predicted
Helps look at things methodically and logically at the steps needed to achieve aims and
objectives
Sources of guidance for entrepreneurs
Government organisations like GOV.UK or department of business offer free advice for range
of issues like legal requirements setting up.
Government organisations also offer grants for new businesses and loans
Privately-run organisations like federation of small businesses and British chamber of
commerce which emphasises networking and training alongside helping with business plans.
Markets
Product- physical product like a car
Service- intangible product like financial advice
Customer- someone who buys a product from a business
Trade customers- businesses who sell the product or enhanced version of it
Consumer- someone who uses goods/services produced by business
Market- place where buyers and sellers trade goods/services with each other. Can be
physical or based on online
Competition- where two or more sellers of similar goods/services act independently to
persuade buyers to choose their products. E.g. Car insurance market
Types of market
Local market- customers travel short distance to purchase goods/services from seller.
Supermarkets, restaurants. Easy to access but relatively small
Global market- goods/services are offered for sale by businesses across different countries.
Things that come across borders or bought digitally
Seasonal market- marketing products or services at certain points of the year
Mass market- large market of customers with widely different backgrounds that a business will not
try to distinguish between. Undifferentiated
Advantages- purchase goods/services in bulk leading to being able to afford large
advertisement and marketing campaigns from high sale volumes
Disadvantages- high competition as businesses attracted to high sale volume.
Having unique selling point aids to stand out
Niche market- smaller section of the market where products/services are focused. Aimed at
satisfying specific market needs via tailored product
Advantages- less competition and can meet customer needs
Disadvantages- fewer potential customers thus making it hard for retailers to stock products
Trade and consumer markets
Trade markets- business sells to another business. Branding tends to be unimportant as high
quality at low price in needed. Business to business (B2B)
, Consumer market- business sells product to general public. Emphasis on branding and
image as buyers want high quality good with large brand name. Business to consumer (B2C)
Interpretating market data
Market analysis- process of gathering information about anything that affect conditions in
the market in which the business operates. Market data allows business to understand this.
Market size- total value of QD in a specific market or period of time.
Market share- proportion of sales a business or product has achieved expressed as % over a
period of time
Market trends- taking a series of market data over period of time to try predict what will
happen in the future.
Market segmentation
Market segmentation- involves dividing market into smaller sets of customers or segments
who have similar needs/wants. Via age, sex, income or location
Allows business to decide what segment it wants to focus on its terms of product service
Business can become cost effective and efficient
Customers likely able to buy products/services that meet their demand potentially at lower
cost
advantages disadvantages
Creates separate products for each Producing number of goods to suit each
segment, business can focus on segment can be expensive= hard to
segments and identify how to meet make profit
their needs.
Find out areas of growth for
products/services
Competition
More competition= consumer benefit as products/services more price sensitive
One dominant business (monopoly)
25% or more of industry's sales (apple as 70% sales of US MP3 market). Able to
restrict choices made by consumers as can raise prices higher than another
competitor.
Benefits- economies of scale, faster rate of tech advancement due to higher profitability
Few large businesses (oligopoly)-
markets that are large, potentially large number of customers and can support
launch of new product better than SMEs.
Withdraw- likely to attract competitors who like high profits/growth
Perfect competition
market where buyers and businesses are big in number causing the market price to not
be influenced by one buyer or business. E.g., eBay shops where businesses tend to set
prices close to competitors
Monopolistic competition
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