Business Activity & The Changing Environment
Task 1 • Write down your name and what grade you would like to achieve in Business & how you expect to get that grade
What is business? • A place where a firm buys and sells things in exchange for money • They aim to make a profit • What ways do you think they could make a profit/
Your activity • Write down three things that a business may aim to do from the beginning • What do you think their objectives would be?
Task 2 • Think of 1 business that you are familiar with & write down three things about this business • Why do you think this business is successful?
Homework • Pick an organisation that you either like or dislike • Research the company and give your findings • Headings may include, company history, products/services, employees, market share etc • Please do not copy from internet
Year 10 Business activity & the changing environment
Objectives W. A. L. T: § Distinguish between the different types of business organisations § Explain what these different types of organisations offer W. I. L. F: § You to give your own thoughts& opinions § You to participate § You to work as part of a team
Starter activity • What are the functions of a business? • List all the people that are involved in a business • What ways can people raise finance for their business?
Types of businesses • Sole Trade • Partnerships • Private Limited Company (LTD) • Public Limited Company (PLC) • Co-operatives • Franchises
Sole Trader • An individual which trades under his/her own name • Is totally independent • Makes all the important decisions • Responsible for paying all of the debts • Few formalities in setting up • Can employ as many people as he/she wishes
Advantages of a Sole Trader • Decisions can be made quickly • Leads to greater interest & more dedicated & hard working owner • Profits are kept by the sole trader • Paperwork is minimal • Easy to start trading as the sole trader • Has close contact with employees and customers • Problems are easier to solve
Disadvantages of a Sole Trader • Personally liable for all debts that it occurs (unlimited liability) • Less capital available for expansion • Taxed at a higher rate than a private company • May have difficulty in managing all business functions • When the sole trader dies so does the business • Raising capital could be difficult for one person
Examples of Sole Traders • Corner shop • Coffee shop • Carpenters
Your task • Suggest two advantages & two disadvantages of a person setting up as a sole trader • List two objectives that a sole trader may have
Partnerships • Can have between 2 & 20 partners • Set up under the Partnership Act 1890 • A partnership deed can be used to set out the rights of the partners • Aim to make a profit
Examples of partnerships • Doctors • Accountants • Solicitors
Advantages of a partnership • More capital is available than for the sole trader because more people are contributing • Better use of business expertise because each partner can concentrate on what they are good at • Better decision making because decisions are made after discussions
Disadvantages of Partnerships • Group decision making may cause conflict between partners • Like sole traders, partners have unlimited liability thus they are liable for all the debts of the business • Decision making can be slower which can lead to inflexibility • Profits must be shared
Your task • Why is it important that a business has a deed of partnership? • Why do you think partnerships are a good idea?
Key terms Unlimited liability The owners are personally responsible for paying debts if the business goes bankrupt Limited liability If the company goes into liquidation, the shareholders of the company are not responsible for paying the debts of the business
Business Activity and the changing environment
Objectives W. A. L. T: • Explain the different types of business organisations • Examine the different finance methods available to business W. I. L. F: • Your participation • Your ideas and opinions • Complete tasks
Starter Activity • You have started up your own business in Nottingham • Make a list of all the things which are necessary to make this business successful
Private Limited Company • A company that is a legal entity in its own right • It can be sued and can sue • Shareholders own the business • A group of between 2 & 50 people who buy the shares are called the shareholders • Cannot sell shares to the public
Public Limited Company • Can sell their shares to members of the public through the stock exchange • Must have at least 7 shareholders with no maximum limit • Must issue a prospective detailing the history of the company & inviting the public to buy shares
Public Limited Company • Shares are bought & sold on the stock exchange • Accounts must be published and audited on an annual basis • An annual report must also be compiled each year
Advantages of a public limited company • Limited liability • Easier than private limited company to raise capital • Attract top management because of public image • Continuity of existence • Lots of publicity based on stock exchange quotations
Disadvantages of a public limited company • High formation costs • Accounts have to be published • Profits must be distributed to shareholders • Ownership & control are separated because although the shareholders own the company the Board of Directors make the decisions
Key Terms Shares • These are long term sources of finance • Sold to people who become shareholders of the company • A plc is able to advertise its shares for sale to the general public • A private limited company must sell their shares privately Shareholders • These are people who own part of the Business
Sources of finance • Internal sources of finance • External sources of finance
Internal sources of finance • Retained profits • Stock reduction • Assets sale • Limiting credit to customers
External sources of finance • Owners capital • Hire purchase and leasing • Overdrafts and loans • Grants
Franchises & Sources of Finance
Objectives W. A. L. T: § Evaluate the idea of owing a franchise& determining what advantages & disadvantages there associated with it § Distinguish between the various sources of finance available to businesses W. I. L. F: § You to create a suitable advert for the sale of a franchise § You to answer multiple choice questions and exam style questions
Starter Activity • What are the various businesses organisations that we have done? • What is an entrepreneur? • What are the characteristics of an entrepreneur? • What are the two sources of finance called? • List three finance methods associated with each
What is a franchise? • Involves paying a fee & agreeing to produce goods exactly in accordance with the franchise company’s policy • Payments are made on a regular basis depending on profits made • Training & supervision are provided
Your task • Create a newspaper advert selling a franchise • Example: Mc Donald’s largest restaurant for sale as a going concern to suitable franchisee(address) Excellent trading figures, full training provided. Price £ 375, 000
The Stock market Internet site
The public and private sector • The public sector includes everything that is owned by the government • Examples-army, police force, schools & hospitals • Public means that they are owned by the government for the benefit of the people who run them
The public and private sector • The private sector contains all the businesses owned by private individuals • Almost all the businesses you can think of are in the private sector • Private means that these businesses are run for the benefit of the people who own them
Strengths of the free market private sector • Employers & employees can create their own personal wealth through the profit motive & hard work • A greater range of products are supplied • People have greater freedom to choose & but what they want • Competition helps keep prices down & encourages new ideas
Strengths of the planned public sector • Public services do not depend on the profit motive & will be supplied even at a loss • The provision of basic services available to all regardless of people’s ability to pay them
Objectives W. A. L. T: § Outline the various factors of production § Explain how each factor is important to a business W. I. L. F: § You to distinguish between the different factors of production § You to start working on cash flow and its importance
Factors of production • These four factors of production are the resources that are used to produce the economy’s goods & services • Land • Labour • Capital • Enterprise
Factors of production Land § All businesses need land to create their products Labour § Businesses need to employ people to make and market their products § They may use the land, build on the land or extract from the land § The UK’s labour force is made up of all the men & women who are available to work
Factors of production Capital Enterprise § To make their goods or to provide their services, firms need to invest money in machinery, buildings, vehicles and other major resources § The entrepreneur owns the business and is prepared to take the chance that his or her product will be a success
Cash Flow
Objectives W. A. L. T: § Create a cash flow statement § Differentiate between fixed & variable costs & total costs W. I. L. F: § You to create a cash flow with various figures given
Starter Activity-match the key word to the meaning Sole Trader You must pay back what you put in & all debt Entrepreneur You only lose the amount of money put into the business Limited Liability An individual willing to take risks in setting up a business Unlimited Liability Business organisation that is owned by a single person
Cash Flow • Is the flow of all money into and out of the business • Cash flow is important because if there is not enough money flowing in you don’t have enough to pay bills
Poor cash flow=big problems • Not enough cash to pay daily expenses • Lack of working capital • Staff don’t get paid on time • Creditors may not get paid on time • May become bankrupt
Your task 1) What is a cash flow? 2) Why should a business prepare a cash flow? 3) Why does a business need to keep an eye on their finances?
Reasons for preparing a cash flow • Lets a business know if they will have enough money to meet payments due • Indicates which months there will be a cash shortage
How to prepare a cash flow • Estimate money coming in • Estimate money going out • Subtract payments from receipts • The closing balance will be the opening balance for the following month
The different costs involved Fixed costs: § Costs which have to be paid no matter what has been sold or produced Variable costs: § Costs that vary according to the amount produced or sold Total costs: § Fixed costs + variable costs
Tick which source of finance is necessary for the following £ Stock for resale 10, 000 Premises 120, 000 Machinery 50, 000 Vehicles 18, 000 Land 60, 000 Oil 2000 Wages 1800 Telephone 400 Computers 6000 Short term Medium term Long term
Objectives W. A. L. T: § Distinguish between the various types of stakeholders § Match the type of stakeholder to a various aim W. I. L. F: § You to relate questions to lessons that we have completed already
Starter Activity 1. Customers are an example of a firm’s ------(12) 1. Business objectives are set by the ------(6) 1. An example of an internal stakeholder group is ----(9) 1. Public sector organisations have objectives based on -------(7)
Stakeholders • Internal-owners, managers, directors Variable costs: • External-local community, bank, suppliers
Your task • Select a business of your choice and write about the various stakeholders that would be affected by it
Match an appropriate aim to each stakeholder group Group Aim Customers No pollution Local Community Lenders A return on their investment Job security Employees Lower prices
Judging success-how are objectives measured? • Size • Turnover/market share • Shareholders • Number of employees/staff turnover • Customer satisfaction/number of complaints
Factors of production
Objectives W. A. L. T: § Examine the different factors of production and how they affect a business § Relate the factors of production to a particular business situation W. I. L. F: § Your thoughts and opinions based on these topics and how they would relate them to a particular business scenario
Starter Activity • What are the four factors of production? • Explain what is meant by each of those factors Fill in the blanks: § Employees earn -----(w) § The owners of capital receive ----(I) § Entrepreneurs make -------(p) § The owners of land receive ----(R)
Areas to be covered • Primary Industry • Secondary Industry • Tertiary Industry • Employment
The primary industry • These are businesses that extract something e. g. coal, oil, stone, fish and ore • The location of these businesses usually depends on where the resources being extracted are found
The secondary industry • Theses are businesses that construct or manufacture something • Their location is influenced by many factors such as government support and the existence of a suitable labour force
The Tertiary industry • This is the service sector and supports the other two industries • Services include transport, finance, insurance, training and advertising • Their location will be influenced by the services required by firms in the other two industries
Your task § § § Classify each of these businesses as either primary, secondary or tertiary: A specialist distribution firm A builder A building society A forestry plantation A computer manufacturer List four major influences on location
Objectives W. A. L. T: • Distinguish between the different types of production • Categories different items into the correct production method W. I. L. F: • You to distinguish between the different production methods and give relevant examples
Starter Activity • Factors of production –jumbled up words • Access business studies on line • http: //www. businessstudiesonline. co. uk/Gc se. Business/Activities/Module 1 Me nu. htm#GCSEBus. Mod 1 Factors
Methods of production Job production: • when a business makes a single one of product • The job is often built by skilled labour working to the customer requirements • Since only one item is made the business may not gain economies of scale
Methods of production Batch production: § When there is more than one item made § Each batch of products are finished before the next batch
Methods of production Mass production • When identical items are made on a production line • The product moves from one stage to the next
Chose either job, batch or mass • • • Cans of paint A factory extension Shoes, size 7 Television The channel Tunnel State one advantage and one disadvantage of mass production
Starter Activity • Refer to hand out sheet • Also grade or no grade quiz • http: //www. businessstudiesonline. co. uk/Gc se. Business/Activities/Module 4 M enu. htm#GCSEBus. Mod 4 Production. Method s
Factors of location & PEST analysis
Starter Activity 1) Describe what is meant by batch production 2) A cost which remains the same regardless of the level of production is _____ cost 1) A cost which changes according to the level of production is a _____ cost
Developments in production • Just in time-only buy stock as you need them, no need for additional storage facilities • Cell production-where people make a particular part of the product and moves continually • Kaizen-invest in skilled people rather than technology ( continuous improvement)
Lean production • Refers to the various ways that are now used to improve the efficiency of production • Tries to cut development time • Associated with just in time, cell production and the Kaizen system
Your Task • Choose an organisation of your choice and outline what type of production mostly suits them and give relevant reasons why
The Government • They create various laws and regulations that affect businesses • The EU and the UK Government also support firms • The Government want to be paid VAT and taxes
The P. E. S. T analysis 15 th October 2007
Objectives W. A. L. T: § The importance of the p. e. s. t analysis on a business § Distinguish the difference between P. E. S. T W. I. L. F: § You to relate the p. e. s. t analysis to a particular business (case study)
The PEST analysis Refer to the handout § A scan of the external macro-environment in which the firm operates can be expressed as; § § Political Economic Social Technological
The steps involved Environmental Scan External analysis Microenvironment P. E. S. T Internal analysis Ma croenvironment
Political Factors • These include government regulations & legal issues • Defines both formal & informal rules • Examples-tax policy, employment laws, environmental regulations, trade restrictions and tariffs, political stability
Economic Factors • Economic factors affect the purchasing of potential customers and the firms cost of capital • Examples-economic growth, interest rates, exchange rates, inflation rates
Social Factors • These include demographic and cultural aspects of the external microenvironment • These affect customer needs and the size of potential markets • Examples-health consciousness, population growth rate, age distribution, career attitudes, emphasis on safety
Technological Factors • These can lower barriers to entry, reduce minimum efficient production levels and influences outsourcing decisions • Examples-research and development, automation, technology incentives, rate of technological change
Case study • Relate to the p. e. s. t case study • Read through case study and answer questions based on this case study
The Business Cycle • This shows the regular patterns of upturns and downturns of the level of output in the economy • Goes through stages-boom, slump, recovery • Diagram • The business cycle business studies on line part
The phases • Boom-is the part of the business cycle in which output rises • Slump-is a severe form of recession • Recovery-is the part of the business cycle when output begins to grow again after a slump
Your task • Look at the shops, offices or factories in Witham. Have any of them opened or closed recently? • Are there other reasons or is it a result of the business cycle
The E. U
Objectives W. A. L. T: § Understand the purpose of the European Union § Determine what has happened since the introduction of the E. U W. I. L. F: § You to answer the questions based on the European Union
Starter Activity • The face off quiz on www. businessstudiesonline. com where you answer a series of questions based on the E. U
What is the E. U? • This is a political and economic community • Made up of 27 countries member states located in Europe • In 1957 6 European countries formed the European Economic Community (EEC) by the Treaty of Rome
What has happened since then? • The EU has grown in size through new member states • In 1993, the Maastricht Treaty established the base of the current legal framework
Task 1 • Write down three things that you know about the E. U already • One • Two • Three • Compare answers and then list on board
The purpose of the E. U • The EU created a single market which seeks to guarantee the freedom of movement of people, goods, services and capital between member states • It maintains a common trade policy, agricultural and fisheries policies and a regional development policy
Advantages of the EU • Free Trade (no tariffs or quotas) benefits industries as they have a larger market to sell their goods to • Greater co-operation between countries should prevent the outbreak of war between members • Greater cultural understanding results from freedom to travel within the EU • The E. U has a greater influence on world events than the individual countries could have • European Union regional development funding has improved conditions in the poorer countries and areas
Disadvantages of the E. U • Goods cost more to import from non-EU countries due to tariffs • E. U funded schemes such as the Common Agricultural Policy, are expensive, inefficient and sometimes corrupt • It reduces the political independence of each country-decisions are taken for all countries by the European Parliament
Task Two • Look at the handout regarding the history of the E. U • Draw arrows to link to the correct sequence of events • Discuss with your partner and then draw in the arrows
The European Union
Introduction of the euro • In 1999 the EU introduced the euro • Has been adopted by 13 member states
Your task • Name the country • www. businessstudiesonline. com • The drag and drop section
Members of the E. U • • Czech Republic Poland France Albania Sweden Lativa Serbia Belgium • • Moldova Slovakia Estonia Iceland U. K Luxembourg Romania
Members of the E. U • • • Bulgaria Switzerland Greece Finland Ukraine Spain Ireland Hungary Austria Italy • • • Lithuania Montenegro Slovenia Denmark Malta Belarus Netherlands Cyprus Norway Germany Potugal
Business and the EU • Has helped increase trade between member countries • Businesses has the opportunity to expand • The Eu has tried to protect businesses by imposing custom duties on goods imported into the EU
Homework Essay (Red tasks) Why are more countries wanting to join the European Union/ What might their concerns be? Yellow tasks • Create a poster about the European union. On the poster include a small map of the E. U, information about the E. U, the countries in the E. U and the purpose of the E. U
Importance of the E. U • The European Union contains four of the world’s major economic powers; France, Germany, Italy and the U. K • The E. U is now the UK’s main market
U. K imports in 2000 The EU=58% Rest of Europe=6% North America=15% Rest of the world=21%
U. K Exports in 2000 The EU=54% Rest of Europe=7% North America=15% Rest of the world=24%
The single market • Promoting trade between the member states was a major influence in establishing the EU • Its common market is now a single market consisting of about 400 million people
Purpose of the single market • Free movement of people (labour) • Free movements of goods (no internal tariffs) • Common technical and other standards
How the single market has influenced UK businesses in several ways • Common standards of quality and safety • Open market encourages competition • Free movement of labour and good encourages employment and skills development
The monetary union • Economic and monetary union is closely linked with the euro and eurozone • The single currency will affect the EU: • Trade will be valued in euros, exchange rate fluctuations will have an impact and also price difference may cause problems
Your task • In the EU what is the social charter? • What is the difference between the eurozone and the euro? • What does the EU’s single market seek to do?
Answers • A charter protecting the rights of workers • Eurozone is the member states who have signed up to the single currency. The euro is the name of the single currency • Provides free movement of labour and goods and establish common technical standards
Plenary • Test the person beside you regarding the true and false statements and see if their answers have changed
Objectives W. A. L. T: § Determine how businesses grow § Discuss how businesses grow internally W. I. L. F: § You to create a spider diagram outlining how businesses grow § You to participate and engage fully in lesson
Starter • List ways that a business may grow • Create a spider diagram to display these
How a business grows • There are several methods to measure an organisation’s size: • Profits • Turnover • Employees • Capital employed
Profits and turnover • Profits-how much the business keeps from selling its goods and services • Turnover-the sales that the business makes
Employees and capital employed • Employees-the number of people employed in the business • Capital employed-the resources the business has invested in it
Key terms For a firm, greater size through growth makes: • Economies of scale possible • Survival more likely
How can firms grow internally? • They grow organically • Can grow through mergers or takeovers • This usually happens when an organisation sell more of its existing products, starts selling new products and when businesses enter new markets
Integration • In a merger two companies agree to join • This external growth is the quickest way for organisations to grow • In a takeover one company buys enough of another company’s voting shares to take control
Economies of scale • They are the reasons why the average cost of production may fall with increasing levels of output • What is your opinion? Would it be a good idea for a company to produce in large amount or do you think they should only produce as needs be
Task • You own a small business and you want to ensure that your business provides the best possible service to their customers • Create a questionnaire finding out if customers are happy with the service they are getting from your company
Starter Activity Merger The businesses own money that is ploughed back in Takeover If large amounts are made and it reduces the average cost Turnover When one company buys enough of another company’s voting shares Retained profits Way of comparing a businesses size Economies of scale Takes place between two companies through their agreement
Externalities • All businesses bring benefits to people and others outside the business this is called externalities • Externalities are costs or benefits arising from business activity that are experienced by people or organisations outside the firm
Example • A new housing developing is opening up in Witham • They are aimed at people from deprived areas • These people have been involved in crime and substance abuse • You must outline the negative and positive externalities associated with this venture
Your task • Create a spider diagram showing the positive and negative externalities Positive Negative
Year 10 Business Monday
Objectives W. A. L. T: § Distinguish between imports and exports § Distinguish between visible and invisible trade W. I. L. F: § You to complete the starter activity § You to answer the questions based on importing and exporting
Starter Activity Home Trade The export and import of services Importing Selling to other countries Exporting The import and export of goods Visible Trade Buying or selling to people in same country Buying from other countries Invisible
Trading • Is the buying and selling • Home trade is when businesses buy or sell goods to people in the same country • When businesses buy or sell from other countries outside the home country is foreign trading
Importing vs. exporting • When businesses buy goods or services from other countries is called importing • When businesses sell goods or services to another country is called exporting
Visible trade • Is the export and import of goods • Dairy produce, livestock, machinery, oil, clothes, shoes are all examples of visible trade
Invisible trade • Is the export and import of services • When Americans or other foreign tourists come to the U. K on holidays, it is an example of invisible trade
Your task • Outline on a spider diagram the reasons why the U. K imports and exports Importing Exporting
Reasons for importing • Climate is not suitable to produce all crops • Lack natural resources • Needs to import certain raw materials • Wider choice
Reasons for exporting • Easier for the U. K to produce agricultural produce because of climate • Businesses need more than the home market • Creates extra employment • Foreign currency
Task • Explain the difference between home trade and foreign trade? • Give three reasons why the U. K imports goods from other countries • Why do we export to other countries?
Task-tick the correct answer Exports U. K tourists going to Italy U. K computer parts sold to France An U. K business buying parts from China Imports
Year 10 Business Wednesday
Objectives W. A. L. T: § Distinguish between the various types of finance § Distinguish between ordinary and preference shares W. I. L. F: § You to attempt the starter activity § You to complete all the relevant task
Starter Activity • Why do businesses need finance? • Give two examples of sources of finance • Give two examples of each of the two finance types
Internal sources of finance • Retained and using profits • Selling assets • Using trade credit • Investing any surplus cash • Reducing stocks held
External sources of finance • Personal savings • Borrowings • Issuing shares • Loans and mortgages • Overdrafts • Factoring debts
Types of shares • Two types of shares-ordinary and preference • Ordinary shares allow holders to vote at company meetings • This makes an ordinary shareholder an owner of the company
Preference shares • These don’t usually give their holders the right to vote at company meetings • Preference shareholders receive priority over ordinary shareholders when it comes to paying dividends and repaying capital
Your task • List three reasons why businesses need finance • State two differences ordinary shares and preference shares
Ordinary and preference shares Ordinary Voting rights? Normally one per share Dividend Variable Payment? Capital Paid after repaid? preference; re paid last Preference Usually nonvoting Fixed Paid before ordinary; repai d before ordinary
Homework • Red task-Choose a business of your choice and explain what source of finance would be most adequate for that business to grow • Yellow task-Write a letter to a company of your choice explaining the difference between ordinary shares and preference shares (you must research)
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