Thought for the day To open a business

Thought for the day: To open a business is very easy; to keep it open is very difficult Chinese proverb

Get an A A Grade Level 4 Level 3 Level 2 Level 1 Evaluation Application & Analysis Understand Knowledge To what extent, Evaluate, discuss, justify, advise, recommend. Apply, Examine, Analyse, Interpret, Formulate. Compare, Contrast, distinguish, prepare, construct, calculate, explain, comment Define, Identify, Complete, Outline, describe, Classify

Types of business organisations

1. 2 Nature and Organisation of Business: Types of Organisations Learning Objective Who? Keywords Explain the reasons for setting up a business. ALL Private sector Public sector Mixed economy Free-market economy Command economy entrepreneur Explain the process a business will have to go through to start up. Level 1 Distinguish between different types of business organization and identify their main features. Distinguish between organizations in the private and public sectors. MOST Explain the nature of public–private partnerships. (HL) Level 2 Analyse the relationship between organizations in the private and public sectors. SOME Analyse the problems that business start-ups may face. Level 3 &4 Analyse the extent to which ownership and control differ in organizations. Evaluate the most appropriate form of ownership for a firm. Analyse the impact of the division between ownership and control on internal and external stakeholders. Compare and contrast the objectives of NGOs and non-profit organizations and other organizations. Analyse the impact of the actions of NGOs and other non-profit organizations. Analyse the costs and benefits of cooperation between the public and private sector. (HL)

Activity q. Level 4: Discuss As a group create two A 3 posters Explaining Public and private sectors Using resources in the room.

Public Private

Entrepreneurs • The creation of any business relies heavily on the ability of the entrepreneur to calculate and manage risk. • The creation of a business involves considerable opportunity costs when combining human and financial resources. • Holiday HWK: Research a successful entrepreneurs and investigate their attitudes to risk taking.

Entrepreneurs • Personal qualities and skills • (survey) • Pg 9 - 10

Starting a Business • Read: Pg 11 - 12 • What factors to consider when starting a business…

Pick a colour and speak about this point…. • • • Business idea Finance Human resources Entrepreneur skills Competition Suppliers Customers Marketing Legalities Customer base Working Capital

Identifying Market opportunities • ‘Market Opportunities’ – identification of new or unsatisfied customer needs. • Being able to identify and exploit market opportunities allows the entrepreneur to have a better chance of survival and success. • Market opportunities can come in several ways….

Identifying Market opportunities

Identifying Market opportunities Market Research is imperative! • Identifying a gap in the market • Innovative ideas and creations • Developing the entrepreneurs’ personal qualities and skills Pg 24 Hoag

Possible Problems with start ups… • Globally 40% of new business fail in their first year. . .

Possible Problems with start ups… Globally 40% of new business fail in their first year. . . • Lack of Finance • Cash flow problems • Marketing Problems • Unestablished customer base • People management problems • Legalities • Production problems • High cost of production • Poor location • External influences Pg 10 Activity 2. 1

Starter Stars Plan the starter for next lesson… recapping this lesson

Business ownership

Profit-based private sector Businesses Most businesses in the UK are privately owned. This means: • They are owned by private individuals • These individuals risk their own money • The owners’ reward is the profit they make.

Private ownership options • Sole trader – 1 owner • Partnership – 2 people or more • Private limited companies (Ltd) – often a family-run business with the protection of limited liability • Public limited companies (plc) – large organisations whose shares are traded on the Stock Exchange • Franchises – small business trading with agreement of large firm • Cooperatives – collectively owned by workers/customers

Key difference • Sole traders and partnerships have unlimited liability. Owners are responsible for all debts and may have to sell personal possessions. • Companies have limited liability. Owners can only lose their investment even if the company has huge debts.

Sole traders Benefits Drawbacks • Easy to set up and give a personal service • Owner independent – can make quick decisions • Minimum of paperwork • Knows customers – helps to avoid bad debts • Unlimited liability • Long hours, no cover for holidays/sickness • Capital may come from savings • Needs business skills • Business ends on death

Sole Trader – Key Points – Make Notes…

Partnerships Benefits • Easier to raise capital • Problems/ideas can be discussed • Greater range of skills/expertise • Cover for holidays/sickness Drawbacks Unlimited liability Profits are shared May be disagreements Decisions/actions legally binding on all partners • Death of a partner means share needs repaying • •

Partnership – Key Points – Make Notes…

About companies Each company has its own identity in law. The company employs staff, not the owner(s). The company owns assets, not the owner(s). The company operates until it is formally wound up or goes into liquidation. • The company pays corporation tax on its profits. • •

Private limited companies Benefits • Limited liability • Minimum of 1 director and 1 shareholder • Easy to set up/affairs still private • Easier to raise capital/borrow from bank • Share transfers need agreement of all Drawbacks • Cannot sell shares to the public • More regulations to comply with • Accounting procedures may be more costly • Death of shareholder has no effect on company

Ltd – Key Points – Make Notes…

Public limited companies Benefits • Limited liability • Increased capital as public can buy shares • Minimum of 2 directors and 2 shareholders • Shares increase in value if company successful • Operating large scale can lower costs per unit Drawbacks • Many regulations to comply with • Accounts (and problems) are public knowledge • Shareholders may sell shares if dividends poor • Original owner may lose overall control

PLC – Key Points – Make Notes…

Companies/Corporations – Key Points • Legal forms of Business organisation • Pg 15

Activity q. Level 4: Discuss Pg 16: textbook Activity 2. 3

Review of main types of private ownership • Sole traders – suitable for one person running small business with low risk/little investment required • Partnership – suitable for professional groups, husband/wife businesses, small business needing different skills • Private limited company – suitable for family business, essential if risk considerable, eg through expensive stock • Public limited company – suitable for large national/international operations

Private ownership review Most private businesses are owned by sole traders, partners or are companies. Other alternatives are: • Cooperatives – societies which operate for the benefit of their members (whether customers or workers). • Franchises – where a large company allows a small operator to trade on name in return for share of profits.

Cooperatives Benefits • Each owner has equal share/one vote • Profits are shared equally • Can have limited liability status • Workers can decide whether to be owners Drawbacks • Obtaining finance may be difficult • Decisions by consensus take time • ‘Hard’ decisions may be difficult to make • ‘Equality’ can be hard for good leaders/workers

Franchise Benefits • Less risky than starting own business • Selling a known name • Advice and guidance available • Owner keeps most of profit Drawbacks • Share of profit goes to franchisor • Franchisee must abide by legal agreement • Only franchisor products can be sold • Success very dependent on popularity of product

Public ownership • Term used for enterprises owned and controlled by the state. • Aim is to provide services needed by everyone, regardless of income or wealth, eg health and education. • Mainly financed through taxation. • Pg 16

Examples of public ownership • Central government departments, eg Department of Health • Local authorities and councils • Public corporations, eg BBC, Bank of England, British Nuclear Fuels

Owner liabilities All owners must: • Produce annual accounts • Pay tax on profits • Operate the business within the law • Abide by specific agreements (eg Partnership or Franchise agreement) or trade/professional regulations relating to their activity

Owner liabilities • Sole traders/partners are personally liable for debts • Shareholders in companies can lose investment if business fails • Company directors can be held personally liable in law in certain circumstances • Franchise operators may have to meet specific sales targets.

Factors which influence changes of ownership • More capital required to finance expansion or extend operations • More skills/abilities required • Greater security/less risk required • Change of business activity • Changes in legal regulations and requirements

Non-Profit organisations (NPOs) • Not-for-profit organisations • An establishment run in a professional and business-like manners but without profit being a major objective. • -aim to provide a service (e. g leisure and tourism) • Or to promote a special cause (Public libraries, state-schools, museums, government hospitals and social services) • Does not mean the business does not make a surplus. • ‘Profit’ surplus goes back into the business (e. g fee paying rpivate schools is reinvested into the school).

Non-Government organisations (NGOs) • Operates in the private sector. • But are not-for-profit. • Set up and run for the benefit of others in society (but independent of the government). • NGOs also known as – Private voluntary Organisations (PVOs)

Non-Government organisations (NGOs) Two types of NGOs • Operational NGOs – established from a given objective or purpose (Oxfam, Unicef) – tend to be infoved in reilf-based and community projects. • Advocay NGOs – (green peace and amnesty) – take a more aggressive approach to promote or defend a cause – they strive to raise awareness through direct action (lobbying, PR, mass demonstrations). The strength of NGOs is they are run and supported by highly committed people.

Non-Government organisations (NGOs) QUANGOs – Quasi-autonomous non-government organisations are semi-NGOs. They are funded by the government but run by people independent of the government (i. e semi independent organisations that support certain interests of the national government).

Charities • A type of registered non-profit organisation. - key function is collecting donations in order to support a cause that is beneficial to society. - As they don’t ‘sell’ they have to market a different way.

Activity q. Level 4: Discuss How would you go about marketing a charity…. . Since you have nothing to ‘sell’

• Celebrity endorsements • Special charity events • Media Germany, Russia, Holland, Yugoslavia, Australia and Japan. The event as a whole contributed 16 hours of music all of which was live, and over 1. 5 million people tuned in to watch the events unfold. The proceeds of which exceeded 110 million, which was more than was ever hoped for.

• Advantages and disadvantages of Charities • Pg. 36 Hoag

Non-Profit and Non-Government organisations (NGOs)

Pressure Groups • Non-Profit organisations established by their members to address a special interest of the group. • - campaigning against environmental neglect • Smoking in public areas • Testing on animals. • E. g Trade Unions, animal rights activist groups, environmental protection. • Examples

Pressure Groups • Aim to win public support from their actions. • Try to influence government legislation (national minimum wage) • Advantage – they force business and government to take into account the true costs of business activity (pollution & environmental damage) • (more detail in Unit 1. 4) Green peace in Poland

Higher Level • Pg 19 - 20 Relationship between organisations in the private and public sector

Higher Level Merit Goods

Higher Level Public-Private Enterprises

Types of Organisations and Business strategy There are various factors that affect the choice of business organisation. These include: • Amount of finance • Size • Limited liability • Degree of ownership and control • Type of Business activity

Sell this Product The challenge: Pick a ‘type of ownership’ & ‘Sell it’ to the class. • ‘Our product ‘setting aims’ are like no other because…’ • ‘Your company needs to ‘have a mission statement because’ our product because…’ • ‘Setting Objectives will revolutionise… • ‘Benefits of setting aims is groundbreaking because…. ’

Plenary Level achieved_____ What do you now know as a result of today’s lesson? What are your areas for improvement? What are you going to do about this?