BUSS1

BUSS1

Enterprise/Entrepreneur
1. Enterprise: The willingness and ability to think of a new business idea & taking the risks involved
2. Entrepreneur: Someone who starts and runs a business & takes the responsibility for risks involved.
  1. Risks include: Land/Natural Resources, Labour, Capital, Enterprise.
  2. Innovative
  3. Additional Competition - Keeping prices low - RIVALRY
  4. Reducing Unemployment
  5. Motives Include: Escaping a job, Pursuing interest, Exploit gap in the market, innovation, be your own boss, work from home, second career
3. Risks, Rewards & Opportunity Cost
  1. Risk: Own Money
  2. Reward: Financial & Satisfaction (Monetary & Non-Monetary Reward)
  3. Opportunity Cost: Cost of next best alternative. What would you do with time, money & expertise otherwise?
4. Government Support
  1. Early Stages, Small Business = Vulnerable... Failure
  2. Government Grant: Local & Central Gov. Usually given out for; Innovation, Research & Development - Training - Economic Regeneration - Encouraging Youths
  3. *Also Support on the internet!*
5. Stakeholder: Individual/group with an interest to the business. inc. employees, management, shareholders, customers, suppliers & competitors.
Generating/Protecting a Business Idea
1. Sourcing Business Ideas
  1. Experience
    1. Previous Job
    2. Hobby/ Interest
  2. Finding a gap in the market
    1. Ad: Improved success rate, 'first mover advantage', little/limited competition
    2. Dis: Little/No Expertise - prone to mistakes, Is it a real gap? - Has it been done & failed?, Competition enters quickly.
  3. Brainstorming: Process for generating innovative and creative ideas through open-ended group discussion
    1. Ad: Good knowledge of product, passion/interest of product = motivation, contacts = established market, entrepreneur have a reputation in market?
    2. Dis: Competition?, Passion may cause overestimation of market, need entrepreneurial skills as well as product knowledge
2. Researching Business Ideas
  1. Business/ Telephone Directory
  2. Local maps to locate local competition
  3. Small scale research - questionnaires /interviews
  4. Market mapping - Identify market segments
3. Protecting a Business Idea
  1. Copyright
    1. Protection given to books, plays, films and music
  2. Patent
    1. Exclusive right to produce a product usually fixed period of time - up to 20 years
  3. Trademark
    1. Word, image, sound and smell enabling a business to differentiate itself from it's competitors
Franchising
1. Franchise: Form of business contract which the franchisor agrees to sell to the franchisee the rights to use their name, logo and trading methods
2. Franchisor: The business selling the franchise agreement to the franchisee
3. Franchisee: Entrepreneur who buys the franchise agreement from the franchisor
4. Franchisor
  1. Advantages: Expand quickly, Limited risk - Revenue is certain - Turnover not Profit, Risk is shared - cost met by franchisee, Franchisee doing work and earning for the franchisor
  2. Disadvantage: Loss of control on how the product is presented to the customer, Difficult to control quality as franchise network expands, Coordination and communication problems increase as franchise grows, Franchisees become powerful as they acquire a number of franchises
5. Franchisee
  1. Advantages: Ability to sell an already established product/service, can take advantage of central services for FREE e.g. marketing, purchasing, training, stock control, accounting systems and administration
  2. Disadvantages: Proportion of revenue to franchisor, may not feel like it's their own so won't benefit from the personal rewards, rules MUST be followed
Resources in Goods & Services
1. Business Inputs & Outputs
  1. Inputs: Contributing to the production of a product/service
  2. Outputs: Occurs as a result of the transformation of business outputs
2. Primary Production: 1st stage of resources extraction - land & raw materials
3. Secondary Production: Resources transformation to produce finished goods & components - car manufacture
4. Tertiary Production: Transformation of resources to provide a service - service sector (inc. retailing)
5. Adding Value
  1. Added Value: Difference in value between price of final product and cost of materials
  2. Advertising
  3. Branding
  4. Product Features
  5. Location
  6. Personal Service
  7. Reducing Input Cost
  8. Differentiation from Competition
  9. Charging Higher Price
  10. Reducing Sensitivity of Demand
  11. Higher Profit Margins
  12. Targeting product/service at different market segment
Business Plans
1. Business Plan: A written document describing the nature of the business, it's objectives, marketing strategy,and projected cash flow forecast and income statement.
2. Contents
  1. Executive Summary
  2. Business Description
    1. Start Date (New-businesses) or how long it's been trading
    2. History/ previous owners
    3. Type of business & sector of the market
    4. Legal Structure
    5. Entrepreneur's Vision
  3. Product/ Service
    1. How is it different from competition?
    2. Benefits of customers will gain
    3. Plans for further development
    4. Info on business protection
  4. Strategy & Implentation
    1. Pricing
    2. Promotion
    3. Sales Strategies
    4. Production Strategies
      1. Location of production (ownership, ads &dis)
      2. Production (owned/leased, age, capacity in relation to forecast demand)
      3. Systems (stock control, quality control, financial management & IT)
  5. Market Analysis
    1. The market (Size & Growth)
    2. The Competition (Who, Strength's & Weaknesses)
    3. The Future (Market Change & Response)
    4. The Customer (Who & Where)
  6. Management Team
  7. Financial Plan
3. Purposes
  1. Future Planning
  2. Identify Action Needed
  3. Setting Objectives
  4. Performance can be measured
4. Limitations - They often prove unrealistic for small businesses for the following reasons
  1. Time Consuming
  2. Money: Time & Advice
  3. Expertise - Entrepreneur may not know enough
  4. Opportunity Cost
  5. Importance Level?
5. Sources of Help
  1. Small Business Advisers
  2. Accountants
  3. Bank Managers
  4. Government Agencies
Market Research
1. Market Research: Process of gathering, analysing and interpreting data about a market
  1. Quantitive and Qualitative Data
    1. Quantitative: Numerical Data. Collected in larger scales - generate statistic results. e.g. 8/10 People...
      1. Questionaire
        Telephone/Online Survey's
    2. Qualitative: Data about feelings, opinions & attitudes. Why do people behave/feel the way they do?
      1. In-depth Interview
        Group Discussions e.g. Focus Groups
2. Primary: (Field) - Collected directly for purposes of the business - doesn't already exist
  1. Sampling
    1. Random Sample: One in which each potential member of a group has an equal chance of being in the sample.
    2. Quota Sample: The sample of a certain number of people is taken from one specific group of the population, for example 100 females.
    3. Stratified Sample: The population is divided into groups with common characteristics, for example, people earning over £100,000, and a sample is randomly selected from this group.
    4. Factors Affecting Choice
      1. Finance
      2. Nature of Product
      3. Level of Risk
      4. Target Market
  2. Methods
    1. Observation
    2. IT
    3. Written Questionnaire
    4. Face-to-face Questionnaire
    5. Telephone & Online Surveys
    6. Focus Groups
    7. Test Marketing
    8. Disadvantages
      1. Expensive
      2. Difficult - Accurate
      3. Inaccuracy = Inappropriate Decisions
      4. Lack of skills/time
3. Secondary: (Desk) - Already in existence - Collected from existing research
  1. Internally
    1. Sales Figures
    2. Stock Records
    3. Geographical Analysis
    4. Financial Records
    5. Customer Opinions
    6. Customer Complaints
  2. Externally
    1. Telephone Book/ Yellow Pages
    2. Trade Associations
    3. Enterprise Agencies
    4. Business Link - Government Help Organisation
    5. Competition
    6. Trade Press
    7. Larger Scale
      1. Government Publications e.g.nationalstatisticsonline
      2. Specialist Market Analysis Companies - Expensive...Detailed
Markets
1. Types
  1. Local: Customers are only a short distance away
  2. National: Geographically dispersed market where customers are spread over a large area
  3. Electronic: Doesn't have a physical presence - exists as a virtual presence via the internet. Many business moved from 'brick to click'
2. Analysis
  1. Size: Measurement of the size of total sales for a whole market - expressed in terms of the value of sales (currency) or volume (units).
  2. Segment: Group of consumers within a larger market who have similar characteristics such as age/income level. Segmentation: Technique where the market is broken down into smaller sections with similar characteristics.
    1. Demographic - Breaks market into customers characteristics. e.g. age, income levels, gender, ethnicity & socio-economic groups.
    2. Geographic: Lifestyle, Personality, Regional, National etc.
  3. Growth: Measurement of the change in market size. Usually expressed as a percentage of it's original size.
  4. Share: Proportion of a total market accounted for by one product or company.
3. Demand: Quantity of a product that customers are willing & able to buy at a give price over a curtain time.
  1. Factors affecting demand
    1. Incomes: Consumer incomes rise = product demand increases...Incomes decrease = demand decreases Luxury Goods: *Income Sensitive* than necessity demand
    2. Marketing: Often a positive relationship between advertising expenditure & other forms of marketing & demand
    3. Seasonal Demand: Important for products such as clothing & energy. Less important for food & customer services etc.
Legal Structure
1. Sole Traders Unincorporated
  1. Owned, controlled & financed by 1
2. Partnership Unincorporated
  1. Owned, controlled & financed by 2
3. Private Limited Incorporated
  1. Owned, controlled & financed by at least 1 shareholder *LL
4. Public Limited (PLC) Incorporated
  1. Minimum of 2 but no maximum shareholders *LL
5. Social Enterprise
  1. *Main objective isn't profit.*
    1. Benefits inc. Motivation, Society, Easier to recruit & retain, grants& other finance available
      1. Drawbacks. Profitability & social aims may conflict, entrepreneur takes lower return - proportion go to social aim.
6. Franchise
  1. Business which has brought the right to trade as an established brand
7. Limited Liability (*LL) - The owners liability is limited to the amount they have invested to the business. Unlimited Liability - Owners are personally liable for all debts incurred by the business.
8. Seperation of ownership & control: Situation where owners are not the same as those controlling day-day (Managers). Therefore each have different objective for the business.
Finance
1. Internal - Finances raised from within the business. e,g,owner's savings, retained earnings/profit & income from sale of assets.
  1. Personal - Ad. No ad. costs, confidence & no interference. Dis. Opportunity cost, limited finance = limited purchases, entrepreneur could loose everything, borrowing from friend/family causes strains if not successful.
2. External - Those outside the business. e.g. banks & shareholders
  1. Bank Loan - Good source of finance for assets e.g. machinery & equipment & other start-up costs
    1. Ad. Timescales used = Repayment Plan, interest Fixed =Budgeting, Guaranteed, No lender agreement terms (profit, percentage, control) Dis. Interest must be paid regardless profitability, may have to be personally secured, length of loan may be longer than life of asset
  2. Overdraft - Temporary arrangement allowing the business to draw out more money than in the account. *Up to an agreed limit.
    1. Ad. Flexible, Quick & Easy Dis. Expensive-Long Term, Fees can be high, can be removed at short notice
3. Venture Capitalist - Professional investor - Invests into business in return for shares - usually, large investments (£250,000+)
4. Business Angel - Wealthy, entrepreneurial individual, willing to invest in small, high risk business. *Expects high return...likely to have high growth potential.
5. Crowdfunding - Funding a new business by raising small amounts from a large no. of people- typically online.
6. Share Capital - putting money in for a share of the business
Location
1. Fixed Costs (Quantitative) - Land/buildings, Government Grants, Utility Bills, Cost of Managerial Staff
2. Variable Costs (Quantitative) - Material Transport, Local Material, Wage Levels, Bulk Increasing/Reducing
3. Qualitative - Environment, Ease of Access, Quality of Infrastructure (Roads, Airports, Rail,Bandwidth) Quality of Labour, Planning Laws/Restrictions, Competition
4. Technology (Quan.) - (Teleworking = Entrepreneurs work from home, Internet) Ads. Reduced Costs - Premises, Reduced Risk - No committing to rent/lease, Reduced Travelling - More Work Hours, Plan around Family Dis. Separation of Work & Home, Initial Start-ups - House rarely suitable, loss of social aspects - lonely, Hidden Costs - house insurance, council tax, tenancy agreement, Distractions - children, pets & TV
5. Costs (Quan.) - Location decisions are CRUCIAL - Break-even analysis & investment appraisal helps to decide based on financial information.
6. Infrastructure (Quan.) - Transport Links, Raw Materials, Customers, Local Services (Waste disposal, Entertainment, Health, Education, Public Services)
7. Market (Quan.) - Start Ups = Close to customer - ESSENTIAL & away from Competition, Growth = Geographically Dispersed - Good Location may change - Transporting product could become more expensive than raw materials.
8. Qualitative: Natue of Product - gain/loose weight during production? Service- Location influenced by customer needs. Do costs differ in location? limitations in choice? What factor is most important?
People in Business
1. Employees
  1. Full Time: Usually around 35 hours +. Ads. Higher Output, Available to handle unexpected events, Build better relationships - Customer/Supplier, Customer Service = Differentiating Factor, Easier to take training opportunities. Dis. High Costs, Limited Flexibility - Capacity & Skills
  2. Part Time: Usually 35 hours or less, 2 types: Term-time Workers, term time & school holiday staff, Zero-hour Contracts, no fixed no. of hours, hours change dependent on demand & employee. Ads. Flexibility, cover busy periods (peak trading), Part-time Job Share = wider range of skills & talents, good for growing businesses Dis. Difficult to access training, communication difficulties, difficult to build customer relationships, may not be much different in costs.
  3. Temporary: One who is employed for a fixed period of time. Often seasonal & may work full or part time. Rarely have the same benefits as permanent employees such as pensions & health insurance.
    1. Ads. Volume which is uneven & uncertain, small jobs e.g. IT system designed & installed, may want to sell a product/service for a fixed time only, helps short term shortage/loss e.g. maternity, some become permanent over time. Dis. May not know the workings & culture, motivational concerns, constant changing makes difficult communication, customers may not like it - particularly services!
2. Consultants & Advisors
  1. Consultants: Businesses/individuals providing professional advice/services for a fee. Often it's how to make the business more successful or to deal with a problem.
  2. Benefits: Specialist skills without full-time employment, adjust size of workforce up & down quickly, avoids searching & recruiting staff - can usually be risky, start-ups can get advice in early stages - sometimes free or at a subsidised rate.
  3. Drawbacks: Don't know business as well as employees, Not as motivated, Can be expensive
3. Flexible Working
  1. Flexibility is a key benefit to Part-time, A small business wanting to operate longer, or increase output will often use PT staff to cover the additional work. This can help small businesses wanting to grow.

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	Created by Sophie Davis over 9 years ago