Business A Level Paper 1 PPE

Legal Ownership Of Businesses, (types of Businesses)
1. Public Limited Companies
  1. Attributes of, "PLC", (public limited companies): PLC's shares can be bought and sold on the stock market by the general public, although there may be cases where a PLC may not sell their shares to the general public
  2. Advantages: A) Easier to build capital, (e.g. Alibaba raised $20 billion dollars when it went public in Sept 14, 2014). B)
  3. Disadvantages: A) Due to the companies public nature, it would be more likely that shareholders may have conflict of interests, making decision making slower. B) Stock inflation C) You have to publicise financial statements, meaning competitors can take advantage of it for their own research.
2. Private Limited Companies
  1. Attributes of a, "PLC", (private limited company), is that the main, "owners", are a group of Directors elected by shareholders, it is important to note that the shares of a private limited company are not available to the general public.
  2. Advantages: A) Faster decision making. B) In the event of a dispute or mixed interests in the direction of a company, Directors are bound by a contract which states how much profits each member earns, and what to do to in order to break up a board of directors.
  3. Disadvantages: A) Harder to build capital and gain finance. B)
3. Joint Ventures
  1. A Joint venture is when two separate businesses form a new company while still retaining their own
  2. Advantages: A) Joint venture's can utilise the expertise from both corporations. B) Larger Capital that can be sourced from the two corporations. C)
  3. Disadvantage: A) Increased managerial cost, as a result of larger amount of subordinates. B) Increased CSR, (corporate social responsibility). C)
4. Sole Traders, (or sole proprietar), is the simplest form of business organisation. It has one owner, but can employ any number of people. They can be involved in a wide range of business activity. In the primary sector they may be farmers or fisherman. In the Seconday Sectory they may be small building or manufacturing businesses. However, most are found within the tertiary sector, which are retailers running small shops.
  1. Advantages: A) Quick and easy to set up due to low amount of beuraucracy and laws involves, (businesses can always transfer to a limited company once launched). B) Simple to run, (owner has complete control over decision making). C) Minimal paperwork, (beauraucracy). D) Owner keeps all the profits. E) Business can be flexible. F) Business may qualify for government help.
  2. Disadvantages: A) Full personal liability, “unlimited liability”. B) Harder to raise finance, sole traders often have limited funds of their own and security against which to raise loans. C) The business is the owner, the business suffers if the owner becomes ill, loses interest, (e.t.c.). D) Can pay a higher tax rate than other forms of a company.
5. Partnerships is when a business has more then one owner. The, "joint", owners will share responsibility in running the business and also share the profits. There are no legal formalities to complete when a partnership is formed. However, partners may draw up a Deed of Partnershhip. This is a legal document which states partnered rights in the event of a dispute. It covers: capital each partner will contrivute, how profits, (and losses), will be shared, procedure for ending partnership, how much control a parter has.
  1. Advantages: A partnership is easy to setup and run, with no legal formalities. Partners can specialise in their area of expertise. C) Partners share burden of running the business. D) Does not have to publish financial information.
  2. Disadvantages: A) Partners have unlimited liability. B) Partners ave to share the profit. C) Partners may disagree and fall out. D) One partners decision legally binds on all other partners.
6. INCORPORATED
  1. Incorporated: A) Legal differences between the owners and the company. B) Owners, (shareholders), have limited liabilities for business debts. C) Most incorporated businesses are operate as a a private limited company.
7. UNINCORPORATED
  1. Unincorporated Business: A) the owner is the business, (no legal difference). B) Owner has unlimitted liablity for business actions, (including debts). C) Most unincorporated businesses are sole traders, (operating in the tertiary sector).
Globalisation
1. Globalisation is when a business expands its operations and or facilities beyond its domestic country, (internationally).
  1. Factors that cause Globalisation: Foreign/ Emerging markets, (like BRICS), may have a more skilled labour force, business can pay less wages, (as they can utilise the loser labour laws/ legislations in place in foreign countries), political stability of a country, exchange rate, indexes like: health, hygiene, infrastructure of a country, ease of doing business. Reduction of trade barriers, (WTO, World Trade Organisation has played a role in trade liberalisation as it encourages free trade). Reduction in the cost of transport and communication. Increased significance of global, (transnational/ multinational), companies, (larger numbers of firms have developed significant business interests overseas, some of them being very powerful).
  2. Advantages: A) Ability to use different time zones to increase services, B) increasing operational scale can achieve economies of scale, C) can reduce overheads, D) allows for a business to utilise the trading bloc of a country that may be part of one, (like the EU, or NAFTA). E) Competitive markets reduce monopoly profits and incentivise businesses to seek cost-reducing innovations. F) Gains from the sharing of ideas / skills / technologies across national borders.
  3. Disadvantages: A) Increased managerial costs, B) Vulnerability to external economic shocks – national economies are more connected and interdependent; C) which increases risk, D) Trade Imbalances: Global trade has grown but so too have trade imbalances. Some countries are running big trade surpluses and these imbalances are creating tensions and pressures to introduce protectionist policies such as new forms of import control. Many developing countries fall victim to export dumping by producers in advanced nations. E) Dominant global brands: globalisation might stifle competition if global businesses with dominant brands and superior technologies take charge of key markets be it telecommunications, motor vehicles and so on.
2. Protectionism is when a country protects the interests of its domestic companies so that foreign companies may not rival with them.
  1. Factors: To protect Jobs: foreign corporations may employ their own nationals in foreign countries, which increases un-employment and makes the government look bad. Protect Infant Industries: governments may want to protect new companies from strong overseas rivals so that they may grow, become established and utlise economies of scale. Raise Revenue: Governments may use import tariffs on imports to improve government services and improve standard of living.
  2. Advantages: A) Protection against Dumping Dumping is a type of predatory pricing behaviour and can often be a concern for domestic firms facing overseas competitors who are looking to offload their spare production in international markets at very low prices. Goods are dumped when they are sold for export at less than their normal value. B) Protection of Strategic Industries A government may wish to protect employment and investment in strategic industries, although value judgments are involved in determining what a strategic sector is.
  3. Disadvantages: A) Increase in prices (due to lack of competition): Consumers will need to pay more without seeing any significant improvement in the product. B) Limited choices for consumers C) Economic isolation: It often leads to political and cultural isolation, which, in turn, leads to even more economic isolation.
  4. Tariffs: Governments can use a number of Trade barriers to restrict trade. One way is through taxation of imports which are called Tariffs, (custom duties), which not only reduce imports, it also increases revenue for the government.
    1. Advantages: A) Protects local jobs B) Strengthens GDP and a countries economy. (Links in to protectionism adv.).
    2. Disadvantages: A) Retaliation from foreign markets/ trade blocs. B) Imports are more expensive.
    3. Import Quotas: Physical limit on the amount of imports allowed into a country.
      1. Advantages: A) By restricting quantity of imports, domestic producers face less of a threat. B) A extreme version of this is a embargo, (done mainly for policital reasons), this can be helpful for a government as they can condemn another country without increased military spending.
      2. Disadvantages
The Market
1. Markets are typically when buyers and sellers come together to exchange goods and services, historically you'd have to physically go to a designated market area but now it is possible to trade goods and services through telecommunication and online services.
  1. Types Of Markets
    1. Niche Markets: Niche markets are typically small markets with a more tailored consumer taste for the type of product being sold. In this type of a market, the business survives by selling specific goods and services to a small but loyal customer base
      1. Advantages: A/B) Low competition meaning that there is a lower barrier to entry in entering these markets. C) Lower initial costs due to the small nature of niche markets. D) Higher profit margins. E) Can charge high price.
      2. Disadvantages: A) Highly susceptible to external factors like: inflation, changing economy, exchange rate, political change, (business also has a higher risk of failing, because of putting, "all eggs in one basket". B) Less growth prospects. C) If a larger business moves into market then it'll be hard to compete. D) No economies of scale.
    2. Mass Markets: Mass Markets are large markets that could have consumers from the range of millions to billions, (depending on the market), mass markets typically have allot of competition and has higher barriers to entry due to the large amounts of profits that can be made within it.
      1. Disadvantages: A) High competition. B) Because of high competition, businesses have to invest more in R&D to innovate and gain market share. C) Higher barriers of entry for newer businesses. D) Requires larger amounts of investments to be made on research in the market, (changes, consumer tastes e.t.c.).
      2. Advantages: A) Businesses can utilize economies of scale because of the larger scale of there operations. B/C) Better prospects for growth due to the larger nature of mass markets, subsequently meaning that they can ascertain higher profits. D) Less susceptible to changes in the market. E) Mass markets encourage innovation due to the competitive nature of it.
2. Dynamic Markets: Dynamic Markets, (by its definition), can define most markets. A dynamic market is one that is constantly changing and evolving rapidly. Businesses need to adapt to change in order to be successful and maintain there market share; this may need to change existing products, develop new products or change how they market their products to keep up with competition. This may cost allot of money for a business, (as they have to do their own market research through primary/secondary sources, in addition to doing R&D to exploit gaps in the market that they may have found), this may result in them cutting costs so they can lower prices and maintain their demand in the market for their products in a changing market.
  1. Factors for market change: A) Change in consumer tastes/ preferances. B) Economic and other external influence, (e.g. the passing of new legislation by politicians).. C) New competitors entering the market. D/E) Innovation and improvements in technology. F) The preferred distribution method of companies changes.
3. Online retailing: Online retailing is a new form of marketing that has emerged out of the 21st century, the basic premise of it is that the goods and services that would've otherwise been sold physically; is now being sold online through the Internet. It's seen a particular serge in recent years, and has put many traditional shops, (in high streets e.t.c.), out of business).
  1. Advantages: A) Online retailing gives the customer more freedom to decide when they should purchase a good or service. B) Allows the customer to compare prices with competitors more easily. C) Cuts costs for a business, as they do not have to employ staff, as-well as not needing physical shops, allowing for more profits.
  2. Disadvantages: A) The firm will need to maintain its website, in-case of cyber attacks and other fraudulent activities. B) Some customers prefer seeing the product/service before purchasing it, but this can be solved with return policies, guaranteed money back e.t.c. C) Because customers can easily compare prices, businesses may have more trouble selling a product. This can be negated through user experience, and other benefits.
4. Competition in markets, in competitive markets products are sold to the same group of customers by many competing businesses
  1. Direct Competition: is when two or more businesses sell similar products that appeal to the same group of customers.
  2. Indirect Competition: is when two or more businesses sell products that are different, but they are competing for the same customers .
  3. The 4P's of Marketing, (marketing mix).
    1. Product: In a competitive market there are lots of products that are very similar, so it is important that a business tries to differentiate from the market and try and establish a sort of, "brand identity", that customers can identify. They can do this by: A) Improving product quality. B) Distinct elements of a product, (I.E. packaging/ logos).
    2. Price: In competitive markets, the price of a product is either set by, "market leaders", (companies with the largest share within a industry), or they are set by consumer demands. Pricing of a product is important as a business wants to make sure that they can make a profit in market while still remaining competitive with the industry as a whole.
    3. Promotion: The promotion of a product is also highly important in the marketing mix. This is because brand association can gradually be created with a particular logo/ brand name that will allow it to stand out further within the market.
    4. Place: In a competitive market businesses need to make sure its easy for a customer to access their products as it is to access competitor products. This can mean that in a competitive market lots of businesses sell online.
5. Market Research: Businesses need to understand where consumer tastes are going and what the market is saying, so in light of this businesses form their own research through primary/ secondary sources to build their very own database. In addition to judging whether or not a product will likely succeed.
  1. ICT, (information and communications technology), allows a business to utilise the tech at its disposal to help build a database on, (for example), customer behaviour, customer spending habits, information on what they spend their money on e.t.c. Some reasons for this may be that it is A) easier for a company to use. B) Cheaper. C) Quicker
    1. Businesses can use a wide range of different websites: A business can use its own website for market research. This could be done by using the website as a platform to conduct short surveys or by analysing activities of people using the site. They could analyse: --1-- A) what times/day/year the website is most used. B) What visitors are clicking on when they use the website. C) How likely a user will buy products via the site/ how much they're likely to spend. --2--- Business can look at competitors website, gather info on new product, prices etc. --3--They could read customer reviews about their products that have been written on other websites.

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	Created by Ibraheem Khan over 1 year ago