A business is an organization whose purpose is to produce goods

and services to meet the needs of customers. A business might

produce its own goods or buy them from a supplier and sell them
to customers. The place where buyers and sellers meet to
exchange goods and services is known as a market.
Before selling your goods to customers, you have to look at their
needs and this can be done through market research. Market
research can tell a business several things such as; what features
customers want, how much they are willing to pay for it, who are
their main competitors, etc There are two types of research,
primary research is collecting data that did not exist before (field
research) and then we have secondary research which is
collecting data that already existed (desk research)
Secondary research has 2 advantages over primary research and
it is that its less time consuming and offers a wide range of
information, primary research though can be more accurate and
up to date as well as effective for collecting qualitative data.
Qualitative data is information collected from your research that is
to do with opinions, judgments and attitudes. It is 1 of 2 types of
data that can be collected. The other kind is Quantitative and it is
to do with numbers.
When researching for their products and where they should be
placed in the market, business use market mapping. Market
mapping helps businesses identify market segments and position
their products through identifying gaps in the market. These maps
can be used to position and compare products in a market based
on their similar characteristics and then identify where customer
needs are not being met. These similar characteristics make the
process called market segmentation and they can be anything
from age, gender even income.
An example of how the market map diagram looks like:

Businesses have competition in the market amongst each other

and it has to be dealt with well and the way on doing that is
allowing the business to differentiate from others, basically
allowing it to have something that their competition doesnt have.
It can have a wider range in products, better design, better
quality and even a stronger brand image.
You can add value. Added Value is the increased worth that a
business creates for a product. Adding value is very closely linked
to profit and its a way on differentiating the business from
completion. Another way which you should add to the list
mentioned above is that you have a Unique Selling Point (USP).

There are several types of businesses one could deal with. One for
example is a franchise; a franchise is the right given by one
business to other businesses to sell goods or services using their
name. In a franchise you have a franchisor and a franchisee,
the franchisor is the business that gives franchisees the right to
sell its product or service and the franchisee is the one that
agrees to distribute the products under license by a franchisor.
The franchisee gets a lot of things from buying a franchise, such
as;
1- An established brand name.
2- Training.
3- Equipment.
4- Access to goods and services.
5- Advertising and promotion.
6- Ongoing support.
We have enterprise, which is a word often used in business which
represents the ideas and initiatives involved in starting a
business. Businesses might sell a good (which is a
physical/tangible object such as a car) or a service (which is an
non-physical/intangible product such as insurance).
An entrepreneur is a person, who owns and runs their own
business and takes risks, they start after they have the initial

spark and idea to make a business and this is called an

enterprise.
Every entrepreneur should have enterprise skills. These skills
are
To be risk taking
Showing Initiative
undertake a new venture

Willing to

Once the entrepreneur has thought of his business idea, he has a

few ways on protecting them. Protecting them is important since
you wouldnt want someone to steal your idea after you worked
hard on it.
You have patents which is registered with the government that
you have the right of ownership with your design or invention.
You then also have copyrights which is the legal ownership of
books, music and films which prevent these being copied by
others. You then also have trademarks which is things like logos,
signs and symbols for your business to be protected.
Entrepreneurs must take risks, but they should be calculated risks
and this is done by comparing both upsides and downsides of
what could happen.
There is something called the marketing mix, which is the 4 P
principle.
1- Price 2- Place 3- Product 4-Promotion
^These are things that should be looked at by businesses to help
with their ideas.

You must know a few basic terms and formulas before

moving onRevenue is the amount of income a business receives by selling
goods or services over a period of time. (Total Costs + Profits =
Revenue) (Price x Quantity = Revenue)
Fixed Costs: It is a cost that does not vary with the output
produced by a business, e.g. salaries and business rates.
Variable Costs: It is the cost that changes directly with the
number of products made, e.g. raw materials and labor. (Variable
Costs = Cost of 1 Unit x Quantity Produced)
(Total costs = Fixed Costs + Variable Costs)
To calculate if a business has a profit or loss you use the formula
below:
(Total Revenue Total Costs = Profit or Loss)

You must know what a cash flow is and how to work with one
A cash flow is the money that flows into and out of a business on
a day to day basis. It predicts how cash will flow through a
business over time.

**PLEASE NOTE; THIS SECTION MUST BE GONE THROUGH WITH

ME, HERE I AM JUST SHOWING YOU HOW A CASH FLOW LOOKS
LIKE. I NEED TO SHOW YOU HOW IT WORKS IN PERSON!!!!!
When business start, they start with something called a business
plan. A business plan is a plan of the development of a business,
giving forecasts of items such as sales, costs and cash flows.
A business plan has several purposes such as;
1- To convince a bank to give you a loan.
2- Forecast financial projections.
3- Identify the needs of customers.
4- Provide information.

More on the Marketing MixProduct: The product itself has to meet the needs of customers
and have the correct attributes and features that the customer
wants. A successful business will try to differentiate their product.
Place: The way in which a product is distributed, how it gets from
the producer to the consumer. This can be online or a retail store.

Promotion: It is the communication between the business and

customer that makes the customer aware of its products
including; advertising, sponsorship, sales promotions and public
relations.
Price: The price of the product must reflect the value customers
place on the product. High-Quality products have a high price and
also extra features can make the products worth more so prices
can be higher.

Basically you have to sell the RIGHT product in the RIGHT place
with the RIGHT promotion at the RIGHT price for a greater chance
in sales.

The term liability refers to the legal responsibility a business has

towards its debts.
Unlimited Liability:
It is when the business is legally responsible for any debts of the
business, therefore there is potential for the owner of the
business to lose their personal belongings to pay off debts.
Limited Liability:
Any debt incurred by the business belongs to the business and
the owners can only lose up to the amount that they have
invested. Their personal belongings are not liable.
Unlimited is dealt with sole traders; limited is dealt with private
limited companies (Ltd).

The Difference between sole traders and Ltd.s:

Sole Traders
Risk

Private Limited
Comp.

Unlimited Liability
means there is more
risk.
The owner has 100%
control of decisions.

Limited Liability
reduces risk on
owners.
Control
The control of the
main owner will
depend on the
proportion of the
business sold as
shares to other
shareholders.
Profits
The owner keeps
Profits are shared
100% of the profits.
proportionally
between the shares
owned by
shareholders.
Privacy
There is more
Accounts are filed
privacy.
with Companies
House and can be
viewed by anyone on
payment of a small
fee.
When a business starts there will be certain tax issues. All
business have to adhere to and every business must keep records
on business activity so that government can keep track. Also to
make sure everything is kept safe and legal.
What taxes do small businesses pay?
- Value Added Tax (VAT): A tax on the value of sales of a
business. Businesses that sell more than a certain amount
will register to pay VAT.
- Income Tax: A tax on the income earned by workers and
sole traders.
- National Insurance Contributions (NIC): A tax on
earnings of workers and sole traders linked to state benefits.

- Corporation Tax: A tax paid by limited companies on the

profits of the company.

Customer Satisfaction is a measure of how much a business or its

products meet customers expectations.
A business must have good customer service but how can they do
this?
It can be done by dispatching orders quickly, offer excellent aftersales care, be convenient and polite, respond to complaints
immediately.
If a business has good customer satisfaction, it can lead to repeat
purchase, loyalty, and differentiation, improves reputation, and
can allow a business to charge a premium price.

Repeat purchases help achieving long term sales and therefore

the success for a business.

Market Demand and

Supply
The price of goods and
commodities change
constantly. These
changes in price are
influenced by the
relationship between
supply and demand.
Supply is the amount
that sellers are willing

to sell at any given price, demand is the amount that buyers are
willing and able to purchase at any given price.
Demand:

Supply:

Impact:

High

Low

Low

High

Shortage prices
rise
Surplus prices fall

A market is where buyers and sellers meet to exchange products

and services.
Commodity Markets are markets for raw materials, such as oil,
steel and wheat, used in production of other goods.
Goods Markets are markets for everyday products such as
clothes and food.

An interest rate is the

percentage reward or payment

over a period of time that is given to savers or paid by

borrowing on loans.
When an entrepreneur starts his/her business they may not have
the capital (money) to start. So they would need to borrow
money, typically from a bank, and this is called a loan.
A rise in interest rates will increase the costs of
borrowing:
-Businesses on a variable rate may struggle to repay loans.
-Small businesses are less likely to borrow money to start up or
expand.
-Customers are less likely to spend money as borrowed money
costs more, so consumer spending falls.
A fall in interest rate will lower the costs of borrowing:
-Businesses will have more money to spend and cash flow may
improve.
-Businesses may borrow money for a start-up or expansion.
-Customers are more likely to borrow and spend their money.
Customer spending rises.

What is fixed interest rates?

An interest rate that does not change over the life of the loan. A
business could lose out on a fixed contract if the rate falls.
What is variable interest rates?
An interest rate that changes over the life of the loan. They can
be more risky and hard for a business to plan against.

An exchange rate is the price of buying foreign currency.

**Please note that this is a very important section. It is not
covered because it is difficult to write down and explain in words,
but this will be gone through with me!
The lines below are for after we go through it together, you will
explain it in your own words for yourself.

A stakeholder is an individual or group that has an interest in

and is affected by the activities of a business.
Since a business can have an impact on stakeholders, they must
take in their needs as consideration.

Examples of stakeholders are:

Owners
(Shareholders)

Worker
s

Supplie
rs
Manage
rs

Governme
nt
The local
community

Competitor
Custome
rs

Stakeholders interested in the financial success of the business

will look at not just its profit but also its market share and
revenue.

A sort of market research is the product trials. Product trials is

when consumers buy a product for the first time to assess
whether or not they want to buy it again. Now if this is successful
then it would lead to repeat purchases and customer loyalty, this
is when customers will buy a product more than once and keep
coming back.

Examples of product trials are:

- Low trial prices.
- Advertising.
- Public Relations.
- Viral Marketing.
- Free Samples.
What are some methods that can be used to increase customer
loyalty and chances of repeat purchases?
- Special Promotions.
- Reminder Adverts.
- Product Innovations.
- Customer Loyalty Schemes (loyalty cards).

Product Cycle:

Introduction: The product is launched/released onto the

market. (Cash flow is negative money goes out not in)
Growth: If the launch is successful then sales would increase
sharply and the product may make a profit for the first time.
(Cash flow is positive, but small)
Maturity: Sales growth slows down, but repeat customers
continue to buy and customers become loyal. The market
becomes saturated as rivals bring out competing products. (Cash
flow most likely to be positive)
Decline: Eventually the product is outdated and there is a big fall
in sales, leading to withdrawal. (Cash flow most likely to be
positive)
//Extension strategies can be a way a business can use to
increase the life of its product. This involves slightly changing the
product so that it has a fresh appeal to the target market or
appeals to a new market segment. Examples may be, creating
new packaging or adding new features

Businesses sell a range of products. Selling a range of products is

called a Product Mix or Product Portfolio. New products are
constantly being launched onto the market. Product portfolio
analysis helps business to make decisions on lots of things such
as;
- What products to launch and when?
- When to withdraw a product.
- How to increase sales?
The Boston Matrix is a product portfolio tool used to plan the
development of products. It can closely be linked to the product
life cycle.

Star: Very successful product, but growth has to be funded to

keep up demand and cash flow may be a problem.
Cash Cows: Little Growth, but an established and profitable
product that can support others.
Question Marks: Presents a problem should the business
invest to increase sales.
Dogs: Few prospects, but should the business continue to sell it if
it is profitable and it funds other products?

How can a business measure its stock?

Firstly you must know that managing stock is about managing the
materials that a business holds in the most efficient and effective
way. Stock can include materials waiting to be used in the
production process, work in progress and some can be finished
stock waiting to be delivered to customers.

The Just In Time (JIT) stock control is a stock management system

where stock is delivered only when it is needed by the production
system, and so no stock is kept by the business.
So now you know that a business could either hold its stock or
have the option on holding little or no. Here I will tell you the
benefits of each
Benefits of holding
stock:

Benefits of holding little/no

stock:

-Businesses can meet

unpredicted surges in
demand.

-Cost Saving is not saving

stock.

-Businesses can replace

damaged goods.
-A business can receive
discounts for bulk buying.

-Less chances of damaged

goods.

There are two ways a business can achieve good quality. This is
done through Quality Control and Quality Assurance.
Quality Control is seen as one part of the chain production. A
quality controller will examine and/or test for quality once the
product has been made.
Quality Assurance involves focusing on quality at every stage of
the production process. Everyone is involved and is responsible
for contributing towards the achievement of quality standards.
*Please note that the benefits are not included but should be
looked at. But I will go through them with you and the lines below
are for you to right them out in your own words.

What are some ways on improving both Cash Flows and Profits?
Firstly we must know that cash is important in businesses. A
business can still be profitable and run of cash and if a businesss

outflows are greater than its inflows then it could run out of cash
and trading will cease.
You can improve yours outflows by; 1- Delaying the payment of
your invoices.
2- Leasing rather than buying. 3- Reducing the orders of your
stock.
3- Improving your credit terms with suppliers 5- Use cheaper
supplies.
You can improve your inflows by; 1- Increasing sale revenues 2De-stocking 3- Reducing credit terms with customers. 4- Use
short term sources of finance.

*-*-*
To improve profits is not easy and you should look into it more. //I
will go through it with you// but know that you must increase
revenue and decrease costs.

Break Even Charts

The breakeven point is the point where the business is making

zero profit and zero loss.
Formulas for you to know
1) Total Revenue = Quality Sold x Average Price
2) Total Costs = Fixed Cost + Variable Cost
3)

4)

Break-Even = Fixed Costs Sales Revenue/PricePer Item

Variable CostPer Item
Price Variable Cost is called Contributions.

The margin of safety: It is the amount of output between the

actual level of output where profit is being made and the breakeven level of output. This is how much production could fall before
the business starts to make a loss.

Break Even Analysis

This break-even analysis is a useful tool to help a business make

decisions and set targets, and plan for the future.
Any fall in fixed or variable costs is
likely to lower the breakeven point.
And an increase in price will also lower
the number of units required to break
even.

When would a business want to use the break even?

1- To understand the past (Were past decisions on pricing
correct?)
2- To set and achieve production targets.
3- To launch a new product.
4- To start a new business.
5- To develop a business plan.

The organizational structure is the way in which a business

is structured to achieve its objectives. This is normally through
a hierarchy. A hierarchy is a structure of different levels of
authority in a business
organization, one on top of the
other.

A business can be organized in

a number of ways. 1) Product
Divisions 2) Regional Divisions
3) Functional areas such as
marketing or finance

Organizational Structures can be seen through organization

charts.
An example of an
Organizational Chart

A business can be centralized and decentralized

Centralized Decisions are made by senior managers (normally at
head office).
Decentralized Decisions are delegated to regional employees at
local stores as well as branches.

Due to being an outgroup in some situations, there are then

barriers to effective communication throughout the business. This
can have an impact on a lot such as; the customer service,
employee motivation, number of mistakes made, understanding
the employees, etc

Barriers of effective communication include; using inappropriate

email systems, being angry or tired, cultural differences, use of
jargon, etc

Most business operations will have an impact on the

environment; this impact could be short term or long term. And
these impacts will have to managed by the business in order to
achieve long term success.

Short-term effects

Long-term effects

Traffic congestion through

transport and deliveries.

Climate change.

Air, noise and water pollution

through manufacturing and
industry.

Depletion of land, food and

other natural resources.

Business should recycle since this is a major help on reducing the

environmental impact they are doing. Please note that the
impacts done by the businesses are depending on size, so the
bigger the business then the greater the impact.
The consumers today are becoming much more environmentally
aware and since that is happening businesses can differentiate
themselves and their products by taking this simple opportunity
on becoming greener.
An example from the above could be a car industry provides
more hybrid cars.

Many businesses would have to deal with trading internationally,

but there are some economic issues that affect this international
trade.
First know the opportunities for countries like the UK, the
opportunities they have; their costs of productions is less in
developing countries, they can import cheap natural resources,
increased demand from foreign countries, etc
This is all good but the countries which the UK is importing from
can be a threat to UK businesses since for example if UK buys
cheap imports then the UK businesses may suffer since no one is
dealing with them.
Now the government can have a major role with a businesss
international trade with another, they do this to support exports
or restrict imports in order to protect their home markets. What
can they do?
They can use;
1- Tariffs and customs duties tax imports and make them more
expensive.
2- Quotas put a limit on the number of imports.
3- An export subsidy will reduce the price of exports and
encourage exporting firms.
4- Whether importing or exporting UK businesses may suffer or
have a benefit from these policies.

**The EU has a bunch of laws and regulations on UK businesses

and consumers; I will look at those with you in person.

The planets resources are scarce; scarce is when there is a

limited amount of resources such as raw materials, fuel and
time. But the problem is that people have an unlimited
number of needs and wants. For example they might want a
better car or a bigger house or a cleaner environment, etc
Since we have this situation we will have Trade Offs and
Opportunity Costs.
A Trade Off is a situation that involves losing one quality or
aspect of something in return for gaining another quality or
aspect.
An Opportunity Cost is the cost of an alternative that must
be forgone in order to pursue a certain action. Put another way,
the benefits you could have received by taking an alternative
action.

I will give you a further explanation- use the lines below to

write it in your own words for better understanding.

Success is not just measured by the profit a business makes.

Stakeholders that are interested in the financial success of a
business are likely to look at the following:
- Profit
- Revenue
- Market Share
- Social Success

This is business performance in terms of social, environmental,

and ethical responsibility. Note that profit is the most common
measure of success, and that revenue is the money a business
gets from selling its output.
A growing market share (which is the quantity sold by a business
as a percentage of the sales in the market) or an increase in
revenue is a sign of success.

Competitiveness and competitive advantage

Competitiveness is the strength of a firms position in a market,

measured by market share and probability. It reflects whether
consumers are prepared to use the business over its rivals.
Competitive Advantages are the advantages that firms have
over their rivals. They help to win customers. These advantages
need to be difficult to copy (defensible) and unique (distinctive).

NOTES