Year Ten Homework Tasks
During year ten you will pay attention to topics from unit one of the syllabus as well as some aspects of unit two. One of the first topics that all pupils will explore surrounds the work that is completed by entrepreneurs. Some examples of successful entrepreneurs include:
- Steve Jobs
- Richard Branson
- Alan Sugar
- James Dyson
Here are some words of wisdom from Alan Sugar which detail what he thinks it takes to be a successful entreprenur:
Steve Jobs (RIP) also discusses what he thinks it takes to be a successful entrepreneur:
Some examples of presentations on Entrepreneurs can be accessed below. These were developed by Year Ten Business students:
Matt Mannix & James Ruffini
David Hare & Rebecca Wilson
Sonny Kennedy & Kyle Buffong
Melodie Trought & Tamara Gordon
Claire Hickman & Katie Burns
Starting a Business
People start business for a variety of reasons. For example, some have demonstrated the ability to identify a 'Gap in the Market', whilst others set up a Franchise. For detailed information about what a Franchise is, please access the clip below:
Some businesses are set up to provide either a product or a service. A product is something that is tangiable, whilst a service is something which is untangiable. Fopr example, hotel's will provide customers with a service, as will transport companies. To further develop your understanding of Products and Services, use the clip below although this is a little long!
A key term that will need to be aware is 'Stakeholder'. All businesses have Stakeholders and these are classified as people who a direct interest in a business and also those that can be directly affected by a businesses decisions. These can be split into two types; these are Internal & External Stakeholders. Internal Stakeholders come from 'within' the business, whilst External Stakeholders come from outside of the business. You will see some examples of Stakeholders listed below; see if you can identify whether or not these are Internal or External.
For further information and assistance on business start-up, please access the revision presentations below that have been developed by Year Ten Business Studies students:
Matt Mannix & James Ruffini
Examples of Stakeholder Groups:
- Employer
- Employees
- Customers
- The Government
- Inland Revenue
- Pressure Groups
- Trade Unions
- Banks and other lending organisations
Aims & Objectives
All businesses will set both Aims & Objectives, although these wil often change as a business becomes more successful. So what are aims?
'Aims are general statements of purpose, so for example a business may aim to break even or make profit. Businesses will also set objectives and tehse are a great deal more specific, for example, a business may aim to make £5,000 worth of profit in six months.'
Use the clip below to give you more help and assistance with aims and objectives:
Some possible reasons for starting up a business include such things as:
- You have lost your job and have some redundancy money available
- You want to the boss and do not want to have to work for someone else
- You have the skills and experience you could use better
- You have a unique or great idea
- You want a new challenge
- You want to make a reasonable living
- You want to make a large profit
There are a number of risks and rewards that can come from starting up a new business. It is important for businesses to learn from any failings as discussed by Richard Branson below:
Richard Branson also offers some very useful and interesting advice for entrepreneurs. See below:
Businesses can produce and sell products or they can sometimes provide their customers with a service. A product is something physical or tangible (meaning it can be physically touched) and a service is something intangible (it is not a physical product).
Profit
The majority of businesses will set out to make and maximise their levels of profit. Some businesses are set up to help society, rather than to make a profit. These businesses are known as a 'social enterprise'. For further information on these businesses please access the link below:
Some businesses will combine both products and services - for example, some people choose to go to a restaurant because of the atmosphere and the environment as well as the food. All businesses are part of either the:
- Primary sector
- Secondary sector
- Tertiary sector
Many businesses start small and remain small. Only a small number will become large companies.
Many new business fail within two years. Some possible reasons for business failure include:
Expecting sales and income to be larger than they are
Forgetting to calculate costs
Failing to keep costs under control
Not having enough cash to pay debts
Charging the wrong price
Not changing the product to meet the customer wants and needs
Taking too many risks
Lacking enough money to help the business grow
Not having enough skills and experience
For more information on why many small businesses fail, please access the clip below:
Sources of Finance
An entrepreneur will need to acquire money to help them setup and start a new business, this is called 'raising finance'. Most new businesses will need one or more sources to finance the business start up.
Businesses will need to raise finance for a number of reasons, for examples:
Renting or buying premises
Vehicles
Advertising
Purchasing equipment or machinery
Stock of Raw Materials
Some typical examples of sources of finance include the following:
Owner's Funds: These relate specifically to money that is put into the business by its owners. There could be one or more owners in a business and the greater number of owners would see more financial input on their part. The owners of a business might use their own personal savings or it is also commonplace for entrepreneurs to use redundancy payments as a source of finance. Owners funds are commonly used at start up and a major source of finance for both sole traders and partnerships.
Bank loans: Some businesses may obtain a bank loan to help them to start up. A bank loan is a large sum of money which is paid back in instalments over a period of time. A bank or other lending organisation will charge interest on any loan that they make to a business and this is one of the main disadvantages of this source of finance. A business will have to show a bank their business plan in an effort to obtain a loan and this can be seen as a high risk, especially in the current climate. Collateral is something which can be sold if a business is not able to meet their repayment commitments - for example, an entrepreneurs house could be sold if the bank do not receive repayment.
Mortgages: This is a loan from a bank or buildings society which is used to buy land and buildings. Mortgages will also have interest payments applying to them and are normally paid back in the long-term.
Overdraft: This is a flexible loan and one that a business will use only when they need to. A bank will not always agree to an overdraft and if it does, the rate of interest will be quite high, meaning that this is an expensive source of finance. These can also be withdrawn at short notice.
Loans from family and friends: This is very popular source of finance for many entrepreneurs who are setting up small businesses. This is often very easy to arrange and does not normally contain charges of interest. The main problem with this source of finance, is that this does not normally cover sub substantial amounts of money.
Hire Purchase: This is often used by businesses to purchase assets and pay for them in instalments. One of the main disadvantages associated with this source of finance is that it can be very expensive as a business will not own an item until it has been paid for.
Leasing: This allows businesses to rent assets from another business and it is their responsibility to maintain and repair this if the need arises.
Government Grants: Many governments will encourage people to start new businesses as this helps to create jobs and opportunities. A grant is a sum of money that a government will pay to a business for a specific reason and they are generally quite difficult to obtain. Most grants do not have to be repaid and do not contain interest payments.
Issuing Shares: Selling shares is a way that companies can generate finance. Companies will sell shares to shareholders in an effort to generate money and in an effort to expand. Selling shares is a cheap way of obtaining finance, however, if a company makes a profit, they will have to pay dividends to their shareholders - this is share of their profits.
Business Ownership
A business is always owned by someone - this can be one person or several. A business can have a number of different types of ownership depending on the aims and objectives of the owner. One of the main objectives at business start up is going to be survival although most businesses will aim to make a profit for their owners. Profits may not be the main objective but in order to survive, a business will need to make a profit in the long run. For some help and assistance on the different types of business ownership, please access the link below:
Choosing the appropriate legal structure for a business
It is essential that an entrepreneur carefully considers the type of business they are going to set up as. This could include any of the following:
Sole Trader
Partnership
Public & Private Limited Companies
Sole Traders are owned b y one person. This is often deemed to be the easiest form of business to set up - all you need to do is start trading. Although Sole Traders are owned by one person, they will often employ a substantial amount of staff. One of the main advantages is that Sole Traders do not have to register with the government when they set up. All business decisions are made by the owner and this makes a quick and easy process. The owners will also keep all the profits. For further information on Sole Traders, you can access the video clip below:
It can be quite stressful for a Sole Trader as they have to make all the decisions. This can see them put under significant amounts of pressure. He / she will need to monitor all aspects of the business. They also have unlimited liability. This occurs when the personal possessions of the owners are at risk if there are any problems with paying off debts. This could see an owner losing everything they own. It can sometimes be difficult for a Sole Trader to raise funds in order to get the business going. They have to rely on friends or family in helping them gather funds and although it may be possible to borrow from the bank, banks tend to charge a lot of money through interest and setup payments. A substantial amount of small businesses fail within the first two years - roughly 1 in 3 (A very high percentage). A Sole Trader will generally be small and will not have the power that a large business will have over suppliers and distributors. This will mean that they have high costs which ultimately will mean to lower levels of profit.
Partnerships
The Partnership Act was designed in 1890. A Partnership is created when two or more people set up in business in an effort to pursue a common purpose. A Partnership will generally have between 2 and 20 partners. A deed of partnership is an agreement between partners that sets out the rules of a partnership. This will normally include information about how profits will be divided and how the partnership will be valued if someone wants to leave. This is designed to help avoid disputes and so the share of the profits can be shared equally. The fact that a number of partners are involved instead of one person, means that the decision making process becomes a great deal easier, whilst partners are able to contribute money, whereas Sole Traders have to rely on their own funds. This can lead to better decisions being made as well as the fact that partner's can benefit from each other's experience and insight into problems as well as their skills and expertise. You will also find that Partners are able to cover for each other and this makes the running of the business less stressful. One of the main problems of a Partnership is that partners may have different ideas about how to solve problems and this can ultimately lead to disputes. This can also see the decision making process take a much longer amount of time as all the partners need to be consulted. Instead of keeping all the profits, like a Sole Trader, the profits are divided amongst the partners. Similar to a Sole Trader, the partners will also have unlimited liability. There are some instances where a partnership may have 'limited' partners who can contribute to the business but cannot take money out.
Measuring the size of a business
There are several ways to measure the size of a business, for example:
- The number of employees
- The number of outlets
- Total revenues, or sales per year
- Profit
- Capital employed - the amount invested in a business
- Market value
Market Research is information that is gathered by a business in an effort to find out about a particular market. Market Research will come in two different formats and these are:
- Primary Research (Otherwise known as Field Research)
- Secondary Research (Otherwise known as Desk Research)
These reasons might include being to identify the following:
Market opportunities
The size of the market
Market growth
Market segments
The market share of existing firms
Primary data might be gathered at start-up using the following methods:
Telephone surveys
Customer or supplier feedback
Questionnaires
Focus groups
Internet research
Companies
A company is a form of business that is created when individuals complete two separate documents - these are:
The Memorandum of Association
The Articles of Association
A company will have Shareholders - this is someone who owns part of a company or a share of the business. Shareholders are people who invest in the business - they purchase what is known as Ordinary shares. Owners of ordinary shares have the opportunity to have one vote for every share they have. The owner of 51% of shares would have the total amount of votes. A company will have its own existence in law - they will own things such as land and equipment. People who invest, will be fully aware of how much they can lose if all goes wrong. This is known as limited liability. You need to consider, that without this, it would be very difficult for companies to attract investors.
You need to be aware of the differences between Public & Private Limited Companies. Private Limited Companies are owned by their shareholders but these tend to be the business founders and they invite friends and family to be shareholders, although they might welcome money from outside investors. The abbreviation for Private Limited Company is 'LTD'. Private Limited Companies will not sell their shares on the Stock Market, however, if shares are sold, this will be done privately.
See the video clip below for further help and information on Private Limited Companies in the UK:
For many people, they regard a company as having more status than a Sole Trader. Setting up a company, therefore, could be a good marketing move. Many companies have managers who are employed to run the day-to-day activities but the owners still retain control. There are also various legal procedurtes in place which includes the registering of the company and this can be a lengthy process as well as being expensive. The financial records of the business have to be produced and available for their shareholders and these must be available for the general public to access. This sees many of tehse companies lose an element of their privacy. The business is also required to pay corporation tax and this is a tax which is paid concerning the profits made - this will be more than income tax. If there is any additional investment in the business, these people would become very important stakeholders and some entrepreneurs find this quite difficult and problematic as their styles will sometimes clash.
Business Employees & Legislation
Legislation is the rules and regulations that govern the way a society operates. These rules specifically apply to businesses and individuals.
Watch the short clip below which discusses the different types of legislation and rules at work:
The laws which relate to staff are designed to aid businesses in striking a balance in the workplace for employer and employee rights. The employers are looking to employ labour efficiently and must refrain from treating employees unfairly. Over the last 30 years, legislation concerning employees has changed and increased. The minimum wage act of 1998 had effects upon businesses and the way they operate. This relates to the lowest hourly wage that an employer can legally pay an employee. A piece-rate on the other hand is a fixed amount which employees are paid for each unit that is produced. Some examples of laws that affect businesses are as follows:
Equal Pay Act 1970
Sex Discrimination Acts (1975 & 1986)
Race Relations Act 1976
Disability Discrimination Act 1995
Employment (Age) Regulations 2006
Discrimination can occur within the workplace and this relates to a business employee treating one person differently from another without having a good reason to do so.
Trade Unions are examples of groups of workers who act together to improve their pay and working conditions. Watch the short video clip below which outlines the importance of Trade Unions:
The laws that are mentiuoned above will have consequences for small businesses, for example, the areas of employment this can affect are as follows:
Recruitment
Promotion & Transfers
Training
Pay (Aswell as monetary and non-monetary benefits)
Dismissal
These laws can have a wide effect on businesses and their day-to-day activites. Discrimination can be a source of major problems for a business. Watch this short video clip (advert) which shows an example of disability discrimination in the workplace:
Employees are given a contract of employment and this is a legal document which clearly states their hours, rate of pay, duties and other such conditions. Staff are generally allowed to have time off for a range of reasons including trade union activities. It is the right of employee whether or not they wish to join a trade union and they also have rights over holiday. There are also limits to working hours. It is the responsibility of the owner to:
Allow employees time off for a certain reason
Pay employees as stated in contract of employment
Provide suitable training
Allow employees to join a trade union
Give maternity pay and paid holidays
Provide a safe working environment
The Health & Safety Act of 1974: This act covbers many buisiness activities and these include:
The installation and maintenacne of safety equipment & clothing
The maintenance of workplace temperatures
Giving employees sufficient breaks during the working day
Providing protection against dangerous substances
Fitting guards on dangerous machinery
Writing and displaying a safety policy
For more information on Health & Safety, access the link below:
Compliance of these laws will mean that company avoids having to pay larfge fines. It is an important element in motivating employees.
Simple Business Calculations & key terms
The Price of a product will be determined by a number of factors such as:
The price a competitor charges
The production costs of a product or service
A business wil often change their prices at certain times, for example, this could be determined by a products place on the life cycle. A business could also choose to raise or lower their prices depending on the demand.
A business will need to calculate their total number of sales and this is something which is not stated in terms of money. The number of sales is generally calculated over a period of a week, month or year.
Sales Revenue refers to the money made from sales and this is calculated by:
Revenue = selling price X number of products sold
Two types of costs that exist are Fixed & variable costs. Watch the short clip below to identify what these are and examples of each:
Total Costs are calculated by adding fixed and variable costs together.
Start-Up costs
When a business starts up, its owners will have to pay start-up costs. These are generally one-off costings. They will not have to be paid on a regular basis. For example, these might include:
Premises
Machinery & equipment
Market Research
Running Costs
Running costs are an expense that a business will have to pay on a regular basis in an effort to keep the business running. These would include the following:
Rent
Raw materials & components
Wages
Business taxes
Profit is the amount by which a business's revenue from its sales exceeds its costs. A loss is the amount at which a business's costs are more substantial than its revenue. Watch the short video clip to help you understand how to calculate profit (or loss):
Business Location
This clip below identifies examples of ways in which certain factors affect a businesses location:
Some typical factors that you may consider include the following:
Costs
Transport links
Technology
Availability and the cost of labour
Competitors
Availability of raw materials
Availability of locations
The Marketing Mix
The Marketing Mix consists of the 'four p's'. These are classed as:
Product
Price
Place
Promotion
Each of the above will have a direct influence on a business and the way it is run.
The product specifically refers to the design and specification of a product and its features. A business might alter or change its products to increase its appeal but this can be expensive. The Promotion aspect of the Marketing Mix deals with the way a business communicates with their customers about a product or service. The right form of promotion will depend on what is being advertised, whilst a small business is likely to have a far smaller budget for promotion as opposed to a larger firm. The price of a product will depend on a number of features and this includes the following areas:
How does the customer have to pay for the product?
Can it be paid in instalments?
Does a business offer discounts?
By how much does the selling price differ from the manufacturing costs?
How does a business's prices compare with its competitors?
Does the price represent good value for money?
How much did the product cost to manufacture?
An increase in price will generally lead to fewer products being sold, whilst lowering a price would result in the opposite. Businesses need to sell more products to maximise their profits.
The Place aspect of the mix refers to the distribution of a product (how it gets from manufacturer to customer). Some businesses will sell to wholesalers or retailers before the customer finally gets their hands on a product.
For further information on the Marketing Mix, access the video clip below which is a song entitled 'The Marketing Mix song' and you will no doubt find it useful when revising this topic:
What is Cash Flow?
Cash Flow is the money that flows into and out of a business on a day-to-day basis. This can be split into two distinct categories, these are:
Cash Inflows - money flowing into a business through sales income, loans from banks and investment
Cash Outflows - money flowing out of a business for various reasons including establishing the business, buying raw materials, wages, rent, interest on loans and taxes.
Businesses will have to interpret and predict their cash flow - this is conducted using a cash flow forecast. This is a plan or a prediction of expected inflows and outflows that will take place over a period of time. A cash flow statement is a historical record of the cash that flows in and out of a business. Watch the clips below to further develop your knowledge and understanding of cash flow:
A Cash Flow forecast and statement is normally split into three sections, these are:
Cash Inflows
Cash Outflows
Net Cash Flow
Some key examples of simple calculations you will need to be aware of are:
Cash Inflows: Add together all the cash inflows.
Cash Outflows: Add together all the cash outflows.
Net Cash Flow: Take the total cash outflow from the total cash inflow.
A Cash flow forecast / statement will also have the following: An opening balance and a closing balance. The closing balance is calculated by adding together the opening balance and the net cash flow.
All negative figures are shown in brackets as oppose to using a minus(-).
For further information on how to understand and interpret a cash flow statement, please visit the video clip below:
If a business cannot pay its bills because of cash flow problems, it is said to be insolvent and has to stop trading by law. This means it is not able to meet its financial commitments. If a business becomes insolvent, a person called a 'receiver' is appointed to manage the financial aspects of the business. It is the responsibility of the 'receiver' to make arrangements for the business to repay their debts. For further information on insolvency, please use the video link below:
In an effort to improve cash flow and solve problems a business can do the following things:
Delay payments to suppliers and other organisations they owe money to
Speed up cash inflows - encouraging new customers to pay on delivery
Find new sources of cash inflows
Reduce cash outflows
Arrange an overdraft
Invest more money into the business via the owners
Recruitment
A new business will recruit employees to complete tasks and duties. Successful applicants will have the necessary skills and experience required to do the job successfully. Workers will be hired in one of the following employment contracts:
Full-time
Part-time
Temporary
Recruiting the right people is one of the most important decisions a business will make. The 'right' people will have the necessary skills needed to do the job well. If the wrong person is recruited, this could have a detrimental effect on the business, for example:
Customers may leave
Time and money will be spent trying to recruit someone else
There are two types of recruitment, these are:
Internal - takes place when a job vacancy is filled from within the existing workforce
External - is filling a job vacancy from any suitable person who is not already employed in the business
Some examples of recruitment methods can be identified in this short video clip:
External methods of business recruitment include:
Advertising
Job Centres
Employment Agencies
Internal methods of business recruitment include:
The owner or manager telling employees about a job vacancy
Certain employees invited to apply
Adverts placed in a companies' newsletter
Adverts placed on noticeboards or internal email system
Businesses will choose employees for a particular vacancy and will go through a thorough selection process. These would include:
Interviews
Psychometric testing
A business will pay their employees with either a wage or a salary. The difference between these is explained in the short video clip below:
The amount a person is paid will depend on a number of factors - this includes the following:
Skills
Experience
The general level of wages and salaries that other firms are paying
Businesses will often pay their employees monetary and non monetary benefits. Monetary benefits are additional payments made to employees on top of their wages and salaries, such as bonuses. Non-monetary benefits are rewards given to employees that are not in a monetary form, such as free lunches. Access the link below to find out more information about benefits:
Non-monetary benefits
Monetary benefits will include:
Bonuses
Paying towards employees pensions
Profit sharing
Non-monetary benefits include:
Flexible hours
Free lunches
Parties and outings
Being part of a team
Motivation is the way that people behave in certain ways - it also relates to the range of factors that can affect this. Different people will be motivated by different things, for example, motivating can come from within the employee in the sense that they will work hard if they enjoy their job. Motivation can also come from outside the employee, for example, a business might promise a bonus or reward and even give a threat of punishment. People are motivated in different ways and different factors affect this. Theorist Abraham Maslow, a psychologist, tried to explain this through a theory that has become known as a 'Maslow's hierarchy of needs'. He identified five human needs and he said that if people could meet these needs by working then this would motivate them at work. For further information on this topic, please access the video link below:
It is going to be seen to be a benefit to a business if their workers are highly motivated - this will contribute to the business's success. Employees that are motivated, normally work hard and try to do their jobs as well as possible. Employees that are well-motivated are also likely to be more loyal and this will remain even if they are tempted by other opportunities elsewhere. Small businesses might use the following methods to motivate their employees:
Job enrichment
Training
Working as part of a team
Financial rewards
You may wish to watch this short clip on job enrichment:
Methods of Production
The term production literally means the process of changing inputs into goods and services that can be sold. We tend to think of production by the process of manufacturing but it is also essential that you consider the importance of supplying. The methods of production you need to be aware of for unit one are:
Job Production
Batch Production
Access the video clip below to identify the differences between both Job and Batch production as well as their key characteristics:
Job Production is used by businesses such as:
Garden Designers
Tailors
Personal trainers
Restaurants
Batch production is used by businesses such as:
Bakeries
Wallpaper manufacturers
Fish and chip shops
It is essential that businesses manufacture their products efficiently. Efficient production will take place when a business uses a minimum amount of resources to produce its goods and services. The increase in efficiency has come about because of developments in the use of technology and this is key to continuing to improve efficiency. Expensive technology can also help to reduce costs and can also be used to develop a product time after time. In the long term, it also helps to reduce the costs of production. If a business uses technology, this can help to reduce waste and also to produce identical products. This can also help to avoid wasting energy.
A business will have to also consider the Quality of their products. Quality is the extent to which a consumer is satisfied with a product. Businesses will attempt to produce products as cheaply as possible to allow them to maximise their profits, however, they must balance this against quality. Businesses will find that if their consumers are not satisfied with a product, they will not buy it and this will ultimately affect the overall level of profits.
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