AS Business Studies - Unit One

Entrepreneurs & Business Enterprise

Entrepreneurs are people who see and act upon opportunities in the business world and have the courage and initiative to act upon these. Some of the most significant characteristics that successful entrepreneurs have include:

• A clear understanding of the market and its conditions
• Knowing exactly what customers need and want
• Determination
• Passion
• Persuasive abilities
• Confidence
• Taking calculated risks

Many entrepreneurs have money as their main motive, however, this only equates to around 20%. Starting a business is a massive challenge and takes into account great risk, although the possibility for profits is a leading motive for people starting their own businesses. For some words of wisdom from Richard Branson on what makes a successful entrepreneur, watch the video clip below: 

The government will often assist entrepreneurs in business start up and this is often through such schemes as Business Link. Watch this short clip below which discusses how Amanda Waring, owner of Mama's Jewels, received £4,000 to help fund her business.

One of the key terms when considering business start up is Innovations - this refers to new ideas which are brought to the market. Some entrepreneurs will call upon Mentors to help them and assist them when needed. For some further words of wisdom on ways in which you can become a successful entrepreneur, watch the video clip of Sir Alan Sugar below:

Before using market research, a good entrepreneur will investigate the market they are moving into. They may investigate by conducting geographical mapping which would involve walking around a specific area and reviewing the competition and customers. They might check on prices, special deals and any discounts available. This information will help them to identify a gap in the market, otherwise known as a market niche. An entrepreneur will conduct market mapping - to view an overview of this concept, please access the clip below:

Starting a new business requires a significant amount of planning, skill and also luck!! Figures suggest that 70% of new businesses fail within the first three years and this can be attributed to a number of factors:

• The business idea is not good enough
• A good idea can be copied by other firms in the market
• Customer do not value the product or service

Some entrepreneurs will reduce risk by purchasing a franchise. A franchise is a successful, established business who sells the rights to another entrepreneur to trade under their name. For further information, access the video clip below:

Key examples of terminology you must be aware of are:

Franchisee: A person or company who has paid to become part of an established franchise business.

Franchisor: The owner of the holding company (Franchise)

The main problem with operating as a franchise is that you lose an opportunity to develop your own ideas and lack the freedom to make all the decisions within a business.

Protecting Business Ideas

Businesses are able to protect their ideas in a number of ways. These include:

Patents

Copyright

Trademarks

To develop your knowledge of each of the above, watch this video clip below:

In some cases, some businesses dominate a market in terms of sales. If one business dominates a market, this is known as a monopoly. When discussing monopoly power, this sees a business have the ability to charge high prices because you are the sole supplier of the product.  For further information on a monopoly, watch this short clip below:

The opposite of a monopoly is oligopoly and this can be defined by seeing the clip below:

Transferring Inputs into Outputs

Within every economy, there are three sectors, these are primary, secondary and tertiary. The primary sector relates to companies and people that are working to extract raw materials, whilst the secondary sector deals with the production of goods using these raw materials. This is sometimes known as the manufacturing stage or transformation stage. The final sector is the tertiary sector which deals with companies or people who provide services, either to the public or businesses. Use this clip below to help you further revise these sectors:

Starting a business can carry huge risk, both financially and emotionally. The fear of a business idea failing is going to be quite off-putting for people starting up. According to MIT, there are 14 key characteristics associated with successful entrepreneurs:

• Drive and energy
• Self-confidence
• High initial and personal responsibility
• Control
• Tolerance and ambiguity
• Low fear of failure
• Moderate risk-taking
• Long-term involvement
• MOney as a measure, not merely an end
• Use of feedback
• Problem solving skills
• Good use of resources
• Self-imposed standards
• Clear goal-setting

Business Types & Unlimited Liability

A Sole Trader is an individual who runs a business by themselves and makes all the decisions. There are likely to be other employees within this business, however, they do not make any decisions regarding the progression and development of the business. A sole trader is the person who takes on the burden of the possibility of business failure and this means that the owner will have unlimited liability. For further information on a sole trader, access the video clip below: 

Unlimited liability refers to the debts that a business has accumulated from running the firm. If a sole trader cannot pay his or her debts, then the courts can allow personal possessions or assets to be used to pay creditors. If insufficient funds can be raised, then this person is declared bankrupt. For further information in unlimited liability, watch this clip below:

Unlike sole traders, a Partnership occurs when two or more people come together to start a business, not a company. The individuals concerned will have unlimited liability for any debts that the business runs up. Within this business, it is vital that the partners trust each other. There are undoubted advantages and disadvantages associated with a partnership and these can be found within the short clip below:

Limited Liability

Limited liability is different from unlimited liability in the sense that the any debts that are accumulated are the responsibility of the business itself and not the owner or shareholders. If there is not enough money to pay off any debts the a company will close down, but the owners and shareholders have no personal liability for remaining debts. A Company will complete two documents upon start-ip, these are:

The Memorandum of Association

Articles of Association

For further information on limited liability, please access the link below: 

There are two types of companies and these are know as:

Private Limited Companies (LTD)

Public Limited Companies (PLC)

For an overview of the differences between these two companies, please access the short clips below:

Some examples of key terms that you need to be aware of when focusing on the legal identify of a business include:

Creditors: Those that are owed money by a business.

Incorporation: Where a business is established as a separate legal identity from its owners and therefore giving the owners limited liability.

Cooperatives: These organisations can be worker owned or customer owned, whilst they do not focus just on maximising level of profit. 

Charities: Some organisations have charitable status and these include organisations such as Greenpeace and Friends of the earth. 

Mutual businesses: These organisations have no shareholders and no owners - they exist solely for the best interests of the members. 

Market research

Market research is a method used to investigate and research the market before you enter it. Market research can be split into two distinct categories and these are:

Primary research

Secondary research

For further information on both primary and secondary research, please access the link below:

Businesses will look to conduct Qualitative research and this will undertake two main forms, these are:

Group Discussions

Depth interviews

Businesses will also consider the use of qualitative research and this will involve the following:

Sampling

Sample Size

Developing questionnaires that are appropriate

For further information on the difference between qualitative and quantitative research, access the clip below:

Types of markets that exist
A market is a place where buyers meet sellers. Every market has a size and this can be calculated by reviewing how much customers spend during the course of a year. Other issues for analysis refer to the way the market can be divided up in terms of the competitors. 
There are different ways of analysing a market, however, most small firms know and care very little about the size of the national market. When considering market analysis, you can review a market by considering or not it is:
Local or national?
Physical or electronic (Virtual)?
Watch this short clip below which shows how Tesco considered the changes in the market in Korea and acted upon these. 

Another example of a virtual market is ebay. Watch this clip below to help you understand its position within the market:

Factors Affecting Demand

For an introduction to demand, watch the video clip below:

Some examples of factors that can affect demand include:

Price

Income

Actions of competitors

The Marketing / advertising activities of the business

Seasonal factors

For further help and assistance identifying examples of factors which can affect the demand for a product or service, access the video clip below:

For an explanation of recent developments in the world's economies and investment opportunities, access the video clip below:

Market Share
Market Share refers to the proportion of the total market held by one company or product. This can be measured by volume or by value. Review the clip below for information on how to calculate a businesses market share: 

Some examples of key terms you need to be aware in regards to goods include:
Inferior goods: products that people turn to when they are less well off and then turn away when their wages or salaries / financial position increase.
Luxury goods: products that people buy MUCH more of when they are better off.
Normal goods: Products or services that change dependent on the position of the economy.
For further information on the difference between these types of good, access the video clip below:

Sources of finance available to businesses
All businesses need and require money - where this money comes from is recognised as a source of finance. For example, a new business will require financial support to help them start up, whilst a business looking to expand and grow, will require finance for this purpose. A business may also need finance to help to alleviate cash flow problems. Sources of finance can be split into two distinct categories, these are:
Internal sources
External sources

The Advantages of Internal and External Equity —powered by eHow.com

Legal Structure for Businesses
In Business Studies, you need to be aware of the different types of legal identity that businesses may wish to start up as - this could include each of the following:
Sole Trader

Partnerships

Franchise - please see clip at the top of the page
Private & Public Limited Companies
Public & private Limited Companies
Unlimited Liability affects both Sole Traders and Partnerships. 

For each of these business legal identities, you will need to identify the advantages and disadvantages for setting up as this business type. Sole Traders, for example, are the most common form of business and are often classified as the easiest to set up and establish. There are no formal rules to establish when  establishing a sole trader, or more importantly, administrative costs to pay. The accounts of the business do not have to be published which creates a great deal of confidentiality. The main disadvantages associated will include:

• Limited sources of finance available at start up
• Long hours of work
• Unlimited Liability

When considering partnerships, there are also a number of advantages and disadvantages that can be identified, these include:
Advantages

• Additional skills as more than one partner
• More capital / finance available
• Shared responsibility and decisions
• Extra skills

Disadvantages

• Sharing the profits across the partners
• Loss of control
• Decision making takes a great deal longer
• Unlimited Liability