Business Activity & Business Activity & The Changing The Changing EnvironmentEnvironment

Business Activity & Business Activity & The Changing The Changing EnvironmentEnvironment

Task 1

• Write down your name and what grade you would like to achieve in Business & how you expect to get that grade

What is business?• A place where a firm buys and

sells things in exchange for money

• They aim to make a profit

• What ways do you think they could make a profit/

Your activity• Write down three things that a

business may aim to do from the beginning

• What do you think their objectives would be?

Task 2• Think of 1 business that you

are familiar with & write down three things about this business

• Why do you think this business is successful?

Homework• Pick an organisation that you either like

or dislike• Research the company and give your

findings• Headings may include, company

history, products/services, employees, market share etc

• Please do not copy from internet

Year 10 BusinessYear 10 BusinessBusiness activity & Business activity &

the changing the changing environmentenvironment

Year 10 BusinessYear 10 BusinessBusiness activity & Business activity &

the changing the changing environmentenvironment

ObjectivesW.A.L.T: Distinguish between the different types

of business organisations Explain what these different types of

organisations offerW.I.L.F: You to give your own thoughts& opinions You to participate You to work as part of a team

Starter activity• What are the functions of a

business?

• List all the people that are involved in a business

• What ways can people raise finance for their business?

Types of businesses

• Sole Trade

• Partnerships

• Private Limited Company (LTD)

• Public Limited Company (PLC)

• Co-operatives

• Franchises

Sole Trader• An individual which trades under his/her own

name

• Is totally independent

• Makes all the important decisions

• Responsible for paying all of the debts

• Few formalities in setting up

• Can employ as many people as he/she wishes

Advantages of a Sole Trader

• Decisions can be made quickly• Leads to greater interest & more

dedicated & hard working owner• Profits are kept by the sole trader• Paperwork is minimal• Easy to start trading as the sole trader• Has close contact with employees and

customers• Problems are easier to solve

Disadvantages of a Sole Trader

• Personally liable for all debts that it occurs (unlimited liability)

• Less capital available for expansion

• Taxed at a higher rate than a private company

• May have difficulty in managing all business functions

• When the sole trader dies so does the business

• Raising capital could be difficult for one person

Examples of Sole Traders

• Corner shop

• Coffee shop

• Carpenters

Your task• Suggest two advantages & two

disadvantages of a person setting up as a sole trader

• List two objectives that a sole trader may have

Partnerships• Can have between 2 & 20 partners

• Set up under the Partnership Act 1890

• A partnership deed can be used to set out the rights of the partners

• Aim to make a profit

Examples of partnerships

• Doctors

• Accountants

• Solicitors

Advantages of a partnership

• More capital is available than for the sole trader because more people are contributing

• Better use of business expertise because each partner can concentrate on what they are good at

• Better decision making because decisions are made after discussions

Disadvantages of Partnerships

• Group decision making may cause conflict between partners

• Like sole traders, partners have unlimited liability thus they are liable for all the debts of the business

• Decision making can be slower which can lead to inflexibility

• Profits must be shared

Your task• Why is it important that a business

has a deed of partnership?

• Why do you think partnerships are a good idea?

Key termsUnlimited liability

The owners are personally responsible for paying debts if the business goes bankrupt

Limited liabilityIf the company goes into liquidation, the shareholders of the company are not responsible for paying the debts of the business

Business Activity and Business Activity and the changing the changing environmentenvironment

Business Activity and Business Activity and the changing the changing environmentenvironment

ObjectivesW.A.L.T:• Explain the different types of business

organisations• Examine the different finance methods

available to businessW.I.L.F:• Your participation• Your ideas and opinions• Complete tasks

Starter Activity• You have started up your own

business in Nottingham

• Make a list of all the things which are necessary to make this business successful

Private Limited Company

• A company that is a legal entity in its own right

• It can be sued and can sue• Shareholders own the business• A group of between 2 & 50 people

who buy the shares are called the shareholders

• Cannot sell shares to the public

Public Limited Company

• Can sell their shares to members of the public through the stock exchange

• Must have at least 7 shareholders with no maximum limit

• Must issue a prospective detailing the history of the company & inviting the public to buy shares

Public Limited Company

• Shares are bought & sold on the stock exchange

• Accounts must be published and audited on an annual basis

• An annual report must also be compiled each year

Advantages of a public limited

company• Limited liability• Easier than private limited

company to raise capital• Attract top management because

of public image• Continuity of existence• Lots of publicity based on stock

exchange quotations

Disadvantages of a public limited

company • High formation costs

• Accounts have to be published

• Profits must be distributed to shareholders

• Ownership & control are separated because although the shareholders own the company the Board of Directors make the decisions

Key TermsShares• These are long term sources of finance• Sold to people who become shareholders of the company• A plc is able to advertise its shares for sale to the general

public• A private limited company must sell their shares privately

Shareholders• These are people who own part of the Business

Sources of finance

• Internal sources of finance

• External sources of finance

Internal sources of finance

• Retained profits

• Stock reduction

• Assets sale

• Limiting credit to customers

External sources of finance

• Owners capital

• Hire purchase and leasing

• Overdrafts and loans

• Grants

Franchises & Franchises & Sources of FinanceSources of Finance

Franchises & Franchises & Sources of FinanceSources of Finance

ObjectivesW.A.L.T: Evaluate the idea of owing a franchise&

determining what advantages & disadvantages there are associated with it

Distinguish between the various sources of finance available to businesses

W.I.L.F: You to create a suitable advert for the sale

of a franchise You to answer multiple choice questions

and exam style questions

Starter Activity• What are the various businesses organisations

that we have done?

• What is an entrepreneur?

• What are the characteristics of an entrepreneur?

• What are the two sources of finance called?

• List three finance methods associated with each

What is a franchise?

• Involves paying a fee & agreeing to produce goods exactly in accordance with the franchise company’s policy

• Payments are made on a regular basis depending on profits made

• Training & supervision are provided

Your task

• Create a newspaper advert selling a franchise

• Example:Mc Donald’s largest restaurant for sale as a going concern to suitable franchisee(address)Excellent trading figures, full training provided. Price £375,000

The Stock marketInternet site

The public and private sector

• The public sector includes everything that is owned by the government

• Examples-army, police force, schools & hospitals

• Public means that they are owned by the government for the benefit of the people who run them

The public and private sector

• The private sector contains all the businesses owned by private individuals

• Almost all the businesses you can think of are in the private sector

• Private means that these businesses are run for the benefit of the people who own them

Strengths of the free market private sector

• Employers & employees can create their own personal wealth through the profit motive & hard work

• A greater range of products are supplied

• People have greater freedom to choose & but what they want

• Competition helps keep prices down & encourages new ideas

Strengths of the planned public sector

• Public services do not depend on the profit motive & will be supplied even at a loss

• The provision of basic services available to all regardless of people’s ability to pay them

ObjectivesW.A.L.T: Outline the various factors of production Explain how each factor is important to a

business

W.I.L.F: You to distinguish between the different factors

of production You to start working on cash flow and its

importance

Factors of production

• These four factors of production are the resources that are used to produce the economy’s goods & services

• Land• Labour• Capital• Enterprise

Factors of production

Land All businesses

need land to create their products

They may use the land, build on the land or extract from the land

Labour Businesses need to

employ people to make and market their products

The UK’s labour force is made up of all the men & women who are available to work

Factors of production

Capital

To make their goods or to provide their services, firms need to invest money in machinery, buildings, vehicles and other major resources

Enterprise

The entrepreneur owns the business and is prepared to take the chance that his or her product will be a success

Cash FlowCash FlowCash FlowCash Flow

ObjectivesW.A.L.T: Create a cash flow statement Differentiate between fixed & variable

costs & total costs

W.I.L.F: You to create a cash flow with various

figures given

Starter Activity-match the key word to the meaning

Sole Trader You must pay back what you put in & all debt

Entrepreneur You only lose the amount of money put into the business

Limited Liability An individual willing to take risks in setting up a business

Unlimited Liability Business organisation that is owned by a single person

Cash Flow

• Is the flow of all money into and out of the business

• Cash flow is important because if there is not enough money flowing in you don’t have enough to pay bills

Poor cash flow=big problems

• Not enough cash to pay daily expenses

• Lack of working capital

• Staff don’t get paid on time

• Creditors may not get paid on time

• May become bankrupt

Your task1) What is a cash flow?

2) Why should a business prepare a cash flow?

3) Why does a business need to keep an eye on their finances?

Reasons for preparing a cash

flow• Lets a business know if they will

have enough money to meet payments due

• Indicates which months there will be a cash shortage

How to prepare a cash flow

• Estimate money coming in

• Estimate money going out

• Subtract payments from receipts

• The closing balance will be the opening balance for the following month

The different costs involved

Fixed costs: Costs which have to be paid no matter

what has been sold or producedVariable costs: Costs that vary according to the

amount produced or soldTotal costs: Fixed costs + variable costs

Tick which source of finance is necessary for

the following£ Short

termMedium term

Long term

Stock for resale

10, 000

Premises 120,000

Machinery 50,000

Vehicles 18,000

Land 60,000

Oil 2000

Wages 1800

Telephone 400

Computers 6000

ObjectivesW.A.L.T: Distinguish between the various types

of stakeholders Match the type of stakeholder to a

various aimW.I.L.F: You to relate questions to lessons that

we have completed already

Starter Activity1. Customers are an example of a firm’s

------------(12)

1. Business objectives are set by the ------(6)

1. An example of an internal stakeholder group is ---------(9)

1. Public sector organisations have objectives based on -------(7)

Stakeholders• Internal-owners, managers,

directorsVariable costs:

• External-local community, bank, suppliers

Your task• Select a business of your choice

and write about the various stakeholders that would be affected by it

Match an appropriate aim to each stakeholder group

Group Aim

Customers No pollution

Local Community A return on their investment

Lenders Job security

Employees Lower prices

Judging success-how are objectives measured?

• Size

• Turnover/market share

• Shareholders

• Number of employees/staff turnover

• Customer satisfaction/number of complaints

Factors of productionFactors of productionFactors of productionFactors of production

Objectives

W.A.L.T: Examine the different factors of production

and how they affect a business Relate the factors of production to a particular

business situation

W.I.L.F: Your thoughts and opinions based on these

topics and how they would relate them to a particular business scenario

Starter Activity• What are the four factors of production?• Explain what is meant by each of those

factors

Fill in the blanks: Employees earn -----(w) The owners of capital receive --------(I) Entrepreneurs make -------(p) The owners of land receive ----(R)

Areas to be covered• Primary Industry

• Secondary Industry

• Tertiary Industry

• Employment

The primary industry• These are businesses that extract

something e.g. coal, oil, stone, fish and ore

• The location of these businesses usually depends on where the resources being extracted are found

The secondary industry

• Theses are businesses that construct or manufacture something

• Their location is influenced by many factors such as government support and the existence of a suitable labour force

The Tertiary industry

• This is the service sector and supports the other two industries

• Services include transport, finance, insurance, training and advertising

• Their location will be influenced by the services required by firms in the other two industries

Your taskClassify each of these businesses as either primary, secondary or tertiary:

A specialist distribution firm A builder A building society A forestry plantation A computer manufacturer

List four major influences on location

Objectives

W.A.L.T:• Distinguish between the different types

of production• Categories different items into the

correct production method

W.I.L.F:• You to distinguish between the different

production methods and give relevant examples

Starter Activity• Factors of production –jumbled up

words

• Access business studies on line

• http://www.businessstudiesonline.co.uk/GcseBusiness/Activities/Module1/Module1Menu.htm#GCSEBusMod1Factors

Methods of production

Job production:

• when a business makes a single one of product

• The job is often built by skilled labour working to the customer requirements

• Since only one item is made the business may not gain economies of scale

Methods of production

Batch production:

When there is more than one item made

Each batch of products are finished before the next batch

Methods of production

Mass production

• When identical items are made on a production line

• The product moves from one stage to the next

Chose either job, batch or mass

• Cans of paint• A factory extension• Shoes, size 7• Television• The channel Tunnel

State one advantage and one disadvantage of mass production

Starter Activity• Refer to hand out sheet

• Also grade or no grade quiz

• http://www.businessstudiesonline.co.uk/GcseBusiness/Activities/Module4/Module4Menu.htm#GCSEBusMod4ProductionMethods

Factors of location & Factors of location & PEST analysisPEST analysis

Factors of location & Factors of location & PEST analysisPEST analysis

Starter Activity

1) Describe what is meant by batch production

2) A cost which remains the same regardless of the level of production is _____ cost

1) A cost which changes according to the level of production is a _____ cost

Developments in production

• Just in time-only buy stock as you need them, no need for additional storage facilities

• Cell production-where people make a particular part of the product and moves continually

• Kaizen-invest in skilled people rather than technology ( continuous improvement)

Lean production• Refers to the various ways that are now

used to improve the efficiency of production

• Tries to cut development time

• Associated with just in time, cell production and the Kaizen system

Your Task• Choose an organisation of your

choice and outline what type of production mostly suits them and give relevant reasons why

The Government• They create various laws and

regulations that affect businesses

• The EU and the UK Government also support firms

• The Government want to be paid VAT and taxes

The P.E.S.T The P.E.S.T analysisanalysis

The P.E.S.T The P.E.S.T analysisanalysis

1515thth October 2007 October 2007

Objectives

W.A.L.T: The importance of the p.e.s.t analysis

on a business Distinguish the difference between

P.E.S.T

W.I.L.F: You to relate the p.e.s.t analysis to a

particular business (case study)

The PEST analysisRefer to the handout

A scan of the external macro-environment in which the firm operates can be expressed as;

Political Economic Social Technological

The steps involved

Environmental Scan

External analysis Internal analysis

Microenvironment Macroenvironment

P.E.S.T

Political Factors• These include government regulations

& legal issues

• Defines both formal & informal rules

• Examples-tax policy, employment laws, environmental regulations, trade restrictions and tariffs, political stability

Economic Factors

• Economic factors affect the purchasing of potential customers and the firms cost of capital

• Examples-economic growth, interest rates, exchange rates, inflation rates

Social Factors• These include demographic and cultural

aspects of the external microenvironment

• These affect customer needs and the size of potential markets

• Examples-health consciousness, population growth rate, age distribution, career attitudes, emphasis on safety

Technological Factors

• These can lower barriers to entry, reduce minimum efficient production levels and influences outsourcing decisions

• Examples-research and development, automation, technology incentives, rate of technological change

Case study

• Relate to the p.e.s.t case study

• Read through case study and answer questions based on this case study

The Business Cycle• This shows the regular patterns of upturns and

downturns of the level of output in the economy

• Goes through stages-boom, slump, recovery

• Diagram

• The business cycle business studies on line part

The phases• Boom-is the part of the business cycle

in which output rises

• Slump-is a severe form of recession

• Recovery-is the part of the business cycle when output begins to grow again after a slump

Your task• Look at the shops, offices or

factories in Witham. Have any of them opened or closed recently?

• Are there other reasons or is it a result of the business cycle

The E.UThe E.UThe E.UThe E.U

ObjectivesW.A.L.T: Understand the purpose of the

European Union Determine what has happened since

the introduction of the E.UW.I.L.F: You to answer the questions based on

the European Union

Starter Activity• The face off quiz on

www.businessstudiesonline.com where you answer a series of questions based on the E.U

What is the E.U?• This is a political and economic

community

• Made up of 27 countries member states located in Europe

• In 1957 6 European countries formed the European Economic Community (EEC) by the Treaty of Rome

What has happened since then?

• The EU has grown in size through new member states

• In 1993, the Maastricht Treaty established the base of the current legal framework

Task 1• Write down three things that you

know about the E.U already• One• Two• Three• Compare answers and then list on

board

The purpose of the E.U

• The EU created a single market which seeks to guarantee the freedom of movement of people, goods, services and capital between member states

• It maintains a common trade policy, agricultural and fisheries policies and a regional development policy

Advantages of the EU

• Free Trade (no tariffs or quotas) benefits industries as they have a larger market to sell their goods to

• Greater co-operation between countries should prevent the outbreak of war between members

• Greater cultural understanding results from freedom to travel within the EU

• The E.U has a greater influence on world events than the individual countries could have

• European Union regional development funding has improved conditions in the poorer countries and areas

Disadvantages of the E.U

• Goods cost more to import from non-EU countries due to tariffs

• E.U funded schemes such as the Common Agricultural Policy, are expensive, inefficient and sometimes corrupt

• It reduces the political independence of each country-decisions are taken for all countries by the European Parliament

Task Two• Look at the handout regarding the

history of the E.U

• Draw arrows to link to the correct sequence of events

• Discuss with your partner and then draw in the arrows

The European The European UnionUnion

The European The European UnionUnion

Introduction of the euro

• In 1999 the EU introduced the euro

• Has been adopted by 13 member states

Your task• Name the country

• www.businessstudiesonline.com• The drag and drop section

Members of the E.U• Czech Republic• Poland• France• Albania• Sweden• Lativa• Serbia• Belgium

• Moldova• Slovakia• Estonia• Iceland• U.K• Luxembourg• Romania

Members of the E.U• Bulgaria• Switzerland• Greece• Finland• Ukraine• Spain• Ireland• Hungary• Austria• Italy

• Lithuania• Montenegro• Slovenia• Denmark• Malta• Belarus• Netherlands• Cyprus• Norway• Germany• Potugal

Business and the EU• Has helped increase trade between

member countries

• Businesses has the opportunity to expand

• The Eu has tried to protect businesses by imposing custom duties on goods imported into the EU

HomeworkEssay (Red tasks)

Why are more countries wanting to join the European Union/ What might their concerns be?

Yellow tasks• Create a poster about the European

union. On the poster include a small map of the E.U, information about the E.U, the countries in the E.U and the purpose of the E.U

Importance of the E.U

• The European Union contains four of the world’s major economic powers;France, Germany, Italy and the U.K

• The E.U is now the UK’s main market

U.K imports in 2000UK imports 2000

EU

Rest of Europe

North America

Rest of the world

The EU=58%

Rest of Europe=6%

North America=15%

Rest of the world=21%

U.K Exports in 2000UK imports 2000

EU

Rest of Europe

North America

Rest of the world

The EU=54%

Rest of Europe=7%

North America=15%

Rest of the world=24%

The single market• Promoting trade between the

member states was a major influence in establishing the EU

• Its common market is now a single market consisting of about 400 million people

Purpose of the single market

• Free movement of people (labour)

• Free movements of goods (no internal tariffs)

• Common technical and other standards

How the single market has influenced UK businesses in

several ways• Common standards of quality and safety

• Open market encourages competition

• Free movement of labour and good encourages employment and skills development

The monetary union• Economic and monetary union is closely

linked with the euro and eurozone

• The single currency will affect the EU:• Trade will be valued in euros, exchange

rate fluctuations will have an impact and also price difference may cause problems

Your task• In the EU what is the social charter?

• What is the difference between the eurozone and the euro?

• What does the EU’s single market seek to do?

Answers• A charter protecting the rights of workers

• Eurozone is the member states who have signed up to the single currency. The euro is the name of the single currency

• Provides free movement of labour and goods and establish common technical standards

Plenary• Test the person beside you

regarding the true and false statements and see if their answers have changed

ObjectivesW.A.L.T: Determine how businesses grow Discuss how businesses grow internally

W.I.L.F: You to create a spider diagram outlining

how businesses grow You to participate and engage fully in

lesson

Starter• List ways that a business may

grow

• Create a spider diagram to display these

How a business grows

• There are several methods to measure an organisation’s size:

• Profits• Turnover• Employees• Capital employed

Profits and turnover• Profits-how much the business

keeps from selling its goods and services

• Turnover-the sales that the business makes

Employees and capital employed

• Employees-the number of people employed in the business

• Capital employed-the resources the business has invested in it

Key termsFor a firm, greater size through growth makes:

• Economies of scale possible• Survival more likely

How can firms grow internally?

• They grow organically

• Can grow through mergers or takeovers

• This usually happens when an organisation sell more of its existing products, starts selling new products and when businesses enter new markets

Integration• In a merger two companies agree to join

• This external growth is the quickest way for organisations to grow

• In a takeover one company buys enough of another company’s voting shares to take control

Economies of scale• They are the reasons why the average

cost of production may fall with increasing levels of output

• What is your opinion? Would it be a good idea for a company to produce in large amount or do you think they should only produce as needs be

Task• You own a small business and you want

to ensure that your business provides the best possible service to their customers

• Create a questionnaire finding out if customers are happy with the service they are getting from your company

Starter ActivityMerger The businesses own money

that is ploughed back in

Takeover If large amounts are made and it reduces the average cost

Turnover When one company buys enough of another company’s voting shares

Retained profits Way of comparing a businesses size

Economies of scale Takes place between two companies through their agreement

Externalities• All businesses bring benefits to

people and others outside the business this is called externalities

• Externalities are costs or benefits arising from business activity that are experienced by people or organisations outside the firm

Example

• A new housing developing is opening up in Witham

• They are aimed at people from deprived areas

• These people have been involved in crime and substance abuse

• You must outline the negative and positive externalities associated with this venture

Your task• Create a spider diagram showing

the positive and negative externalities

Positive Negative

Year 10 BusinessYear 10 BusinessYear 10 BusinessYear 10 Business

MondayMonday

ObjectivesW.A.L.T: Distinguish between imports and exports Distinguish between visible and invisible

tradeW.I.L.F: You to complete the starter activity You to answer the questions based on

importing and exporting

Starter ActivityHome Trade The export and import

of services

Importing Selling to other countries

Exporting The import and export of goods

Visible Trade Buying or selling to people in same country

Invisible Buying from other countries

Trading• Is the buying and selling

• Home trade is when businesses buy or sell goods to people in the same country

• When businesses buy or sell from other countries outside the home country is foreign trading

Importing vs. exporting

• When businesses buy goods or services from other countries is called importing

• When businesses sell goods or services to another country is called exporting

Visible trade• Is the export and import of goods

• Dairy produce, livestock, machinery, oil, clothes, shoes are all examples of visible trade

Invisible trade• Is the export and import of

services

• When Americans or other foreign tourists come to the U.K on holidays, it is an example of invisible trade

Your task• Outline on a spider diagram the

reasons why the U.K imports and exports

Importing Exporting

Reasons for importing

• Climate is not suitable to produce all crops

• Lack natural resources

• Needs to import certain raw materials

• Wider choice

Reasons for exporting

• Easier for the U.K to produce agricultural produce because of climate

• Businesses need more than the home market

• Creates extra employment

• Foreign currency

Task• Explain the difference between home

trade and foreign trade?

• Give three reasons why the U.K imports goods from other countries

• Why do we export to other countries?

Task-tick the correct answer

Exports Imports

U.K tourists going to Italy

U.K computer parts sold to France

An U.K business buying parts from China

Year 10 BusinessYear 10 BusinessYear 10 BusinessYear 10 Business

WednesdayWednesday

ObjectivesW.A.L.T: Distinguish between the various types of

finance Distinguish between ordinary and

preference shares

W.I.L.F: You to attempt the starter activity You to complete all the relevant task

Starter Activity• Why do businesses need finance?

• Give two examples of sources of finance

• Give two examples of each of the two finance types

Internal sources of finance

• Retained and using profits

• Selling assets

• Using trade credit

• Investing any surplus cash

• Reducing stocks held

External sources of finance

• Personal savings

• Borrowings

• Issuing shares

• Loans and mortgages

• Overdrafts

• Factoring debts

Types of shares• Two types of shares-ordinary and

preference

• Ordinary shares allow holders to vote at company meetings

• This makes an ordinary shareholder an owner of the company

Preference shares• These don’t usually give their holders

the right to vote at company meetings

• Preference shareholders receive priority over ordinary shareholders when it comes to paying dividends and repaying capital

Your task• List three reasons why businesses

need finance

• State two differences ordinary shares and preference shares

Ordinary and preference shares

Ordinary Preference

Voting rights?

Normally one per share

Usually non-voting

Dividend Payment?

Variable Fixed

Capital repaid?

Paid after preference;repaid last

Paid before ordinary;repaid before ordinary

Homework

• Red task-Choose a business of your choice and explain what source of finance would be most adequate for that business to grow

• Yellow task-Write a letter to a company of your choice explaining the difference between ordinary shares and preference shares (you must research)