Business gces 1/10

1. What is business activity

Business-organisation that provides goods or/and services

-Produces output(goods or services)

-Goods and services are consumed
-Resources are used
-A number of business function may be carried out
-External factors affect business
-Aim to make a profit
-satisfy people needs and wants(infinite,resources are scare)

Private enterprise(private sector)

-make profit

Social enterprise(non-profit marketing)

-eg charity organizations

Public enterprise(public sector)

-governmeent owned
-eg health care, education, etc

Stakeholderes(an individual or group with an interest in the operation of business)

-owners(entrepreneurs)->setting up and running business
-customers->consume goods and service
-employees
-managers->help run most of the business
-Financers->lend money to business(banks,family memebers)
-The local community
-The government->has interest in all business

All business operate in a changing business enivronement

2.Business objectives

Objectives
-motivate
-where to take business and wut steps are needed
-assess performance

Main financial aims and objectives

-survival
-Profit->aim profit maximisation
-sales->enjoy lower costs,have a large market share
higher public profile
-increase market shares->able to charge higher market prices, higher profile
-financial security->profit satisficing->flexibility

Non-financial objectives
-Social objectives->improve human well-being
-Personal satisfaction->happier and feel satisfied
-motivated by challenge
-independence and control
Factors to change objectives
-market conditions->dynamic markets
-technology->sell more to exploit economies of sales, eg online selling
-performance->succesful and less successful periods
-legislation->socially responsible
-internal reasons->change in ownership...

3. Sole trader, partnerships, social enterprise and franchises

Set up business are called entrepreneurs

Roles of entrepreneurs (I DOR)
-innovaters->most people->copying or adopting business ideas
Others->spotting gap in market, new invention or market research
-Organisers->giving instructions,making arrangments and setting up systems
-Decision makers->raise finance, product design, choice of production
methods,prices, recruitment and wages
-Risk takers->risk losing money if fails

Unincorporated business
-small business, owned by one or a small group of people
-no legal differnece between owner and business

Incorporated business
-seperated legal identity

Simplest form of business organisation-> sole trader or sole proprietor(business

owned by a single person)
|
mostly found in tertiary sector(tutoring,
hairdressing, etc)
Advantages (OSO FIQ)
-Owner keeps all profit
-Independent, owner complete control
-simple set up, no legal requirements
-Flexibility, adapt to change quickly
-offer personal service
-qualify for government help

Disadvantages (US TT LN)

-Unlimited liability(if business fails->lose more money)
-struggle to raise finance->too risky to lent money
-too much responsibility
-long hours, hard work
-too small to exploit economies of scale(make full use of the advantage of
producing in large quantities)
-No continuity(business dies with owner)

Partnership (2-20 ppl)

Deed of partnership
-how much capital each partner would contribute
-how profit and losses wil be shared among
-procedure for ending partnership
-how much control each partner has
-rules for taking on new partners
Advantages(ESJMF)
-Easy set up and run, no legal formalities
-specialize in their expertise
-job of running business is shared
-More owners, more capital
-Financial information is not published?

Disadvantages (PPPS)-Have unlimited liability

-Profit has to be shared
-Partners may disagree and fall out
-partners decision is legally binding on all
-small

Limited partnership(sleeper partner)

-provide capital but ttake no part in manaement of business
-can only lose money invested

Franchise
Franchisors developed a successful business and allow others, the franchisees, to
trade under their name
eg, mcdonalds, subway, pizza express, etc
Franchisors offer franchisees in order to start (StLETraMa)
-licence to use the brand
-start up package including help, advice and branding matrials
-Training on how to run and operate the business the franchise way
-marketing support for all franchisees
-exclusive geographical area-will not be in the same places of the same franchisees

Franchisees return to franchisors

-one off start up fee
-ongoing fee
-contribution to marketing costs
-May make a profit on some of the materials supplied to franchisees

Advantages to franchisee(LBSN)
-Less risk
-back-up support is given
-set-up costs are predictable
-national marketing are organised

Disadvantages
-Profit is shared with the franchise
-Strict contracts have to be signed
-Lack of independence
-expensive way to start a business(start up fee)

Advantages of franchisor
-fast method of growth
-cheaper method of growth
-Franchiswws take some of the risks
-Franchisees more motivated than employees(own business)

Disadvantages
-Potential profit is shared wiht franchisees
-Poor franchisees-damange reputation
-franchisees may get merchandise from elsewhere
-cost of support for franchisees might be hight
Social enterprise(e.g. co-op food)
-clear social and/or environmental mission
-generate most of their income through trade or donations
-reinvest most of their profits
-majority controlled in the interests of social mission
-accountable and transparent

Forms of social ent.

Cooperatives
-operates as consumer or retail cooperatives
-owned and controlled by members
-Any profit made by cooperatives is given to members

Woorker cooperatives
-employees share ownership
-workers contribute to production as well as desicion making

Charities
-raise money for good causes
-raise awarness
-rely on donation
-fundraising events

4.Limited companies and multinationals

Limited companies
-incoporated business
-limited liability
-raise capital by selling shares-each shareholder owns a number of shares-joint
owners
-they vote on important descisions
-more shares, more control and money in dividends
-shareholders elect directors-do as they want
-annual general meeting-vote out directors
-pay corporation tax
-follow legal procedure

Forming
-two or above
-memorandum of association and articles of association(documents to registrar of
companies)
-if acceptable-certificate of incorporation
Memorandum
-name of company
-name and address of company registered office
-company objectives and nature of its activities
-amount of capital to be raised and no. of shares

Articles
-rights of shareholders
-procedures for appointing directors
-length of time directors should serve before re election
-timing and frequency of company meetings
-arrangement for auditing(inspect)company accounts

Private Limited companies

-business name ends with Limited/Ltd
-shares can only be transferred privately, cannot sell or traded on stock market
-often family business, owned by family or close friends
-directors tend to be shareholders

Advantages of private ltd

-Limited liability
-more capital can be raised
-control cannot be lost to outsiders
-business continues even one shareholder dies
-more status than eg, sole trader

Disadvantages
-Financial information has to be made public
-costs money and time to set up
-proits are shared between more members
-takes time to transfer shares to new owner
-cannot raise huge amounts of money, like PLC

Public limited companies(PLC)

Expensive
-needs lawyers to ensure prospectus(documents that wants public to buy its shares)
is 'legally' correct
-bank may be paid to process share applications
-some shares may be unsold, a fee is paid to underwriter(Any person) to buy any
unsold shares
-advertising and administrative expenses
-minimum 50000 pound of share capital

Advantages
-large amount of capital can be raised
-limited liabilities
-can exploit economies of scales
-able to dominate the market
-shares can be bought and sold easily
-may have a very high profile in the media

Diasdvantages
-set up cost very expensive
-outsiders can take control by buying shares
-more financial information has to be made public
-remote from customers
-more regulatory control owning to Company's act
-managers may take control rather than owners

Multinational organisation
large businss with significant production,
service operation in at least 2 countries
-huge assets and turnover->extremely well resourced
-highly qualified professionals
-powerful advertising and marketing ability
-highly advanced and uo-to-date tech
-highly influential both economically and politically
-very efficent->exploit huge economies of scale
-ownership and control centered in host country

Public coporation(CISSPP)
busines owned and controlled by the state/government
-Created by law(created by act of parliment)
-Incorporaton(seperate legal identity
-State owned(government appoints people-board of directors, responsible for
corporation's policies)
-State funded(came from tax
-Provide public business
-Public accountability