Professional Documents
Culture Documents
Commerce Notes
Commerce Notes
Production
Converting raw resources into goods or services
Satisfy needs and wants of people
Manufacturing
Converting raw materials into finished- and semi-finished goods
Likely to use people, tools, equipment, and machinery
Goods are mass-produced
Make consumer goods, sold for the consumer, and intermediary goods, used by
other manufacturers
Some manufacturers make capital goods that are equipment used in manufacturing
Provision and Delivery of Services
Direct Services | aim directly at consumers
o Banking, telecommunications, personal services, care services, education,
and public transport
Commercial Services | support businesses with transportation of goods
o Trade | involves exchange of goods and services between different owners
for money
Export and import agencies
Retailing
o Aids to Trade | services provided by commercial enterprises to support
businesses in the trading process
Comms systems
Transport
Advertising
Four factors of Production
Land | need land to locate premises
Labour | the workforce such as manual, skilled, and managers
Capital | anything that confers value or benefit to its owner
o Working capital is the stock of raw materials that will be used up in
production. For example, wheat to make bread is the working capital
o Fixed capital refers to the stock of man-made resources to help make goods
and services and can be used again. Used in production of working capital
into goods or services. For example, the rolling pin to beat the dough is fixed
capital
Enterprise | an entrepreneur that risks their own money in a business venture
Allows workers to become an expert at what More likely that worker becomes bored
they do. Practice makes perfect because of constant repetition
The easier it will be to find work Risk of unemployment when a demand for
a certain skill or trade declines
Get paid more Harder to find jobs and gain money when
demand for skill declines
Greater use of specialised tools, machinery, Problems can occur if one stage of
and equipment is possible when workers production relies on another
specialise
Buying from home suppliers is done more quickly Small local suppliers are less
efficient
A business might win support from customers if it uses Local suppliers could result in
local suppliers higher costs
Buying from Suppliers in Other Countries
Advantages Disadvantages
Buyers will have greater choice when May require complex and unfamiliar
selecting a supplier documents
Some products have superior quality than May be more difficult to settle trading
those at home disagreements
Overseas suppliers may be able to supply in Distance means delivery times are longer
larger quantities
More control over production May not have facilities to deliver the order
Buying large quantities help ensure Buying from small number of suppliers means
uniformity reduced variety of produce available
Mail Order
Advantages Disadvantages
Often cheaper or exact price May not be able to use credit card
Time between placing an order and receiving Return of goods can be inconvenient
said order is short
Goods can be outsourced from all over the Lack of personal contact between buyers
world and sellers
Benefits Drawbacks
- Might get a question that tells you whether this business should convert from a sole
trader/cooperative/partnership to a sole trader/cooperative/partnership. If you do,
think of the PLUMS method
o P – how are the Profits distributed
o L – is it Limited liability
o U – is it unlimited liability
Above two are N/A because it will still be unlimited liability
o M – management
Desire for control
o S – sources of finance
Need for finance?
UNIT 8 – Franchising
Franchise, Franchisor, and Franchisee
- Franchisor is a creator of a franchise who enables the franchisee to use the
successful business formula in exchange for
o Initial fee
o Cut of profits
- The franchisor controls the
o Product range
o Interior of outlet
o Staff uniform
- The franchisee is a person or company who has paid to become part of the franchise
- The franchisee controls the
o Staff training
o Staff requirement
o Stock control
- A franchise is a business model where an owner allows another operator to trade
under their name
Should the Entrepreneur become a franchisee?
Pros Cons
Brand recognition Limited freedom in decision making
- Customers know it - Forced to follow franchisor
- Don’t need to do price penetration
Easier than starting from nothing Susceptible to ‘other’ franchisees
- Franchisor gives training to you, - KFC ran out of chicken
product range, and the suppliers
Less Risk means more likely to give you a Initial fee to be part of franchise
loan
- Piggyback on success of the
franchise to get a bigger or cheaper
loans/finance
Cut of profits to be paid to franchisor
Evaluation
- Size of the fee
- Size of the cut of the profits
- Appetite for risk
- Could set up your own business
Should the business use franchising to grow?
Pros Cons
Speed up growth Reduced control
- Franchisees cover capital expenses - May be hard to meet your
such as rent/bills standards
- You need less borrowing - Consistent experience
Less HR costs Profit sharing
- Employees of franchises are not - Because franchisee takes on costs
your problem
- Less costs for HR
Less operational costs
- Franchisee solves day to day issues
Initial fee and ongoing profits
Franchisee may bring you on to national or
international level
Evaluation
- Size of fee you receive
- Size of cut of the profits
- Amount of control you keep
- Quality of the franchisee
UNIT 31 – Communications
What is communication?
- Communication is about receiving and sending information
o Sender
o Message
o Receiver
o Feedback
- Channels of communication are routes which information might travel in a business
o Downward communication is passing messages from the top of the
organisation to those at the bottom
Subordinates look at their managers for guidance
Allows decisions made by management to be carried out by the
employees
Allows managers to give instructions, control, and organise
o Upward communication is passing messages from the bottom of the
organisation to those at the top
Helps managers understand the neds of employees
Managers aware of problems
Helps staff feel they’re valued
Provides managers with information to help make decisions
o Horizontal communication is the exchange of information between
colleagues on the same level of importance in an organisation
The importance of good communication in business
- Efficiency and profitability may suffer
- Lead to mistakes, wasted resources, and confusion
o Mistakes occur
o Costs rise
o Decision making slows down
o Staff motivation suffers
- Appropriate methods of communication
o Different types of messages will require different methods of communication.
Some factors to consider are
Direction of communication
Nature of communication
Costs
Speed
Whether a record is needed
Length of message
Recipient of message
Types of communication
- Oral
o People talking to each other
o Best form of communication needs to be spread quickly
o There may not be a record of the message sent
- Written
o Type of message that uses the written word
o Ex. Email
o A record of the message can be sent
o More expensive than oral communication
- Electronic
o Uses electronic methods such as texts, images, sound, etc.
Methods of Oral Communication
- Telephone
- Meetings
- Face-to-face communication
Methods of Writing Communication
- Letters
- Agenda
- Minutes
Methods of Electric Communication
- Internet
- Videoconferencing
- Email
UNIT 32 – The Importance of transport and its different forms
The Importance of Transport in the chain of distribution
- Operate more efficiently in the transport of goods, logistics
- Movement of goods
o Transport is needed to move raw materials and components in the stages of
production
- Movement of people
o Huge numbers of people are transported every day in the world
o Allow businesses to recruit workers from distant locations and gives the
business more choice in recruitment
- Globalisation
o Cost of flying has reduced
o People can travel to business meetings more easily and goods can be
transported more cheaply
- Employment
The different forms of transport available to commerce
- Road
o Flexible, cost-effective, wide range of modes, short distances, fast, connect
other transports
o Expensive for heavy and bulky, road accidents, congestions, environmental
costs, slow compared to other methods, loads may be limited
- Rail
o Cost effective for long ranges, suitable for heavy and bulky, minimal
disruption, no delays by congestion, suitable for transporting large numbers
of people between cities, environmentally friendly
o May cause delays due to having a fixed route, not good for small quantities of
goods, run on timetables, set up costs and maintenance costs are high,
disruption can be significant
- Sea
o Very cheap per-mile, environmentally friendly, does not require
maintenance, large quantities, provides access to great number of
destinations
o Slow, cargos are prone to damage, delays due to bad weather, some
countries are landlocked, no good for small loads
- Air
o Fast, no maintenance of network infrastructure, good for small quantities,
useful in countries where there is not much roads and rails
o Expensive, delays due to bad weather, small capacity, trans-shipping costs,
emissions are substantial
- Inland waterways
o Canals, rivers, and large lakes
- Pipelines
o Transport liquids and gases underground and underwater
UNIT 33 – Modes of Transport and their Efficiency
Roads
- Delivery Vans to carry small quantities of goods
o Significant increase in the use of vans because of the growing online industry
- Buses are for transporting people to and from work, school, and keep in touch with
relatives
o City buys
o Rural bus
o Intercity bus
- Taxis are flexible and convenient
o The price are often calculated by a meter and depend on the length and time
or are discussed beforehand with the driver
- Motorcycles transport one or two people cheaply
o Dodge traffic and so are useful for couriers with small packages
Railways
- Passenger trains are used for the transportation of people (not illegally)
o May take several minutes, hours, or days depending on the route
- Freight trains
o Takes traffic of roads and reduce carbon emissions
o Carries coal, iron, ore, sugar, fertiliser, gravel, sand, and oil
Air
- Passenger aircraft
o Lower costs of operating passengers
o Transport large numbers of people very quickly between countries
- Freight planes are designed specifically to transport freight
Sea
- Ferries are designed to carry people
- Tankers carry huge amounts of oil, petroleum, chemicals, and other liquids
- Bulk carriers
o Single-deck vessels that have tanks on top and sides to make as much room
as possible for cargo
o Used to carry one type of solid cargo
- Cruise liners
o Growth in popularity of cruising in recent years
- Cargo liners
o Accommodate different types of cargo
- Ore-bulk-oil carriers
o Carry dry cargo and a tanker can only carry liquid cargo
Containerisation
- Packing and transporting goods in metal containers of the same shape and size
- Use of standard containers changed the world of freight transportation
- More efficient
The Benefits to a business of having its own transport
- Their own transport fleets are more reliable
- They are more flexible
- Can offer a better customer service
- Use their own fleets to reinforce their brand
- Owning a private fleet will be cheaper
The Efficiency of Different Forms of Transport
- Want supplies and deliveries quickly
- Need transport provision to be reliable
- Maintain highest standards of safety
- Particular forms are favoured depending on the situation
- Convenience
- Carriers are likely to optimise routes
UNIT 34 – Warehousing
The Role of Warehousing
- May have specialist loading and unloading facilities
- Seasonal demand means that they stock up certain goods throughout the year until
they are needed to cope with seasonal demand
- Protecting supply
o Perishable goods often require specialised storage facilities
- To help make prices of some goods more stable
o Prices fluctuate when there is a mismatch between supply and demand
The Functions of Warehouses
- Store large inventories of goods
o Store them until needed
- Built to protect goods from loss or damage due to heat, dust, win, moisture, or
infestation
- Warehouses are responsible for any losses resulting from the storage of goods
- May provide services by adding value to the goods they store
o May be processed, graded, or branded
Types of Warehouses
- Bonded warehouses
o Goods are subject to customs and excise duties
o The payment of these goods can be delayed when stored in bonded
warehouses
o Goods are allowed to be repackaged, branded, and matured. However, firms
are not allowed to manufacture in bonded warehouses
o Activities at bonded warehouses are under close scrutiny
- Cold storage
o Some goods have to be stored in a temperature-controlled environment to
Reduce the amount of food that goes to waste
Prolong the shelf-life of foods and therefore provide goods out of
season for customers
May offer refrigerated transportation
May offer emergency cold storage if a customer loses power
Can adjust temperatures of cold rooms to meet the needs of different
goods
- RDC
o Manufacturers and other suppliers deliver goods to RDCs when they need to
be stored for a short time
o The goods are sorted into orders and redistributed
Think like Amazon’s warehouses
- Cash-and-carry Warehouse
o When retailers run out of goods, instead of waiting for delivery, retailers go
to cash-and-carry warehouses to buy goods. However, they do not offer
credit facilities and must bring their own transportation