unit 1
what can a business provide?
- goods [tangible]
- services [intangible]
why are businesses set up?
- to provide a service / sell goods
- to distribute goods to other businesses
- to benefit others / non profit reasons
- because they see a business opertunity
what is the primary sector?
- produces raw materials
- natural resources
- extracted from ground
- can be grown
- can be collected
what is the secondary sector?
- manufacturs goods
- turns raw materials into finished goods
what is the tertiary sector?
- provides services for other businesses or consumers
can a business be in only one sector?
no; they can be in multiple
what is enterprise?
- being able to identify new business oppertunities and to take advantage of them
- involves starting a business or helping an existing business expand
- risk of failure
- reward of profit
what is an entrepreneur?
- a risk taker
- organised
- innovative
why might someone become an entrepreneur?
- financial reasons [earn more money than they previously did]
- gap in the market [useful good / service that no business is providing]
- being their own boss [easier to fit work around their schedule]
- follow an interest [gives a person job satisfaction]
- dissatisfied with their current job [more motivation to work]
what are the factors of production?
- land
- labour
- capital
- enterprise
what is land?
- non renewable and renewable resources
- extraction of materials by mining
- water
- animals
- usually scarce; not enough to satisfy everyones demands
what is labour?
- work done by people contributing to the production process
- different levels of education / experience / training which makes some peoples work more valuable to productive
what is capital?
- equipment / factories / schools that help to produce goods / services
- capital had to be made first [before land]
what is enterprise? fop
- entrepreneurs who take risks and create things from the other three factors of production
what is oppertunity cost?
- the benfit thats given up in order to do something else
- puts value on the product / business decision based on what they had to give up to make it
what is a sole trader?
only one owner of a business
what are the advantages of a sole trader?
- easy to set up
- own boss
- you can decide what happens to any profit
what are the disadvantages of being a sole trader?
- long hours of work / not many holidays
- unlimited liability [you are liable for paying back any debts]
- unincorporated [business doesnt have a seperate legal identity; if sued your sued personally]
- hard to raise money / get a loan [banks view st as risky so you often have to rely on own savings or family and friends]
what is a partnership?
- between 2-20 partners
- each partner has equal say on decisions / profits unless there is a deed of partnership
what are the advantages of a partnership?
- more ideas
- greater range of skills / expertise
- more people to share the work
- grow faster [more money can be put into the business]
what are the disadvantages of a partnership?
- each partner is legally responsible for what all partners do
- most have unlimited liability
- not the only boss [more disagreements which could lead to conflict]
- profit is shared [less money for themselves]
what is a limited structure?
- two types : public and private
- more expensive
- less financial risk to the owners
- incorporated [seperate legal identity from the owners: money/property etc belongs to the company]
- limited liability [company is liable; only risk is losing the money you invested]
- owned by shareholders [more shares means more control]
what is a private limited company?
- ltd
- shares are only sold if the shareholders agree
- ownership is restricted
what are the advantages of a ltd?
- limited liability
- incorporated [company can continue trading even if a shareholder dies]
- easier to get a loan / mortgage
- control [all shareholders have to agree; how the business is managed and how many people get to share the profits]
what are the disadvantages of an ltd?
- expensive to set up [legal paperwork]
- legally obliged to publish its accounts every year
what is a public limited company?
- plc
- shares are traded on stock exchange [bought and sold by anyone]
- turn public because they want to expand
what are the advantages of a plc?
- more capital can be raised
- expanison
- limited liability
- incorporated
what are the disadvantages of a plc?
- hard to get shareholders to agree on how the business is run [very little say unless you have lots of shares]
- easy for someone to buy enough shares to take over the company
- accounts are public [competitors can see if your struggling]
- more shareholders [more share of profits]