Business
What it means to be enterprising
willing to take risks for business succes. being able to spot a good business opportunity and hav the vision and drive to make the business succeed. preapared to take calculated risks, show inititave and have energy.
characteristics of entrepeneur
•creative/innovative/comes up with original ideas
•good decision maker
•persuasive
why does the government encourage enterprise
•reduces unemployment so they have less to pay out in benefits
•increases tax revenue so more to spend
•new ideas make country more competitive and gives consumers more choice
reason for setting up business
•person has an idea they think will sell
•there is a gap in the market
•a person wishes to be independent and be their own boss/make own decisions
•turn hobby into a career
•wants to make money and keep profit for themselves, higher standard of living
nature of risk taking
•losing money
•losing time
reward of risk taking
•making profits
•satisfaction
business resources (cell?)
land, labour, enterprise, capital
land
land which business is built on and all natural resources that come from the land
labour
human resources (workers) that are used in the production process. greater skill level, greater productivity.
capital
money used to set up a business and buy the man made resources.
enterprise
the person who sets up the business. generally aim to make a profit and willing to take risks.
micro firms
less than 10 employees. turnover of less than £1.7 million
small
between 10 and 49 employees. turnover of less than £5.6 million
medium
between 40 ans 249 employees. turnover of less than £22.8 million.
large
more than 249 employees. turnover of more than £22.8 million.
private sector
business owned and controlled by private individuals who in most situations aim to make a profit. the owner providesthe capital.
limited liability
if the business fails the owner only loses the amount of money they have put into the business. the owner and the business have seperate legal identitys. eg: private limited companies
unlimited liability
if the business is unsuccessful the owner have to pay all the debts including having to sell personal possessions. the owner and the business have the same legal identity. eg: sole traders
sole trader
a business owned and controlled by one person. the most common type of business organisation eg hair dressing
advantages of a sole trader
•make all the decisions
•keep all the profits
•easy/cheap to set up as there are no legal processes
disadvantages of sole traders
•long hours and hard work
•lack of specialisation
•lack of economies of sale
compared to ltd
•unlimited liability
partnership
a business owned and controlled by between 2 and 20 partners who contribute capital and expertise to the enterprise. deed of partner ships.
advantages of partnership
compared to sole trader
•more expertise
•shared responsibility and decision making.
•more specialisation as partners may bring different skills to the business.
compared to ltd
•financial information is more private
•it is easy to set up with few legal requirements
disadvantages of partnerships
compared to sole trader
•share the profits
•shared decision making
• if one partner is dishonest then all partners are held liable
compared to ltd
•unlimited liability
•lack of continuity
private limited company
owned by shareholders. controlled by board of directors. will be family or friends. shares are not available to everyone. LTD or limted will be included in the name.
advantages of a private limited company
compared to sole trader/partnership
•increased capital as shares can be sold to family and friends
•limited liability
•specialisation and division of labour
compared to a PLC
•more private in terms of disclosing information than a PLC
disadvantages of private limited company
compared to sole trader/partnership
•financial information no longer remains private as some of the accounts of the business have to be made public
•it is a longer and more costly process to form a limited company as documentation is required
•divorce if ownership from control. some of the owners might have little say in the running of the business.
compared to a PLC
•shares are not available to the public so the share capital is limited
public limited company
a business that is owned by shareholders and run by board of directors. shares are traded freely on the stock exchange.
advantages of a public limited company
compared to all other ownerships
•economies of scale
•easier to gain finance
•more publicity. increased awareness and corporate image.
advantages compared to a sole trader/partnership
•limited liability
•continuity
compared to LTD
•raise additional finance by selling shares on the stock exchange
disadvantages of public limited company
compared to all other business ownerships
•expensive to set up
•have to disclose more information
•more vulnerable to a takeover
•slow decison making
differences in ownership and control in a public and private limited company
•private limited company is family and friends and public limited company are members of the public.
•private limited company will normally have shareholders that run the company on the board whereas the public limited company is controlled by the Board of Directors on behalf of the shareholders.
franchises
franchise allows a person to set up a business selling a well-known set of products without the risk attached fo opening as a sole trader and having to establish themselves in the market. A FRANCHISOR GIVES PERMISSION TO A FRANCHISEE TO SET UP A BUSINESS USING AN ESTABLISHED NAME AND IDEA. the franchisees liability depends on whether they set up as a sole trader. partnership or limited company. Eg; McDonalds
advantages of a franchise to the franchisee
•reduces risks
•less capital investment
•the sole right to sell a well known set of products and brand in their particular area
•established product and repetition tyerefoe higher sales
disadvantages to the franchisee
•does not have complete control of the running of the business
•does not have the right to sell the business without the agreement of the franchisor
•cannot buy stock from other sources that may be cheaper
•royalties have to be paid to the franchisor
advantages to the franchisor
•easier and quicker to expand
•benefits from the economies of scale
•highly motivated franchisees
•reduced capital investment
disadvantages to the franchisor
•loses management of the day to day dunning of the outlet
•a poor franchisee can damage the reputation of the whole business