AQA GCSE Business Studies Study Guide and workbook Name:________________________ Unit 1 Setting up A Business:  Introduces the issues involved in setting up & running a business  Looks at what businesses do  Why they Succeed or Fail  Explores the different perspectives of the various stakeholders involved in a Business  1 hour examination, 60 marks, 40% of GCSE Topics: 1. Starting a Business Page 2 - 25  Starting A Business Enterprise  Setting Business Aims & Objectives  Business Planning  Choosing The Appropriate Legal Structure For The Business  Choosing The Location Of The Business 2. Marketing Page 26 - 38  Conducting Market Research With Limited Budgets  Using The Marketing Mix 3. Finance  Finance & Support For A Small Business  Financial Terms & Simple Calculations  Using Cash flow 4. People in Business  Recruiting  Motivating Staff  Protecting Staff Through Understanding Legislation 5. Operations Management  Production Methods For Manufacturing & Providing A Service  Customer Service 2 AQA GCSE Business Studies D Holland 1.Starting a Business:- Topics:-  Starting A Business Enterprise  Setting Business Aims & Objectives  Business Planning  Choosing The Appropriate Legal Structure For The Business  Choosing The Location Of The Business  How people start up a business  How they plan ahead  How they decide to locate a business Starting a Business Enterprise Topics:- You should understand what a business is and the reasons why  Reasons for starting a business businesses are set up. eg to produce goods, supply services,  Sources of business ideas distribute products etc. Businesses should include social enterprises.  How entrepreneurs look for a gap in the market You should understand the advantages and disadvantages of  How they identify a product idea or market niche operating as a franchisee, rather than setting up an independent  Advantages & disadvantages business.  How they plan ahead People who start up a business are called entrepreneurs Entrepreneurs= someone who is willing to take the risks involved in starting a business. Entrepreneurs believe that the rewards of starting a business are worth the risks & costs involved. Characteristics of Entrepreneurs:  Personal organisation.  Communication: written, oral, negotiating, interpersonal.  Numeracy: general math skills, collecting/recording/analysing/ presenting data.  ICT Skills: text/graphics manipulation, email & internet use  Team player & innovative (new/different)  Negotiation/leadership skills  Motivating others & decision making  Using initiative & adaptability  Optimistic, creative & confident. Reasons for Starting a Business:  Interest/hobby- make money  Self-satisfaction  Want to be own boss & make own decisions  Want to keep all the profits  Need a job (if start a business employed) & can hopefully make profit  Provide a service for others Entrepreneur Self-Assessment Test The Entrepreneur Self-Test was developed by the Chamber of Commerce to be used as a resource. It is not comprehensive or an exact evaluation but can provide you with an overall view of your entrepreneurial potential. This test assesses your character qualities, problem- solving methods, motivations, relational skills, business knowledge and support system known to be critical in successful entrepreneurship. Please answer the questions objectively to generate a realistic and useful interpretation. If you are able to answer “yes” to 18 of the questions below then you have the potential to successfully start your own business. If you answered less than 18 questions “yes” then you need to improve some of your own skills. It takes a variety of different skills to successfully run a business, so look at each question to which you answered “no” as an opportunity for improvement. 3 AQA GCSE Business Studies D Holland YES NO 1. Would others describe you as persistent? 2. Do you stay on task? 3. Do you remain optimistic even in unpleasant situations? 4. Are you self-motivated? 5. Are you innovative in finding solutions to problems and challenges? 6. Do you mind working hard if that is what it takes to complete the task? 7. Are you willing to make sacrifices to possibly gain lasting rewards? 8. Are you willing to work long, demanding hours? 9. Do you enjoy competition? 10. Do you have an innovative idea that you see a significant need for? 11. Can you make up your mind in a hurry if necessary? 12. Are you willing to take chances? 13. Are you adaptable to change? 14. Do you recover from set-backs by taking a different approach and trying again? 15. Do you relate well to people on different levels? 16. Do you get along well with others? 17. Can you lead and inspire others? 18. Do you take full responsibility for consequences? 19. Have you ever worked as a manager or supervisor? 20. Would your family and friends be supportive of your new venture? 21. Do you regularly network with others to gain information and guidance? 22. Do you have the emotional strength to withstand the stress? 23. Do you have sound financial knowledge of how a business operates? 24. Do you understand the basics of the balance sheet and income statement? 25. Can you effectively keep accurate notes and records? Social Enterprise= a business that is set up to help society rather than to make profit. Tip: to decide whether a business is successful or not look at their original aim, if to be a service or to make profit then decide. Business sectors- classified in terms of stage in production process PPrroodduuccttss Physical items can be consumer goods. Consumer goods can be provided for consumers, they may be single use like food (consumable goods) or durables like TV’s, fridges (durable goods). Business to GGooooddss SSeerrvviicceess business goods, called capital or producer goods, allow one business to help another business produce e.g. machinery. Services cannot be Physical Items Intangible seen, like a hair-cut or insurance or your car. Primary Sector: Use raw materials (1st stage of production) e.g. farms, fishing fleet. 4 AQA GCSE Business Studies D Holland Secondary Sector: Use primary resources & convert into products (2nd stage of production) e.g. manufacturers & printers. Tertiary Sector: Provide services e.g. schools, estate agents & delivery firms. Source of business ideas: -  May be own idea  Can be an expansion of an already existing idea - making sure it has a USP (Unique Selling Point)  Can be based on an already existing popular idea but can base your business in another part of business e.g. allowed to mix cereal in some stores idea came from Body Shop  Basing a business on an interest/hobby  Looking for a gap in the market & then basing the business on this  Noticing /growing trend in the market e.g. popularity of recycled products has increased lately.  Can establish a business by buying someone else’s idea- franchise e.g. pizza hut Adv: saves time, reduce risk of failure, support from franchiser More on Franchises later Disadv: dictated to by franchiser Need an Idea that:-  that can work  has a market  that you can provide or service  that you can meet your objectives Entrepreneurs conduct market research to find this out…… Market Research= is the process of gathering, analysing & presenting data relevant to marketing. Adv: highlighting market opportunities & preventing mistakes being made Disadv: entrepreneurs may not conduct enough research, funds limited, so limit research taken. Research:  Key features of market  Types of potential customers for the product  Likely competitors  Occurring trends in the market e.g. size of market may be measured by volume/amount of sales or value of sales (amount of money spent on products) Trends in the market:  Is the market as a whole growing? (e.g. size of market- online films & music, interest in environment & healthy eating)  Are particular parts of the market growing? (e.g. specific types of music)  Who is the main competition (Market share of competitors important) & what is your business USP Your business You are considering setting up a local business. You will need to invest £10000 in your business. You are quite rightly nervous about losing £10000 so you decide to carry out market research. Complete the table below to show what questions you would ask. 5 AQA GCSE Business Studies D Holland Type of business Question Reason for asking question Market share = is indicated by the sales of one product (sales levels) compared to the total market sales.  Is a niche emerging? -niche market is a small part of a bigger market e.g. shoes made of rubber rather than leather- for those who don’t like killing animals. Adv: niche markets are small, a new business will unlikely to be competing against a huge existing business. When conducting market research, entrepreneurs may conduct: Primary Market Research: involves gathering & analysing marketing data that has not been collected before. Secondary Market Research: involves gathering & analysing marketing data that has been collected already. Primary data is data you collect yourself. Secondary data is data that is already collected. A new chocolate bar is being developed. It is given to school children to test in a survey. Is this data being collected primary or secondary? Explain your answer. Give one advantage of collecting data this way. Give one disadvantage of collecting data this way. 6 AQA GCSE Business Studies D Holland Define the following terms Entrepreneur Social enterprise Products Consumer goods Durable goods Services Market research Primary market research Secondary market research Market share What is the difference between business in the primary, secondary and tertiary sectors? State three reasons why it is important for a business to have objectives? Describe characteristics of an entrepreneur. Setting Business Aims & Objectives: You should be aware of the main types of business aims, including: Topics:- survival, profit, growth, market share, customer satisfaction, ethical  Types of business objectives/aims and sustainable. You should be familiar with the role of objectives in  Purpose of setting objectives running a business and how they can be used to measure the  How a business might use objectives to measure it success success of a business. You should have an understanding of the  How stakeholders can influence business objectives importance of stakeholders in influencing the objectives of a small business. When one sets themselves objectives it easier to sort out their priorities & make decision e.g. how much time & effort to devote, prepare 7 AQA GCSE Business Studies D Holland themselves for possible future situations. Objective (Aim)= is a target that is set for a business to achieve.  Provides a focus for everything an entrepreneur does  Enables them to look back & see whether they have accomplished their aims.  Will be clear on exactly what the business is trying to achieve  Helps decision-making & establishing priorities  Helps investors to understand the direction in which the business is heading-helps them make their decisions (e.g. if they want to invest- helps attempt to raise money to set up a business  Provides a target so that everyone can compare the actual results with the planned results to decide how successful the business has been.  Motivates everyone connected to the business as they know what the business is trying to achieve & how they can measure their success. Typical of objectives for starting up a business Does it have…? Equipment (facilities) Money (finance) People (staff) Are the targets SMART(ER) OBJECTIVES ? (E= Extending/Evaluate) (R= Reviewed/re-evaluate) Are they strategic: long term & have a back-up plan?  Survival: Simply surviving is an achievement at first- to publicize businesses name, may be necessary to charge lower prices & make lower profits than entrepreneur would like to make in the long run.  Providing a good product: To prove an entrepreneurs self-satisfaction & to prove to others they can do it. Doing a good job, taking pride. Encourages a entrepreneur to try hard to make a business work.  Earning a profit: Entrepreneurs accept low profit in the short-run. In the long-run entrepreneurs want to make a decent amount of profit-essential to stay in business. Entrepreneurs idea have own ideas how to do this. For some a reasonable amount of profit to have a reasonable standard of living is enough. Others set ambitious targets & aim to make a large amount of money & then sell business & retire.  Customer Satisfaction: Want to achieve a particular level of customer satisfaction by providing better service or selling wider range of products than competitors- in long run helps make more profit- satisfied customers likely to comeback & buy more products they will also d word of mouth advertising for the business.  Market Share: Target of share of market they hope to achieve: market share measures the sales of one product or business as a percentage of the total market sales. Equation: sales of a product xx 110000 TToottaall mmaarrkkeett ssaalleess e.g. If your sales are £20,000 & the total market sales are £400,00 your market share is: ££2200,,000000 x 100 ££440000,,000000 =5%  Being Ethical: Decide what is right or wrong e.g. paying staff reasonable wages, treating suppliers & customers with respect & being honest to them about business. Unethical businesses may be criticised by the media & may lose customers. By being ethical Business may be getting favourable media coverage, using its ethical message in its marketing, so attracting customers, investors & employees.  Environmental & Sustainability targets: -make sure business activity does not harm environment; limit energy they use, limit carbon footprint, achieve recycling targets, reduce wastage, reuse supplies. May want resources from sustainable sources . 8 AQA GCSE Business Studies D Holland Private sector Organisations: are owned by individuals: -aim to make profit Public sector Organisations: are owned by the Government: - free service, non-profit making- aim to benefit particular cause that they were set up to help. TIP: always look at the objectives of the people starting up a business- only then can you make proper judgment whether or not they have succeeded. You may not be happy with £20,000 a year but someone may be. Objects allow an entrepreneur to measure their performance as: Provides point of focus & help them to make decision about what to do & to review how things are going. Enable them to make appropriate decision if things get bad. Help you to analyse the reasons if performance of business goes bad & helps find solutions. Help stop same mistake happening again. Helps time management. Helps analyse decision & their effectiveness & make future decisions. Stakeholders: are individuals & organisations that are affected by and affect the activities of a business. Include: owners, employees, buyers, suppliers, government, distributors & local community etc. All these groups will have their own objectives & these may influence the targets set by business. E.g. employees: want to grow a business so have promotion opportunities. They want to behave ethically- because that’s the sort of business they want to work for- these aims may affect the types of objectives the business sets. Supplier: want to be paid on time. So the business may target to pay bills on time. A small firm selling to a large market may have to accept the terms offered by the supermarket if it wants to succeed, this means buyers affect what realistic objectives a start-up business aims. Stakeholders influence a business:  Negotiation: Employers may demand for a better pay. Suppliers may want better terms & conditions.  Direct Action: Customers might soak up buying a product, employees may go on strike  Refusal to cooperate: local councils refuse to cooperate with a business if they do not like its behaviour. E.g. they could refuse planning permission. Employers can express their grief by not working hard. Voting: owners can have a vote on the actions an organisation takes. E.g. Two owners may out-vote another owners decision. Define the following terms Objective SMART target Private organisations Public organisations Stakeholders What is the difference objectives of survival, making a profit and providing a service? Explain how the objectives of being ethical and gaining market share may be aided by each other? 9 AQA GCSE Business Studies D Holland If total sales in a market was £1 million and one business had sales of £250,000. What would be the market share of that business? Business plan You need to understand how business planning assists in the setting up of a Topics: business and the raising of finance. You should know the main sections of a • the purpose of business planning business plan. You will not be expected to write a business plan. You need to • the main sections within a business start-up plan be aware of the risks faced by businesses and what can be done to minimise • uncertainty and risk for start-up businesses. risk. Business Plan: is a document setting out what the business does at present, plus what it intends to achieve in the future and how this will be accomplished. The plan will include marketing & financial plans. Business Planning: is the process of producing a business plan. - a plan beforehand of starting a business, helps remember what one wants to do & in which order they want to do it in. this is helpful to groups within & outside the business. Purpose of a Business Plan: a business plan states what a business is trying to achieve over the next few years & how it intends to accomplish these aims. Main sections within a business plan:  Background information on the founders & investors & their previous experience.  An analysis of the market & the firm’s position within it  The firms objectives  The firm’s plan on how it will compete  An explanation of how the business will compete against its rivals- how it will be competitive, and what it makes it better than the competition (USP)  An analysis of the financial position of the business, including forecasts of sales, profits & cash flows. Business planning  important when setting up a business  In order to anticipate any problems - if problems are identified beforehand then the stakeholders will be better at dealing with the problems.  Shows possible investors, an investor would want to see what the manager intends to with their business & when the investor will see a return on their investment & they would want to know why the mangers think the business will succeed. E.g. how much sales are expected to increase, what the profit target is & why they will attract customers.  But a business plan needs to be regularly reviewed & updated- as mangers need to know where their business is going & how it is going to get there. Conditions are always changing, with new laws, competitors & customer taste changing. Difficulties of Business planning:  Uncertainty- hard to predict accurately future sales figures & market events. Plans might not be totally accurate. Market conditions can change very quickly (e.g. a new competitor may set up), so pans can become easily out of date. A manager’s plan or target of a particular market may be unsuccessful. Although business plans reduce the risks of doing something wrong it does not remove the risk altogether.  Lack of experience- people starting a business may not have the skills to plan ahead effectively- they may not effectively imagine changes in the future, although they may be excellent at doing their job. Bigger businesses can use experts & have access to more resources e.g. expensive market research, start-up business may lack these advantages. Risk: is the possibility of something going wrong. Uncertainty: is something that cannot be sure will happen. Business plan helps entrepreneurs & stakeholders plan ahead, there are risks when starting up ( e.g. a business may not succeed a an entrepreneur may lose their original investment) a business plan does not guarantee success, they can reflect their business activities to their business plan to ensure they are on track. Business plan reduce risks: To try to reduce the risk of business plans going wrong entrepreneurs can:  Research market thoroughly  Talk to experts & consultants (if they can afford it) 10 AQA GCSE Business Studies D Holland