Transcript Business Management
Business Management
Unit 1 1.1 - What do businesses do?
1
UNIT 1.1 – What do businesses do?
In this Unit you will find out about:
Goods and services Needs and Wants Business types and sizes Sectors of the Economy and Industry Production and Consumption Creating Wealth 2
What are goods and services?
Businesses make goods Some examples of goods made
Computers
Cars Washing Machines
Mobile phones Sweets Clothes Seafood DVD players I-pods Businesses provide services Some examples of services provided
Banking
Insurance Education
Hairdressing Public transport Entertainment – cinema
3
Goods and services can be described as
Tangible
goods – can be seen, touched and handled –
eg washing machine, car Intangible
goods – cannot be touched or handled – eg public transport, hair dressing
4
Goods and services can be described as
Durable
goods and services – long lasting –
eg clothes, education Non-durable
goods and services – used up quickly – eg sweets, cinema
5
WHAT ARE CAPITAL AND CONSUMER GOODS?
Capital goods
Goods used by a business to make consumer goods and other capital goods
Consumer goods
Goods sold to people (ie consumers – us) for their own use 6
Types of business organisation
Sole Trader Partnership Types of business Private Limited Company Public Limited Company Public Ownership 7
Sole Trader
FEATURES OF SOLE TRADER
Aims is to make a profit Business May
owned employ
and often
run
by one person other people in the business Tend to be
small
businesses
Albany Stores, Esplanade Post Office, Flower basket, 8
Sole Trader
ADVANTAGES:
Owner keeps all the profits Owner controls all the decisions Easy to set up the business
DISADVANTAGES
Owner bears all the responsibilities If owner cannot work the business may suffer – lack of cash Owner may have difficulty obtaining finance Owner has unlimited liability
9
Partnership
FEATURES OF PARTNERSHIP
Aim is to make a profit Business between
two
and
twenty
partners Partners usually enter into a
legal agreement
Partnership Agreement which states
States share of profit Which partner has most responsibility called a
Partners may invest
different amounts
of money
This will affect their
share of profit
Examples: Dentists, vets and lawyers Can you name 3 partnership businesses in Oban?
Munros Garage, Shore Street Dentists, Oban Chocolate Company 10
Partnership
ADVANTAGES:
Partners can share workload according to skills Partnerships find it easier to raise finance than sole trader Risks are shared between partners – risk of poor profit
DISADVANTAGES
Profits shared between the partners – therefore smaller share More people to run business – risks of disagreement Partners usually has unlimited liability Legal agreement needs to be set up
11
Private Limited Company
FEATURES OF PRIVATE LIMITED COMPANY
Aim is to make a
profit
Name of the business will end with
Ltd
Owned by
shareholders
– minimum of
one
Shares in the company are
owned privately
Run by a
Board of Directors
Such companies are often
family businesses
Examples: MacQueen Bros had recently become a Private Ltd Company
Can you name 3 private limited companies in Oban?
Direct Footwear Services Ltd, MacQueen Ltd, Beaver Timber Ltd, 12
Private Limited Company
ADVANTAGES:
Owner keeps control of the business Private limited company can raise more finance that a smaller business Shareholders have limited liability
DISADVANTAGES
Profits shared between more people A legal agreement must be set up Shares cannot be sold to the public, so raising finance can be more difficult than for a public limited company
13
Public Limited Company (plc)
FEATURES OF A PUBLIC LIMITED COMPANY
Aim is to make a profit Name of the business will end with
plc
Owned by
shareholders
– minimum of Minimum share capital of
£50,000 two
Shares in the company can be
bought and sold
Stock Exchange
Run by a
Board of Directors
Examples: BP plc, on the
Can you name 3 public limited companies operating in Oban?
Woolworths plc, Boots plc, W H Smith plc 14
Public Limited Company (plc)
ADVANTAGES:
Public limited company can raise more finance that PLC can borrow more money Shareholders have limited liability
DISADVANTAGES
PLC has no control over who buys its shares Profits shared between many more people Expensive to set up Accounts must be published annually
15
Public Ownership
FEATURES OF A PUBLICLY OWNED ORGANISATION
Main aim is to provide a service Funded by
taxpayers
Controlled by
government
Provide
essential services
for the whole population
Non profit making
Examples: BBC , National Health Service, Education Services
Local Government, 16
Public Ownership
ADVANTAGES:
Less competition
DISADVANTAGES
May not be as profitable as private sector businesses.
17
Limited and Unlimited Liability
Unlimited liability
Sole trader or unlimited partners have full responsible for the debts of the business.
If the business does not have enough money to pay its debts the owners or partners must pay the debts from their own personal funds.
May result in the owners having to sell their own possessions to raise the money
Limited Liability In a Private or Public Limited company the shareholders liability is limited to the amount they have invested, or agreed to invest in the company.
The will not have to sell their own possessions to pay the debts of the
18
Limited Partnership
Your Internet task Use the Wikipedia website to research the term Limited Partnership Write you answer in Pupil Activity Task 20
19
Sizes of Business Organisations
Business organisations can be of different sizes
Small businesses
Often owned and run by one person
Or owned and run by a partnership
Sell goods or services locally
Employ fewer than 50 people
Eg hairdressers, electricians, computer trainers
20
Sizes of Business Organisations
They can be
Medium-sized Businesses
Owned and run by a group of people (eg partnerships, shareholders or directors)
Can sell goods and services locally and or nationally
Employ between 50 people and 250
Eg manufacturers – clothes, National car hire companies, theatres, insurance companies
21
Sizes of Business Organisations
They can be
Large Businesses
Owned by a large number of people eg shareholders and run by people appointed by them - directors
Produce and sell goods and services in several locations – often in several locations
Employ more 250 people – sometimes hundreds of thousands
Eg Car manufacturers – Ford, retail food outlets – Marks & Spencer, Banks, Oil companies
22
Sizes of Business Organisations
They can be
Charities
Aim to care for those in need or help
Use donations from the public
Raise funds in other ways
Do not make a profit
Examples include Oxfam, RSPCA, and Save the Children
23
Local/National Businesses
Features of Local business organisations
Small to medium sized Services local markets Employs small number of people Has only a few outlets
For example Mathesons Furniture MacQueen Bros Alba Features of National Business organisations
Have household names Easily recognised eg logos Employ large workforce Have branches/factories in major towns and cities For example Boots The Chemist River Island HMV
24
Multi-National businesses
Multi-national businesses sell goods or provide services worldwide and operate in more than one country For example Ford McDonalds Esso Shell Starbucks
25
SECTORS OF THE ECONOMY
The economy can be divided into 3 different sectors: Private –
owned by sole traders, partnerships, limited companies and public limited companies –
financed by and banks private monies from shareholders 26
SECTORS OF THE ECONOMY
The economy can be divided into 3 different sectors: Public –
Owned by the state
Financed by the state
For example - nationalised industries, local authorities, schools and hospitals
27
SECTORS OF THE ECONOMY
The economy can be divided into 3 different sectors: Voluntary –
owned by those taking part in the activities
administered by officials
financed by activities donations, gifts and fund raising 28
SECTORS OF INDUSTRY
Industry can be divided into 3 different sectors
Primary
Secondary
Tertiary
These divisions are defined according to the type of product or service produced
29
SECTORS OF INDUSTRY
PRIMARY SECTOR – agriculture, fishing, mining This involves the extraction of raw materials
Oil Production
Fishing
Forestry
Can you name any other extraction industries?
Coal, Quarrying 30
SECTORS OF INDUSTRY
SECONDARY SECTOR - manufacturing This involves the manufacture of goods
Car manufacturing
Engineering
Shipbuilding
Can you name any other manufacturing industries?
White goods – fridges etc 31
SECTORS OF INDUSTRY
TERTIARY SECTOR – service This involves the provision
Insurance
Hairdressing
Leisure
Public Transport
Education
Fire Service
of services
32
Difference between Needs and Wants As consumers, we buy the goods offered by a range of organisations/ businesses .
The following are examples of goods we buy
33
WHAT IS A NEED ?
A NEED is something an individual must have in order to survive – these are the basic needs or wants
Food
Shelter
Clothing
Drink
34
WHAT IS A WANT?
It is important to distinguish between what we need and what we want
I’ll tell you what I want, What I really, really want, So tell me what you want, What you really, really want....
35
WHAT IS A WANT ?
A WANT is something an individual would like to have, or wishes for – they are not essential for survival When a want is fulfilled it gives the consumer Satisfaction. Examples are:
I-pod
Sports Car
Video Camera
Expensive jewellery
36
HOW DOES A BUSINESS KNOW WHAT WE NEED OR WANT
A business will use Market research to identify what consumers need and want.
This information helps the business in decision making eg whether a new product/service should be developed
37
PRODUCTION AND CONSUMPTION
Production is the process of making goods so that they can either be consumed , or further processed before being consumed eg before a jumper can be knitted the farmer must produce the wool, the sheep is sheared, the wool is then washed spun, dyed, packaged and knitted into the final garment.
Consumption food.
is when the customer Purchases the goods or services produced by the business and uses the up eg non-durable goods or fresh
38
PRODUCT-LED AND MARKET-LED PRODUCTION
Products and services can be supplied to the market for a variety of reasons: Product-led – a business makes/produces goods and provides services, basically because they are good at it.
Market-led - a business makes/produces goods and provides services to meet identified consumers’ needs.
39
THE PRODUCTION PROCESS/CHAIN
The production process will follow several stages and involves the transformation of raw materials into finished articles:
INPUT – raw materials PROCESS – Manufacturing stages SOLD TO CUSTOMERS OUTPUT – Finished goods 40
Example of the production chain
The production of a cake for tea:
The Farmer – produces wheat The Miller – produces flour The baker – makes the cakes and adds the cream The retailer – sells the cakes to Mrs Stewart Mrs Stewart’s son eats the cakes
41
Another example of the production chain
The raw material could come from Australia, the
manufacturing process in Scotland and retailers world wide.
Farmers rear sheep to obtain wool Sheep sheared – wool - basic raw material produced Wool delivered to spinning factory Wool is washed, spun, dyed and packaged Wool delivered to textile company
Skilled workers use machinery to ‘knit’ the jumper Manufacturers package the final product Delivered to the retailers – world wide Retailer sells the jumper to the customer
This shows how various businesses meet each others’ needs in their attempt to produce a product for the consumer .
42
Factors of production
Resources required to produce goods and services can be divided into 4 main groups knows as the Factors of Production.
LAND – site of factory/premises LABOUR – people employed to produce the goods CAPITAL – money required to purchase ENTERPRISE – provided by the owner
43
CREATING WEALTH
Creating wealth occurs at each stage of the production Process.
Value is added by each producer eg
miller adds to the value of the wheat by processing it.
Baker adds to the value of the processed wheat by making it into cakes
The total value of the cake is much more than the value of the raw materials used in its production Therefore each stage creates more total wealth than the previous stage
44