AQA Business BUSS1 AS

Entrepreneur - Takes calculated risks when deciding on setting up a biz venture in pursuit of an idea

Role:

• Combine factors of production (land,labour,capital) to produce product/service that adds value
• Sources finance
• Balance risks - decisions
• Uses skills - profitable biz

Frequent characteristics:

• Driven and keen to succeed
• Problem solver
• Calculated risk taker
• Passionate
• Able to learn from mistakes

Motivation and Objectives:

• PIGSS - Profit, Image, Growth, Service, Survival

Government support:

• Increased funding to schools - raise awareness
• Business Link
• Government grants
• Princes Trust

Sources of ideas:

• Need for new product/service
• Gap in market
• Copycat (another area)
• Improving

Identify:

• Small budget market research (Yellow Pages)
• Personal exp
• Observation
• Knowledge/skills

Franchise is established when another business (franchisor) gives the right to supply its product/service to another business (franchisee)

Types of Franchises = Agency, Licensing, dealership/distrubutor, business format

Franchisee Benefits:

• Lower risk
• Support

Franchisee Disads:

• Costs may be higher than expected (royalty payment)
• Lower rewards compared to starting under own name
• Brand damage issue
• Less independence with decisions

Franchisor benefits:

• Easier to grow brand
• Financial reward - royalty payments

Franchisor disads:

• Reputation may be damaged
• Profit is shared

Operating as a Franchise, the biz benefits from trading under est brand name. Gives firm greater recognition. Advertising allows franchisee to benefit from marketing that they couldn't afford by themselves, which leads to potential growth.

Copyright - 70 years after death of author, legal protection against copying for authors, composers and artists. Holder is able to charge a licence fee

Patent - Official doc granting holder the right to be only user/producer. Has to be new.

Benefits:

• No close competition for 20 years
• Profits earned can be used in future
• Sold, rented or licensed
• Small biz may be brought be larger biz for patent

Disads:

• Expensive and time consuming
• Legal costs

Trademark - Renewed every 10 years, creates USP, e.g Nike

Added Value = Inputs and transforming them into outputs that can be sold for profit

Primary = Extracting raw materials

Secondary = Manufacturing materials into finished goods

Tertiary = Selling goods (retail)

Biz plan:

• Clarify idea, gain finance
• Summary of biz, CV, SMART, MR, BE, sources of finance, proposed budgets
• Banks, managers, biz link, accountants
• Has ads/disads

Random - electoral registar, name hat

Stratified random - similar characteristics then random

Systematic - System

Quota sample - Set # of peeps from each group

Cluser sample - based on geographical location

Factors effecting choice sample:

• Target market
• Finance
• Time
• Product itself
• Risk involved

Market share = proportion of total sales of product achieved by a firm = last/whole x 100

Market size = Measurement by volume of value of the total sales of a product = whole + estimated increase amount

Market growth = % change in sales by volume or value over a specificc time period = New-old/old x 100

Unlimted liability = personal possesions of owner must be used

Limited liability = only owners investment in the business is at risk

Types of VC:

• Raw materials
• Wages (hour, day or week)
• Power to make product

Types of FC:                                      Total costs = FC + VC

• Rent
• Salaries (monthly)
• Marketing expenses
• Lighting/heating
• Administration

Total Rev = Price x Quantity # of units sold

Total Profit = TR - TC

BE = # of units needed to be sold in order for TR to = TC

BE = FC/P-VC OR FC/CPU

CPU = P/V.CPU

Contribution = Difference between the selling price per unit and the variable cost per unit

Margin of safety = Difference between the current level of sales and the BE level of sales. How much sales can fall before a biz reaches BE point

BE by volume = units. BE by value = £

BE graph:

• MoS
• SR
• FC + VC + TC
• BE Point

Ads:

• Simple
• Useful - produce
• What-if is possible
• Linked to MR predict

Disads:

• Figures estimates
• FC may not stay the same (increase/decrease at some point)
• Assumes all output sold
• VC are unlikely to stay the same

Net cash flow = Cash inflows - Cash outflows

Closing balance = Opening balance

Opening balance = Opening balance + Net cash flow

Total outflows = Materials + Wages + Other costs

Net monthly balance = Total inflows + Total outflows

Closing balance = Opening balance + net monthly balance

Types of budgets:

• Sales/Income budget
• Expenditure budget (spending limits)
• Profit budget

Budget = ensure no department has an overspend, sets targets, delegates spending power.

Budget process = Set clear objectives year, budget for major cost areas

Advantages:

• Measure performance, prove motivational, departments accountable, greater control/monitor progress

Disads:

• NEW biz lack exp in setting realistic budgets, costs can change, inaccurate = demotivation
  

Good and effective businesses will be SMART:

• Specific
• Measurable
• Achievable/Agreed
• Realistic
• Time bound/specific

Possible causes of business failure:

• Lack of biz management skills
• Insufficient finance
• Poor location
• Poor planning
• External factors - competition, increased costs, changes in consumer tastes, new tech