AQA GCSE Business Studies. Unit 1: Business In The Real World Knowledge Organiser.

Goods, Services. Needs & Wants Business Ownership Structures Public Limited Companies How can a business measure success?
• Goods – physical (tangible) products such as burgers, cars, laptops. Sole Trader •Profit, number of stores, customer satisfaction, number
Advantages Disadvantages
• Services – non-physical items such as hairdressing, NHS, banks, of customers, reputation, number of items sold, market
insurance. Advantages Disadvantages •Limited liability. •It is expensive to set up a Plc, share.
• Needs – essential for us to live. •You make all the decisions. •Unlimited liability. •Can be easier to raise capital at least £50,000 of share capital
• Wants – things which we desire. (money) as the business can has to be available and legal Factors influencing business location
•You have total control – you •Access to capital (money) – can
decide on the direction of the be harder to get loans as there is release new shares for individu- paperwork needs to be pro- •Proximity to target market, cost, availability of raw
Four Factors Of Production als to purchase – anyone can duced. materials, availability of labour, infrastructure in area,
business. only one person – limits the op-
• Land - A business needs land or a building. purchase shares in a PLC. •The company has to publish its competition.
•You keep all the profits. portunities for growth.
• Labour - A business needs workers. •May not have skills in every •Usually well-known organisa- accounts every year, and these
•Can offer flexibility – e.g. work-
• Capital - A business needs money to start and run. tions with a good reputation, are available for the general Business Plans
ing hours. area to run business as well as it
• Enterprise - An entrepreneur is needed to bring it all together and run that makes it easier for them to public and competitors to see. Main sections: personal details, mission statement, aims
•You can keep your business could.
raise finance. Banks are more •Unwanted takeovers are possi- and objectives, details of product/service, market
the business. affairs private –you don’t need •If you don’t work you don’t
willing to lend to large, estab- ble as shares can be bought by research, production details, expected costs and profit,
to publish the accounts. earn (sickness, holidays etc).
lished companies. anyone; the shareholder who financial documents (break even, cash flow forecast,
Three Business Sectors •Easy to set up – no complicated
• Primary - Extraction of raw materials e.g farmer, coal mining. owns more than half the shares balance sheet, income statement).
• Secondary - Turing the raw materials extracted at the primary stage controls the business.
into finished goods. Partnership Why bother creating a business plan?
• Tertiary - Provide a service and sell the goods and services e.g. NHS, •Forces the owner to think carefully about what the
•Unlimited liability – if the business fails, you not only lose the
shops. Advantages Disadvantages business is going to do and what resources are needed.
money you invested, but your personal possessions can also be
•Extra capital – can invest own savings or if •Unlimited liability •Allows them to calculate how much capital is needed to
taken to repay any debt the business has.
Characteristics of an entrepreneur start the business.
applying for loans enables then to gain a •Disagreements – •Limited liability – you only lose the money that you invested. If
Entrepreneur - someone who takes a risk and starts a business. higher loan - more collateral to offer). may not always want •It is needed to convince banks and investors that the
the business fails and has debts, your personal possessions are
Determination, passion, creative, motivated, takes risk, organised •Different partners can bring different the same thing. business is viable. Without a business plan, banks will not
NOT at risk of being taken.
persistent. invest.
skills. •Profit needs to be
•You can keep your business affairs private shared. •If the idea is a bad idea, planning should help the owner
Aims and Objectives
Objectives of an entrepreneur (reasons for starting a business) –you don’t need to publish the accounts. or financial investors realise this – saves wasting time and
•Aim - An aim is general and is what a business hopes to achieve
• Be their own boss. as a result of its work
money.
• Flexible working hours. e.g. survive, maximize profit, grow, increase market share,
Private Limited Company (LTD) Expanding a business
• Pursue hobby/interest. improve customer satisfaction, be more ethical, increase
• Earn more money. Advantages Disadvantages Organic (internal) growth: franchising, open new stores,
shareholder dividends, break even.
• Identified a gap in the market. embrace e-commerce, outsource, develop new products.
•Limited liability. •More legal for- •Objectives - Objectives state in more detail how an aim will be
• Dissatisfied with current job. •Can be easier to raise capital (money) as the malities than achieved. Objectives should be SMART.
External (inorganic) growth: merger & takeovers.
business can release new shares for individuals sole trader and Specific, Measurable, Achievable Realistic, Time based.
Why do businesses face a constantly changing environment? to purchase – new shareholders usually have to partnership. E.g. To grow by opening 20 new stores within the next two
(EXTERNAL INFLUENCES ON A BUSINESS) Economies of scale (the benefits a business gets by
be approved by existing shareholders in a LTD. years.
• Political growing):
•Can’t be taken over (unlike PLC), as sharehold-
• Environmental Purchasing economies of scale, marketing economies of
ers must agree the sale of shares to others.
• Social (trends changing) scale, managerial economies of scale, financial economies
•Different shareholders could bring knowledge
of scale, technical economies of scale.
• Technology Why does a business have aims and objectives?
• Legislation (laws) •To co-ordinate business activity and give a sense of direction –
Diseconomies of scale (the negatives a business can
• Economy (unemployment, interest rates) everyone knows what they should be aiming for.
experience by growing in size):
• Competitors Unit 1 Formulas •Gives a common goal for workforce – can help to motivate and
•Sales Revenue = selling price per item x number sold Poor communication, lack of motivation, loss of direction
make a more efficient and productive workforce.
•Total variable costs = variable cost per item x number sold and co-ordination.
Stakeholders (anyone who is interested or affected by what a business •Helps with decision making – all decisions made by
does). •Total costs = fixed costs + total variable costs departments should help to work towards the business’s aims
• Owners, employees, customers, local community, suppliers, •Profit = sales revenue – total costs and objectives.
government etc. •Cost per unit = total costs ÷ number sold •Act as a yardstick (benchmark) to measure performance –
• Stakeholders sometimes have conflicting views and can influence the •Percentage change = change (difference) ÷ original amount *100 have we done/achieved the objectives. Business can investigate
decisions a business makes. successes or failures and learn from this.