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Business Studies Unit 1 by Mind Map: Business Studies Unit 1
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Business Studies Unit 1

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Types of Market Segmentation

Age

Gender

Social Class

Lifestyle

Geographic

Frequency of purchase

Sample- Represent the market. Equal proportions. The bigger the better!

Random Sample- each member of the target population has an equal chance of being chosen.

Quota sample- a fixed number of serveral different segments each sharing a common feature(e.g age,gender)

Simple - Random (names from a hat)

Stratified - Split into groups , random selection from the groups

Legal Structure of a Business

Sole Trader- Unlimited Liability

+Freedom (own boss)

+Keep all profit

+Less Paperwork

+No legal costs

-Risk

-Work long hours

Limited Skills

No cover if ill

Unlimited Liablitiy

Partnerships e.g Doctors and Solicitors

More start up capital

More ideas

More skills

Can cover when ill

Unlimited Liablility

risk of conflict

liable for decisions made by partners

Private Ltd ( LTD )

Often Small family businesses

Dont have share prices on stock exchange

Public Ltd (PLC)

Sell shares to public

shares freely transferable

Need over 50k in share capital to start

The supply chain

Starts with Raw Materials

Moves to manufactoring, Distribution to shops, Retailers sell to customers

Value is added at each stage e.g a Bead making factory turns plastic into beads, then the handbag manufacorer uses the beads for decoration

Protecting business models

Patent - Protects the product

Trademark - Protects the Logo or slogan

Copyrights- Copy written work and music.

Franchises

Franchisor

Saves wage cost

Get a share of profits

Fast growth

Reduced risk

Share Rewards

Can damage reputation

Franchisee

Reputation Name/Idea

Marketing/Advertising done nationally

Training provided

Leese machinery/equipment

Banks more willing to lend

Pay to use name

Share Profits

Bad reputation spreads

Follow rules of franchisor

Market Research

Why?

Spot Oportunities

Set targets

Check progress

Qualitive - Closed - Statistics

Quantative - Open- Personal Opinions

Primary Research (interview, questionaire, focus groups.)

Specific

Exclusive

Up to date

Expensive

Hard work

Slow

Secondary Research (second hand)

Fast

Cheap

Not exclusive

Out of date

errors

Not enough research can increase the risk of failing. A business must know what the market want

Location

Cost Benefti Analysis - Weighing up the costs of a business against potential benefits.

Break even to measure this, Contribution per unit = Selling price per unit - variable costs per unit, Break even = Fixed costs divided by contribution per unit, (level of sales to cover costs)

Manufactoring businesses providing bulky finished products need to be located near to customers.

Manufactoring businesses starting with heavy raw materials producing lightweight end products need to be located near raw materials.

Good location needs a good infrastrucute (motorways, rail links, ports and airports)

required for import of raw materials, transport of finish products and getting staff to work

Must be located near support services (banking, IT assistance, engineering assistance)

Must be near College/Universities, Affordable housing, schools, medical, leisure, room for expansion.

Government provide grants, loans , equity investment and financial guidance as incentives for some areas.

Located near owners house

Some areas have better image e.g London/Paris for fashion.

Competition

However internet made locations more flexible.

Part time stff

Cheaper

More flexible to demand

Better work/life balance

Wider range of skills

Hard to find

Less loyal

Less dedicated

Less exp

Staff

Important to have a balance of full/part time.

New starting businesses should have part time staff until demand is stable

Permanent Staff have an ongoing contractn and garunteed salary. Severence pay

Tempory- Fixed period of time (e.g 6months) Contracts can be renewed

Business recruitment agencies used to advertise and find suitable candidates. Charge fee for service

Contractors used when businesses require specific specialist skill (short term basis) e.g cleaning, accountancy and building.

Some businesses find it difficult to attract the right candidates as they cannot offer the salaries larger companies offer.

Can be sued if candidates declined for race,sex or disabilities

Business Plans

To get financial backing

Banks/Financers ask for one before investing.

Helps entrepeneur asses businesses strengths and weaknesses

Comparable to real performance

Areas of a Business Plan

Executive Summary - General overview (key points)

Business Summary - Type of business/products/serive provided. Future/ Legal.

Production Plan - How many products produced.

Marketing Plan - Defines the market, market research , promotions (USP)

Human Resources - Qualifications and exp of entrepeneur.

Operations plan - Location, own property/ machinery?

Financial Plan - Financial forecasts, break even/cash flow forcast.

Advice on creating a business plan

Business link, banks, websites, sample business plans, consultants and accountants.

Break even Analysis

Easy

Quick

forcast variations

persuade banks

if data is wrong results will be wrong

Assumes all products will be sold

Assumes variable costs rise steadily

Cash Flow (Not the same as profit)

Selling something on credit counts as profit now but it wont count as cash flow until it enters the account

Improve cash flow by:

Hold less stock

Give customers shorter credit periods

Get suppliers to give you longer credit periods

Sell equipment and lease/rent it.

Can lead to false assumptions

Machinery can break down

budgets

Income

Expenditure

Profit

Help control income/expenditure

Help deligate authority

Help control/ motivate staff

If budget is wrong actual results will follow

Lead to false confidence

Doesnt account for machinery break down etc