N5 BUSINESS MANAGEMENT Unit 1 Understanding Business.
-
Upload
donald-lang -
Category
Documents
-
view
214 -
download
1
Transcript of N5 BUSINESS MANAGEMENT Unit 1 Understanding Business.
N5 BUSINESS N5 BUSINESS MANAGEMENMANAGEMEN
TTUnit 1
Understanding Business
EXTERNAL FACTORS•political •economic •social •technological •environmental •competitive INTERNAL FACTORS•How they affect the operation of and decisions made in the organisations listed above; the main ones being: •employees/staff •finance•management •technological systems STAKEHOLDERS •owners •shareholders •employees •banks •customers •suppliers •local community •pressure groups •local and national government
ROLE OF BUSINESS IN SOCIETY •how businesses satisfy human wants and create wealth •Factors of production and creating wealth•how businesses operate in different sectors of industry •the different sectors of the economyCUSTOMER SATISFACTION•how businesses maximise customer service •why customer service is important to business success TYPES OF BUSINESS ORGANISATIONS•Their differing aims, objectives, sources of finance, industrial and economic sectors they operate in •sole trader •partnerships •private limited company •social enterprises •charities •public organisations •how enterprising skills and qualities help business development OBJECTIVES•Profit, provision of a service, social responsibility, survival, customer satisfaction, market share, enterprise
Role of Business in Role of Business in SocietySociety
• Business provides us with most of the things we use on a daily basis.
Needs and WantsNeeds and Wants• Needs are things we can not do with out
o Watero Basic foodo Heato Shelter
• Wants can be few or endless – we can live without them but would rather not!o Mobileso Tvso Interneto Expensive foods and clothing
Goods and services Goods and services • A good is something you can see and touch
• A good is broken into o Durable (like a washing machine)o Non-durable (like a hamburger)
• Services are you can’t see, touch or pick upo Hotelso Airplane travelo Holidays
Providing both Providing both • Sometimes you just want a sandwich or pasty
from a shop – that is a good
• Sometimes you want it heated, or to sit at a table – that is a service
7
Factors of productionFactors of productionResources 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/machinery• ENTERPRISE – idea provided by the owner
8
LANDLAND Farmland – crops,animals
Buildings – land needed for housing, businesses
Water
Coal-mining to provide heat oil/gas-refineries
9
LABOURLABOURLabour is physical and mental effort.
People who use mental effort include:• Teachers• Bankers
People who use physical effort include:• Assembly workers, eg a car production
line• A baker – mixing of ingredients to make
bread and cakes
10
CAPITALCAPITALCapital is the money and the things that can be purchased with money to make and sell goods and services.
11
ENTERPRISEENTERPRISEEnterprise means having an idea for a new business and taking risks with the other factors of production to make the business a success
12
CREATING WEALTHCREATING WEALTHCreating wealth occurs at each stage of the
production process.
Value is added by each producer eg o miller adds to the value of the wheat by
processing ito 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
13
• Wool prices are about 50 pence per kilogram and for most farmers the value of the wool does not cover the cost of shearing.
Finished product - £55!
Sectors of the Sectors of the EconomyEconomy
• The economy consists of 3 different sectorso Privateo Publico Third or Voluntary Sector
The Private SectorThe Private Sector• The Private sector is made up of
businesses large and small that belong to individuals. These businesses are concerned with o Increasing profito Increasing market shareo Adding value to their goods and serviceso Increasing wealth
The Private Sector is The Private Sector is made up of different made up of different
types of businesstypes of business• Sole Traders (eg David Graham Cycles)• Partnerships (eg MacPhee and Partners)• Private Limited Companies (eg M&Co)• Public Limited Companies (eg Tesco plc)
The Public SectorThe Public Sector• The public sector is used to deliver services and
goods to a wide number of people in a society.• The public sector of the economy is owned and
controlled by the government and local councils. It provides services such as schools, hospitals, the armed forces and social services.
• These organisations are funded by taxes, eg corporation tax, income tax, council tax
The Public Sector The Public Sector consists of:consists of:
• National Governmento This would include the British or UK government as well as the Scottish
Government
• Local Governmento This would include both councils such as Argyll-Bute or Stirling and
towns such as Oban
The Third SectorThe Third Sector• Non-Profit making Organisations
• Social Enterprise
The Third SectorThe Third Sector• This sector is about delivering goods and services
that neither businesses nor the public sector covers
• This sector looks for sponsorship for its capital and volunteers for labour
The Third sectorThe Third sector• Non- profit organisations
o Charitieso Voluntary organisations
• Social Enterpriseso have a main social aim rather than profit but are run in a business like
wayo at least 50% of the profit must be invested into meeting the stated aim
of the enterprise
http://www.socialenterpriselive.com/se100/company-story/20100521/wrappers-delight
The 3 Sectors of The 3 Sectors of IndustryIndustry
oPrimaryoSecondaryoTertiary
The Primary SectorThe Primary SectorThis is EXTRACTING RAW MATERIALSoExtraction industries eg mining or quarryingoFarming oOil and energy extractionoFishingoForestry
• Sometimes an economy based on this sector can be very successful – think of oil based economies.
• Sometimes the primary sector needs very few people and all the products are exported.
The Secondary SectorThe Secondary Sector• This is MANUFACTURING
o Wealth creation at each stage is very higho This is taking materials from the primary sector and processing
themo White goods, clothing, cars, TV’s, yoghurt, bread
o When countries move from primary to secondary sectors the change in wealth can be huge
The Tertiary SectorThe Tertiary SectorThis is the SERVICE SECTOR. •Banking, medicine, travel, beauty, restaurants, government jobs, education are examples
•A country usually shifts to the tertiary sector when manufacturing is being carried out in a country where it is cheaper.
Customer SatisfactionCustomer Satisfaction• Customers give a business money in return for
goods and services provided in a way that makes the customer happy
One off or single customer - a customer that may need a single item and will never
appear again
Repeat customer- a customer that needs a steady supply of
the same or similar goods
Why is Customer Why is Customer Service Important?Service Important?
• You will gain customer loyalty – customers will keep returning and tell other people – free advertising
• Increased sales and profits• A good reputation – your customers say
positive things about you• Increased competitiveness – can compete
better with other organisations• Staff morale is better – they are happy at work
if they don’t have to constantly deal with unhappy customers
How businesses How businesses maximise Customer maximise Customer
Service:Service:• Providing the highest possible quality product • Making sure employees are trained – they should know
about products they are selling. Can be expensive• Having a customer care strategy – letting customers
know the level of service they should expect• Having a customer complaints procedure - aims to
make sure customer complaints are handled in the best possible way
• Having an after-sales service - opportunity to ask questions about their purchase after it has been bought
• Provide guarantees – eg replacement parts within a year of purchase
• Refund and exchange policy – all staff should know about the policy
Types of Business Types of Business OrganisationOrganisation
30
Private Sector Private Sector BusinessesBusinesses
31
Sole TraderSole TraderFEATURES OF SOLE TRADER
• Aims is to make a profit• Business owned and often run by one person• May employ other people in the business• Tend to be small businesses
Examples: Small shops, Car mechanics, Flower shop
Can you name 3 sole trader businesses in Oban?
Auley’s Bar, David Graham Cycles.
32
Sole TraderSole TraderADVANTAGES:
• 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.
33
PartnershipPartnershipFEATURES OF PARTNERSHIP
• Aim is to make a profit• Business between two and twenty partners• Partners usually enter into a legal agreement
called a Partnership Agreement which stateso States share of profito Which partner has most responsibility
• Partners may invest different amounts of money
• This will affect their share of profitExamples: Dentists, vets and lawyers.Can you name 3 partnership businesses in Oban?
Oban Chocolate, MacCamley and Laird, Stevenson Kennedy (lawyers)
34
PartnershipPartnershipADVANTAGES:
• 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.
35
What are Shares?What are Shares?• Companies are owned by people who
are shareholders
• Anyone over 18 can buy shares
• Shareholders are given a share of any company profits
• The share of profits is called a dividend and is payable once or twice yearly
36
Private Limited Private Limited CompanyCompany
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?
M&Co, MacQueen Ltd, Beaver Timber Ltd,
37
Private Limited Private Limited CompanyCompany
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.
38
Public Sector Public Sector OrganisationsOrganisations
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
Can you give an example of a Public Ownership organisation in in Oban?
Local Government
39
Public Sector Public Sector OrganisationsOrganisations
ADVANTAGES:
• Less competition
DISADVANTAGES
• May have funding issues depending on the economy.
40
Third or Voluntary Third or Voluntary Sector OrganisationsSector Organisations
CHARITIESCharities exist for a variety of different causes. They aim
to raise money to fund research or help support those in need.
Use donations from the public Raise funds in other ways Do not make a profit Examples include Oxfam, RSPCA, and Save the
Children
41
Third or Voluntary Third or Voluntary Sector OrganisationsSector Organisations SOCIAL ENTERPRISESocial Enterprises are businesses that trade to tackle
social problems and improve life for the community. They make their money from selling goods and services but reinvest a large portion of their profits back into the business or local community.
Examples of Social Enterpriseo Atlantis Leisureo Phoenix Cinema
42
Enterprise and Enterprise and OrganisationsOrganisations
All organisations exist because someone had an idea and enterprising skills and attitudes!
An Entrepreneur is someone who
• Has an idea for a business venture • Is prepared to take another’s idea and develop it• Is prepared to provide finance to develop an idea• Is prepared to take a risk which will in turn result
in a new produce or service
43
Skills and qualities of an Skills and qualities of an
entrepreneurentrepreneur
An Entrepreneur needs the following skills and qualities:
44
Who are Who are entrepreneurs?entrepreneurs?
• Richard Branson• Linda Bennett• Michelle Mone• Alan Sugar• Fraser Docherty
Dragon’s Den team:• Deborah Meaden• Duncan Bannatyne• Peter Jones• Kelly Hoppen• Piers Linney
Business ObjectivesBusiness ObjectivesSurvival This means to continue trading and it is often the first
objective a business has.
Profit This means to have more income than costs. It is the main objective of any business in the private sector.
Provision of a Service
To provide people with a service they want. An example could be a government hospital with the aim of providing health care.
Customer Satisfaction
To make customers happy and encourage them to make repeat purchases.
Enterprise This means to combine resources to produce a prodcut that customers want. It might involove a business developing a new idea and trying to satisfy the wants of customers in a different way- maybe by providing a new product.
Social Responsibility
To be seen as helping society, by improving the environment, creating jobs, promoting education.
Market Share This can mean two things• Increase market share• Become a market leader
Business InfluencesBusiness Influences• There are a number of factors which influence
how a business operates
• External Factors – things outside the business
• Internal Factors – things inside the business
External Factors External Factors (PESTEC)(PESTEC)
PoliticalPolitical• The Government can introduce laws that affect
every business or just some businesses.
• Exampleso Minimum wage – this can cost an organisation moneyo Smoking ban – affected particularly pubs, causing many to close
EconomicEconomic• This refers to changes to the economy during
periods of boom and slump which can affect busiensses
• Exampleo During a boom, business do well and make their biggest profitso During a slump or recession, the opposite happens. Customers cannot
afford to spend so much money
SocialSocial• This refers to the structure of the population,
peoples tastes and different working practices
• Exampleo Changes in attitudes to working women – has meant more women in
the workforce than, for example, 50 years agoo Changes in fashion – what people want to buy can change very quickly
TechnologicalTechnological• Businesses must keep up with changes in
technology. The introduction of the internet and e-commerce has revolutionised shopping in this country.
• Exampleo Increase in the number of on-line retailers like Amazono Has also changed the way people in businesses communicate with
each other – can be expensive for organisations to keep up with developments
EnvironmentalEnvironmental• This can refer to businesses making changes to
their practices to ensure they are more environmentally friendly or it could refer to the fact that changes in the weather can affect what we buy or sell
• Exampleo Poor weather can lead to crop damageo Extremely hot summers can increase demand for certain products eg
ice creamo Businesses, like everyone else, must ensure they increase the amount
they recycle
CompetitionCompetition• All businesses face competition from other
businesses – this can greatly influence the success or otherwise of an organisation
• Exampleo If a competitor lowers prices, other may have to do so in order to
maintain sales eg petrol prices
Internal FactorsInternal Factors• Internal factors are events or situations within the
business that affect its overall performance. These can be positive or negative
FinanceFinance• This refers to the availability or lack of finance or
money
• Exampleo If there is no finance, a new machine cannot be boughto An organisation can’t run an advertising campaign for their new
productso They may have to take out an expensive loan
TechnologyTechnology• Businesses can fail if they do not have access to
up-to-date technology or if their staff are not trained properly in the use of the technology.
• Exampleo Business who invest in new technology to carry out processes or
communicate with customers have the competitive edge over other organisations
o IT such as computers, mobile devices allow organisations to keep in touch effectively with customers and employees
Human ResourcesHuman Resources• This refers to the staff in the organisation. Well-
trained staff are more productive and have better relations with customers
• Exampleo Staff who feel they have been poorly treated may take industrial action
which will adversely affect the organisationo Well-trained staff can produce high quality products and deal properly
with customers which will give the organisation a good reputation.
ManagementManagement• Managers are very important members of staff.
As they are the ones who make most of the decisions, they can greatly influence the success or otherwise of the organisation.
• Exampleo Good managers will motivate the staff and make them work hard
STAKEHOLDERSSTAKEHOLDERS• A stakeholder is an individual or group of people
who have an interest in an organisation and can influence it in different ways
60
Stakeholders – Stakeholders –
Interest and InfluenceInterest and Influence
Can change amount of tax due
Makes sure tax laws are followed
Inland Revenue
Can work hard or not. Can take action or leave
Want job security, good pay and conditions
Employees
Make the main decisions
Successful businessHealthy profits
Owner
Can buy or not buyCan complain
Want good service/quality goods reasonable prices
Customer
Influence InterestStakeholder
61
Stakeholders – Stakeholders –
Interest and InfluenceInterest and Influence
Can alter interest ratesCan lend or not lend
Want to be repaid loansBanks
Can decide not to supply. Can change prices
Want repeat ordersWant to be paid on time
Suppliers
Can vote at AGMCan buy or sell shares
Want to receive good dividends.
Shareholders
Make decisions affecting how well business performs
Want job security, good salary and promotion
Managers
Influence InterestStakeholder
62
Stakeholders – Stakeholders –
Interest and InfluenceInterest and Influence
Can change tax rateCan change the law
Want taxes to be paidWant laws to be followed
National government
Can refuse or grant planning permissionClose down businesses
Want jobs in the local areaWant businesses to invest in the local area
Local government
Can hold demonstrations to raise awareness
Support and promote a cause eg maintain green belt
Pressure Groups
Can complain to local council or protest eg write to newspaper
Want jobs in the local areaWant businesses to be socially responsible
Local Community
Influence InterestStakeholder