Buiness studies notes

Just some stuff you need to know

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  • Created on: 18-05-13 16:21
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Businesses exist to provide goods or services.
Goods are physical products - such as burgers or cars.
Services are non-physical items - such as hairdressing.
A market is any place where buyers and sellers meet to trade
Primary production: this involves acquiring raw materials. For
example, metals and coal have to be mined.
Secondary production: this is the manufacturing and assembly
process. It involves converting raw materials into components, for
example, making plastics from oil.
Tertiary production: this refers to the commercial services that
support the production and distribution process, eg insurance,
transport and other services such as teaching and health care.
The chain of production shows interdependence: firms rely on other
businesses in different sectors for raw materials.
A monopoly is either the only supplier in a market, or a large business
with more than 25% of the market.
Competition can make markets work better by improving these
· Price: if there are several retailers, each retailer will lower
their prices in an attempt to win customers.
Product range: in order to attract customers away from rivals,
businesses launch new varieties of products they believe to be
superior to their competitors.
Customer service: retailers that provide a helpful and friendly
service will win customer loyalty.

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An aim or objective is a statement of what a business is trying to
achieve over the next 12 months. For example, a business can set
itself any of these targets:
· survival
· increased profit
· growth
· increasing market share
Having an objective is useful because it helps staff to focus on shared
Some businesses are run to make as much profit as possible for
owners. However, not all businesses aim to make profit.…read more

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A sole trader describes any business that is owned and controlled by
one person - although they may employ workers. Individuals who
provide a specialist service like plumbers or hairdressers.
Sole traders do not have a separate legal existence from the business.
In the eyes of the law, the business and the owner are the same. As a
result, the owner is personally liable for the firm's debts and may
have to pay for losses made by the business out of their own pocket.…read more

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A limited company has special status in the eyes of the law. The
ownership of a limited company is divided up into equal parts called
shares. Whoever owns one or more of these is called a shareholder.
The shareholders have limited liability, which is the major advantage
of this type of business legal structure.
There are two main types of limited company:
· A private limited company (ltd) is often a small business such as
an independent retailer in a market town.…read more

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Opening a franchise is usually less risky than setting up as an
independent retailer because the business is proven in selling a
well-known product in a new local branch.
Large firms also often enjoy economies of scale. This means that a
business has lower unit costs because of its large size. They can buy
raw materials cheaply in bulk and also spread the high cost of
marketing campaigns and overheads across larger sales.…read more

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Internal (organic) growth: the business grows by hiring more staff and
equipment or making more of it's existing products.
· External growth: where a business merges with or takes over
another organisation.
Organisation charts are diagrams that show the internal structure of
the business. They make it easy to identify the specific roles and
responsibilitiesof staff. They also show how different roles relate to
one another and the structure of departments within the whole
Hierarchy refers to the management levels within an organisation.…read more

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The chain of command is the path of authority along which
instructions are passed, from the CEO downwards.
One method of reducing costs is to remove a layer of management in
a hierarchy while expecting staff to produce the same level of output.
This is called delayering.
Job production where items are made individually and each item is
finished before the next one is started. Designer dresses are made
using the job production method.
Batch production where groups of items are made together.…read more

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Introducing quality assurance requires Total Quality Management
(TQM), in which managers try to bring about a change in business
culture, convincing employees to care about how products are being
made and to do their part to ensure standards are met.
Stock is any item stored by a business for use in production or sales.
Stock can be:
1. Raw materials and components waiting to be used in the
manufacturing process, eg tyres stored by a car factory.…read more

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Maximum stock level: the largest amount of items to be stored on
site (500).
· Minimum stock level: the lowest amount of items to be stored
on site (100).
Reorder level: the amount at which new stock is ordered. 400 items
are ordered and it takes two weeks lead time for ordered stock to
arrive. There is always a buffer stock of 100 items held in case
deliveries are held up or there is an unexpected large order.
Just in case stock control is costly.…read more

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