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  • Created on: 06-06-18 10:00

The dynamic nature of business

Change in tech                                                             Change in consumer needs

  • Make products/services faster                                   Change in fashion
  • Make products smaller                                              Change in economy
  • Make products/services cheaper                              Change in national demographics
  • Make products/services easier to use                      Change in lifestyle
  • Make products safer                                                 Change in technology


Change in tech and consumer needs means products and services become obsolete quickly. Consumers are encouraged to buy newer and improved versions of the products. This is called planned obsolescence.

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Risk and reward


  • Business success-personal satisfaction, business growth and awards/recognition.
  • Profit-revenue exceeds costs.
  • Independence-value freedom of working for themselves.


  • Business failure-poor cash flow, fall in sales or lots of competition.
  • Financial loss-they lose the capital that they invest and their personal belongings if they have unlimited liability.
  • Lack of security-No guaranteed income, sick pay or holidays.

Risk can be reduced by:                                          Some businesses are riskier:

  • Doing market research                                       Seasonal demand
  • Produce a business plan                                    Highly competitive market
  • Make sure the business is competitive              Unprepared for the market
  • Have sufficient start-up finance
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Business enterprise

A business or enterprise is a person or organization with the purpose of prodcing goods/services to meet the needs of the customers.

Adding value

By lowering variable costs or adding something will make the customer more willing to pay a higher price.

Ways to add value:

  • USP
  • More convenience
  • Speed of service
  • Branding
  • Quality
  • Design
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Adding value

The Higher the added value is the quicker costs can be paid off and the quicker the business will make a profit. Which will increase the chance of business success and long-term growth.

Most products have a varied range of features to improve competitiveness and to add value. Successful products are able to keep costs down as they add new features and benefits.

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  • Risk Takers
  • Show Initiative 
  • Willing to take under a new venture. 

Approximately 40% of business fail in the first 4 years of trading.

They benefit the economy by:

  • Creating products or services to meet needs
  • Create jobs
  • Generate Economic activity through consumer spending
  • Paying tax to the government
  • Exporting goods abroad

Entrepreneurs create new products through invention and innovation.

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Customer Needs

A business that can meet customer needs successfully will encourage repeat purchase and attract new customers.

When making a decision on a product/service customers think of 4 factors:

  • Choice
  • Price
  • Quality
  • Convenience


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Customer Needs(+)

Personal Circumstances

  • Family Needs
  • Personal tastes and preferences
  • Financial Needs
  • Emotional Needs

Customer needs will differ for different types of products

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Market Research

Market Research

  • Identify and understand customer needs
  • Understand how well the business is doing: customer opinion etc
  • Identify gaps in the market or opportunities
  • Identify and understand competition
  • Understand trends in the market such as growth in the market
  • Inform business decisions and reduce risk associated with business decisions.
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Market Segmentation

Market segmentation- is a group of buyers with similar characteristics and buying habits. You can segment a market in many ways:

  • Age
  • Demographics
  • Lifestyle
  • Location
  • Income
  • Gender

Advantages of segmentation                                    Limitations of segmentation

  • Meets specific customer needs                           Can be expensive
  • Differentiates its products                                    Can miss opportunities
  • Focus on a specific group of customers              Customer characteristics change over time
  • Target the market activity
  • Unique brand image
  • Close customer relationships
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Market Segmentation

Market segmentation- is a group of buyers with similar characteristics and buying habits. It allows a business to understand its customers and target them better.

Examples of how to segment a market: Age, Demographics, lifestyle, location, gender, income or location.

Benifts of a segmentation

  • Meet specific needs of customers
  • differentiates products
  • focus on a specific group
  • target its marketing activity
  • unique brand image
  • close customer relationships

Limitations of segmentation

  • Can be costly
  • can miss other opportunities
  • customers needs change eg lifestyle, income and demographics (eg young couples)
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Market mapping

Market maps

It is used to position and compare products in a market. It is also used to identify gaps in the market. Based on two variables.

Benefits of market mapping:

  • Identify potential gaps in the market
  • Identifies rivals
  • Supports market segmentation
  • Helps make business decisions

Limitations of a market map:

  • Based on opinions and perceptions
  • Compares business on only two variables
  • Difficult to identify appropriate variables
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Ways to compete:

  • wide product range
  • Low prices
  • Better design
  • Quality
  • Convenience
  • Brand image
  • Customer service


To make a product different from other products. It helps to gain an advantage over rivals and target other markets.

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Competitive Markets

Decisions made in a competitive market:

  • Improving efficiency
  • ways to improve competitiveness
  • Lowering prices
  • Special offers
  • Cutting costs

Drawbacks of a competitive market:

  • Low prices
  • Low-profit margins
  • Cutbacks on expenditure
  • How and when to expand
  • Monitoring competition closely 
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Aims and objectives

Aims-the general goal that the business sets.

Objectives-They are specific tasks that contribute to the completion of an aim.

Financial objectives:

  • Survival
  • Sales and sales revenue
  • Profit
  • Market share
  • Financial security

Non-financial objectives:

  • Personal satisfaction                     Social benefits
  • Independence and control             Customer satisfaction
  • Challenge                                      Business rewards and recognition
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Revenue and costs

Calculating Revenue

Revenue= Price X Quantity

Fixed costs-Do not vary with the output produced by a business.

Variable costs-Change directly with the number of products made.

Total Costs

Total cost (TC)= Total Fixed Costs (TFC) + Total Variable Costs (TVC)

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Profit and Loss

Profit calculations

Profit = Sales Revenue - Cost of Sale 

Calculating interest on loans

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Break-even charts

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Using Break-even charts

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franchise is the right given to a business to a businesses to sell goods or services using the business name.

Franchisor- the business that gives the franchisees the right to sell their product or service.

Franchisee- a business that agrees to manufacture, distrubte or provide a brand under a licence from a franchisor.

Principle of franchising- the expansion of a business by licensing the right for a entrepreneurs to use their name in their business and equipment... In return the franchisee pays a fee or share of revenue to the franchisor.

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Competitive market

Advantages to a competitive market

  • Improves efficiency
  • finds new ways to be competitive
  • differentiates product/service
  • lowering prices
  • customers have special offers
  • cutting costs

Disadvantages to a competitive market

  • having to lower prices to compete
  • lower profit margins
  • cut back on expenditure
  • how and when to expand
  • have to monitor competition 
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Types of market research

Primary research-First hand contact with customers. It's research that did not exist before.

Secondary research-It's research that already exists.

Primary research:                                   Secondary research:

  • Surveys                                             Internet sites
  • Focus groups                                    Local newspapers
  • Observations                                    Government reports
  • Experiments                                     Market reports
  • Questionnaires                                  Telephone directories
  • Social media                                    Sales data

Primary research is more accurate while secondary research is more general.

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Market Research data

Qualitative data-Information about peoples opinion, judgements and attitudes.

Quantitative data- Data expressed as numbers and statistically analysed.

Size and scale

Market research can be expensive but the greater sample size used, the more accurate the research will be.

Effective market research combines the 2qs together. 

Market research can be bias because the customers may give information the business wants to hear.

Research data should be reliable- it should come from a representative sample of people and the questions should enable people to give accurate and relevant info.

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Sole Trader

Benefits economy by

  • Creating products/services meeting peoples needs
  • creating jobs
  • generating economic activity
  • paying tax
  • exporting goods


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Profit calculation

Profit=Total Revenue-Total costs.

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Private Limited Company

Private Limited Company (PLC)


  • have limited liability
  • more trust to LTDs than other businesses
  • continue trade even if shareholders change
  • easier to raise finance or to grow business


  • more complex to set up than a sole trader or partnership
  • shareholders may disagree
  • financial information is public 
  • more info must be reported to the government


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Market Research

Qualitative- info about peoples opinions

Quantitative- data expressed as numbers and statistics

Market research is expensive so smaller business does little while larger business will do more. The bigger the sample size ( amount of people)the more accurate your research will be.

Effective market research combines qualitative and quantitative reaserch.

Your info can be biased because customers could give info that your businees wants to hear. sso your info should be reliable info should come from reliable eople and questions should be accurate and relvant.

You can get qualitive info with a focous group, interviews consumer panels.

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Percentage increase calculation

Change/original x 100

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Cash flow calculation

Cash flow= (Receipts-payments=Net cash flow)+ Opening balance= Closing balance.

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Calculating Cash Flow

Receipts-Add net cash flow and total payments.

Payments-A missing payment could be found by adding up the rest and taking it away from total payments.

Total payments-Add up all payments or subtract net cash flow from receipts.

Net cash flow-Subtract total payments from receipts or deduct the closing balance from the opening balance.

Opening balance-This is always the previous months closing balance.

Closing balance-Add the net cash flow to the opening balance.

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Importance of Cash to a Business

Without sufficient cash a business would become insolvent which would result in:

  • Pay suppliers 
  • Repay bank loans
  • Pay wages 
  • Buying raw materials and products
  • promotion of business

Cash is the given amount of money that is available to the business to pay for its debts.

Impacts on cash flow:

  • Change in sales revenue/demand
  • Credit terms can change
  • Stock levels
  • Business expansion or contraction
  • Seasonality in sales
  • Change in costs
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Short-term sources of finance

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Long term sources of finance

Different sources of LTF:

  • Personal savings
  • Venture capital(using  the money of investors)
  • Share capital(Selling equity in a limited company)
  • Loan
  • Retained profit
  • Crowdfunding


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Limited Liability

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Types of Business ownership

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Franchisor-The business that gives the franchisee the right to sell its product.

Franchisee-A business that agrees to manufacture, distribute or provide a branded product under licence.

The franchise gives:

  • Training                    Acess to goods and services
  • Equipment               Advertising and promotion
  • Ongoing support     Operate in an exclusive area

Advantages of a franchise                                               Disadvantages of a franchise

  • Brand image and reputation is already established   Initial investment can be high
  • Expensive marketing costs covered by franchise       Little freedom to make decisions
  • Access to tried-and-tested products                           Have to pay a royalty
  • Established customer base                                        Restrictions on where the franchise is
  • High chance of survival 
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Business Location


  • Market
  • Materials
  • Labour
  • Competitors
  • Transport

These factors are key considerations for the business to think about.

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The Marketing Mix





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Influences on the marketing mix

Changing needs:

  • Change in features
  • Change in price
  • More/less advertising
  • Selling your product in popular retailers
  • Returning products online free of charge


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The Business Plan

Purpose of a business plan:

  • Convenience banks to give a loan
  • Forecast financial projections
  • Identify the needs of the customer
  • Gain important info from research
  • Provide info
  • Have a plan that has entails minimal risk

A business plan links in different parts of the specifications together that were covered by the topics.

Who uses business plans

  • Investors
  • Owners
  • Partners and employees
  • Lenders
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The Nature of a Business Plan

A business plan should include:

  • Business idea
  • Aims and objectives
  • Market research
  • Financial forecast
  • Sources of finance
  • Location of business
  • Marketing mix
  • Production


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Stakeholder-Is an individual or group that has an interest in and is affected by the business.

Who can be stakeholders:

  • Owners
  • Suppliers
  • Government
  • Local community
  • Customers
  • Employees
  • Pressure Groups
  • Managers


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Stakeholder Conflict

Positive effects of stakeholders:

  • Shareholders gain a return on their investment
  • Employees and managers receive income, rewards, financial security and status
  • Customers receive high-quality products
  • Local community benefits from development and investments in the local area
  • Government collect income tax and corporation tax

Negative effects of stakeholders

  • Local community suffer from pollution 
  • Government monitor for unjust actions
  • Employees may lose their jobs and income
  • Employees work in poor conditions
  • Shareholders lose their investments
  • Pressure groups protest against unethical business activities.
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Technology and Business

Types of technology used:

  • E-commerce
  • Social media
  • Electronic payment systems
  • Digital communications

How it influences business activity

Costs- It is a huge investment but in the long term it helps improve efficiency and reduce costs.

Sales- Innovating products with the latest technology can increase demand from customers and boost sales.

Marketing mix- It influences all aspects of the mix: from lowering the cost of products to making promotions easier through social media and buying products anywhere anytime.

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Consumer Law

Principles of consumer law:

  • Products need to be of good standard and quality
  • Business should disclose all info about products/services
  • You can return or reject goods
  • Services should be provided with reasonable care.
  • Contracts should be fair
  • Goods should be installed and delivered safely



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Employment Law

Principles of employment law:

  • Recruitment should be fair and prevent discrimination
  • Health and safety should be met in the workplace
  • Disciplinary issues and grievances should be dealt with fairly
  • Redundancies should be fair
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The Economy and Business

Impact of high demand/economic activity:

  • Consumer income rise
  • Inflation may rise
  • Unemployment may fall
  • Interest rates may rise
  • The pound may become stronger

Impact of low demand/economic activity

  • Consumer incomes fall
  • Inflation may fall
  • Unemployment may rise
  • Interest rates may fall
  • The pound may become weaker
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Unemployment and Inflation

High levels of unemployment may make recruitment easier for businesses. However, the number of employees with required skills will fall.

High level of unemployment will lower consumer demand for most businesses products and services.

Economic activity falls and businesses sales revenue will also fall.

Inflation-it is the average change in the level of prices. It is measured using the consumer price index (CPI). 

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Interest Rates

An interest rate is a percentage given on a payment that is given on savings or paid by borrowers on loans.

A rise in interest rate will increase the cost of borrowing:

  • If you are on a variable rate then it will be harder to pay off
  • Small business are less likely to borrow
  • Customers are less likely to spend money

A fall in interest rates will lower the cost of borrowing:

  • Cash flow may improve
  • Borrow money for a start-up or expansion
  • Consumer spending rises


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Exchange Rates

It is the price of buying foreign currency.

The effect of a fall in the pound:

  • Good for UK exporters- sales increase
  • Good for UK tourism- cheaper for foreigners 
  • Good for Uk business- Buy more UK goods
  • Bad for UK importers of materials- cost rises

The effect of a rise in the value of the pound:

  • bad for UK exporters
  • Bad for UK tourism
  • Bad for UK business- fewer people buy UK goods
  • Good for UK importers
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External Influences

They are either an Opportunity or a threat.


  • A rise in economic activity- increased in demand
  • new tech which lowers the cost of production
  • Low-interest rate


  • New competitors
  • Fall in economic activity
  • New tech which makes products obsolete

How to respond:

  • Cut investment and spending when economic activity is low
  • Invest in new tech to be better than competition
  • And so on
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Business Growth

Internal (organic) growth: 

  • It helps increase market share
  • Lead to lower costs
  • Results in more profit

It occurs when a business expands by itself and when their sales output gets bigger.

External (inorganic) growth:

  • Merger- 2 or more businesses voluntarily join up and work as one business.
  • Takeover- 1 business buys another. To take over you need the most shares.

Methods of external growth:

  • Backward vertical- join with a business on a lower stage
  • Conglomerate- businesses with no common interest join
  • Horizontal- 2 or more businss join which are at the same stage
  • Forward vertical- Join a busiines at a higher stage
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Public limited companies (PLCs)

You are able to raise capital by selling shares on a stock exchange. 


  • Raise finance via share capital
  • Limited liability
  • Considered more prestigious and reliable
  • May get better prices with suppliers
  • Better public awareness


  • Complex accounting and reporting
  • Risk of being taken over
  • Increased public and media attention
  • No privacy on financial performance
  • External shareholders have more influence on decisions



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Job Description

It will include:

  • The job title
  • Who the person is responsible to (line manager)
  • Who you are responsible for (subordinate)
  • Duties
  • Salary or wage

Person specification

It contains a description of the characteristics, qualifications, experience/skills required. They are broken down into essential or desirable characteristics.

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Recruitment (+)


It includes education and qualifications, employment history, skills and experience, references from current/previous employers.

Types of recruitment

Internal-(promoting from within the business)

  • Fast and easy
  • Cheaper then external
  • Candidates know the business- more efficient
  • Motivates current employees 


  • More applicants
  • New ideas/skills for business
  • Suitable for the business if growing
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Skills- it will develop their skills and increase their value to the business. Having the most skilled employees can give a competitive advantage.

Motivation- Training gives employees more motivation and can lead to a happy workforce

Retention- investing money in employees training shows the business cares for its employees. Meaning they are unlikely to leave and improving retention.

Tech and training

  • New tech means employees can use computer simulations
  • Training can be more flexible and accessed remotely using webinars and online courses.
  • Employees need retraining whenever new tech is introduced- can be expensive and lower productivity.


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Organisational Structures

Hierarchical structure

Has a long chain of command. Makes the business easier to control and provides opportunities for promotion. Can be costly and slows down effective communication.

Flat structure

Few levels of management but a wide span of control. Which improves the businesses flexibility but authority is not always clear.

Centralized decisions

Made by senior managers which increase control and standardisation but decisions can be slow.

Decentralized decisions

There delegated to regional employees can make better decisions because they know customers better but you could lose control.

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Formulations (mock)

Cost of Sales= opening inventoroires + purchases - cost of goods sold

Sales Revenue= Price x Quantity

Profit Margin= Gross profit x 100

Percentage Change= amount of change x 100

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Ethics and Business

Paying higher wages and using ethical suppliers costs more which reduces profits. However, being ethical appeals to customers and motivates staff leading to high productivity and more sales.

Pressure groups

They try to change businesses behaviour/operations. They can cause bad publicity which v=can damage a business's reputation.

How it affects the Marketing Mix

  • Product- use sustainable resources  and ensure products are safe
  • price- Increase price paid to small suppliers and pay fair prices when there is limited competition for supply
  • Place- Source local products
  • Promotion- Obey advertising legislation and provide accurate info on packaging


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Ethics and Business

Paying higher wages and using ethical suppliers costs more which reduces profits. However, being ethical appeals to customers and motivates staff leading to high productivity and more sales.

Pressure groups

They try to change businesses behaviour/operations. They can cause bad publicity which v=can damage a business's reputation.

How it affects the Marketing Mix

  • Product- use sustainable resources  and ensure products are safe
  • price- Increase price paid to small suppliers and pay fair prices when there is limited competition for supply
  • Place- Source local products
  • Promotion- Obey advertising legislation and provide accurate info on packaging


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Environmental Issues

As a business grows they have a larger impact on the environment.

Short-term impacts

  • Traffic congestion via transport and deliveries
  • Air, noise and water pollution via manufacturing and industry

Long-term impacts

  • Climate change
  • Depletion of land, food and resources

Reducing the impact

  • renewable energy
  • biodegradable packaging
  • replenishing and conserving natural resources

Business can differentiate their products to be greener e.g. hybrid cars.

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A brand represents the characteristics and personality of a business.

Value of a strong brand:

  • Instant recognition 
  • Positive characteristics
  • Becomes the first choice for customers- increases brand loyalty
  • More trust
  • Allows the business to charge premium prices for their goods/services


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It creates customer awareness of, interest in and desire for their products. It also helps build strong brand image and boost sales.

Advertising- tv, radio, websites. Can grab customers attention if in the right place/medium. Can be expensive and difficult to see if it had an impact.

Sponsorship- Sports events, music festivals. Can provide exposure and associate the business with good causes. Communicates very little info about the features/benefits of products/services.

Special offers- BOGOF, free prize draws and discount sales. Can boost short-term sales and clear stock. Not sustainable and reduces profits.

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Production and JIT

Flow production- It is capital intensive (more machines then labour) used for a large customer base

Batch production- Items made in groups. Products made for niche markets and reduces unit cost.

Job production- Needs highly skilled workers. Is very expensive and makes one-off a kind products

JIT (just in time)

  • reduces costs by minimising storage space (which is expensive)
  • Needs more frequent deliveries
  • Unable to deal with a spike in product demand


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Sales Process

Important aspects of the sales process:

Speed and efficiency of service- the better this is the better the customer experience is

Good customer engagement- Employees should be polite, helpful and friendly

Product Knowledge- Gives a better customer experience

Post sales service- Customer more likely to buy from business and helps maintain high customer satisfaction

Websites- Should be easy to use and offer plenty of help

Social Media- Used to easily answer queries complaints, tell info about products/competitions.

Bad sales process:

  • Customer less likely to buy from you 
  • May tell friends to not buy from your business.
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Business Ownership

Sole trader- You make all the decisions, quick and easy to set up, you keep all profits and financial info kept private. However, you have unlimited liability, harder to raise money, lots of pressure.

Partnership- Wider expertise and share decision making, you share the risk, easier to raise finance. However, Profits shared, Partners disagree and decisions affect all partners.

Private limited companies- Have limited liability, customers trust LTD more, easier to raise finance. However, more complex to set up, shareholders disagree, financial info is public, more info is reported to the government.

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Design Mix

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