Business Involvements

Key terms, structures and types of businesses

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  • Created by: Maddie
  • Created on: 23-11-11 19:45

Business Objectives

What the business is trying to achieve. They will vary between businesses depending on their size, sector, what they do and what stage of business they are

The 4 categories that objectives fall into:
Survival - keep the business goinng by ensuring income matches at least expenditure each month

Growth - Expand the range of products or sevices, employ more people or open new outlets

Profit - From making a small profit to maximising the potential profit of the business

Service - To provide the best possible service to customers 

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Business Sectors

Public Sector
a part of the economy who is concerned for providing basic government services such as street lighting, public roads, primary education, healthcare etc.

Private sector
a part of the economy that is owned and controlled by private individuals and business organisations. Such as private and Public limited companies. 

The private sector probably have more set goals, whereas the public sector are more focussed on getting their business more wellknown.

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Stake Holders

Any group or individual with an interest in the business

Shareholders (investors/owners of a company) 

Customers  (will be interested in products, service, prices, location etc)

Employees (staff will be concerned about wages, facilities and job security)

Suppliers (will be concerned about their sales, therefore contracts with the business)

Governments (concerned about laws and tax)

Media (there for public interests) 

-Pressue Groups
-Local Community

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Social Enterprises

Exists for the benefit of a community. All profits are used to help with community projects.

- To gain to a community from business activity
- Jobs
- To improve infrastructure
- Improve health
- Support community
- Provide something to help the community 

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Primary, Secondary and Tertiary Sectors

1. Primary -- 2. Secondary -- 3. Tertiary

1. First stage of production, involving the extraction of raw materials eg farming

2. Second stage of production, where the raw materials are manufactured into a finished product e.g car factory, manufacturer, builder

3. Last stage of production where a service is provided for consumers e.g supermarkets, camera shops, cinemas

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Key Words for Business Activity

The decline of the secondary sector due to increased technology and cheaper production abroad

The way in which businesses in difference sectors of industry depends on each other

Simply refers to a business that specialises in one sector of industry.

Added Value
Each business in the chain of production will want to add value by doing something extra to the product.  

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Sole Proprietor


- Easiest and least expensive form of business
- In complete control, make the decisions and they receive all the income
- Business is easy to finish if desired
- They have no corporate tax payments
- Few business requirements

-They have unlimited liability and are legally responsible for any debts
- Their possessions and personal assets are at risk
- Might be hard to get employers
- Have the risk of business not going well, and you will be responsible for the debt 


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- Complimentary skills and very cost effective
- When in debt, there is more than one able to pay
- More knowledge within the business, more skills, contacts etc
- You can be in more than one place and have better administration and financial     systems

- Long term and expectations can change, for example their could be a split up
- You have less power and the business decisions must be agreed on
- If someone refuses to pay a debt or money issue, one is still expected to pay it
- You share all the profits and decide who is the most valuable to the company 

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Public Limited Company


- Share holders have limited liability so they are not at risk of loosing their personal possessions and any debts come from the company's profit
- They can raise additional capital
- Directors with expertise/experience can be given or appointed
- Greater borrowing power from banks or loaners

- There is a loss of overall ownership
- Decisions take longer to make and there might be a disagreement 
- Profits are shared among a greater number of people
- Published accounts have to be prepared
- Significant expenses are incurred when setting up the company

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Private Limited Company


-Share holders pay off the debt using the amount of money which the buisness invested when paying shares
- Separate entity, if workers die or become unable to work then the business will be able to continue
- Taxation and tax advantages, they are only taxed on their products

- There is a costly legal process which private (and public) limited companies have to go through before they can begin to trade or sell
- Complex accounts, their must be book keeping and they are expected to produce yearly accounts of sales, profit etc

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LTD (Private Limited Company)
Usually smaller businesses with shares sold to friends and family and associates

PLC (Public Limited Company)
Usually much larger businesses, shares sold on a stock market

Both companies register for incorporated status, which means they are run as seperate legal entity from the owners.

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Types of Company

Holding Company
Usually a PLC (Public Limited Companies) that owns the majority of shares in one or more private limited companies (LTD). There LTD will be known as subsidiary companies.

Multinational Companies
A business that operates in more than one country

A franchisor sells the marketing agreement to other smaller businesses. Franchisee's can use their brandin, equipment, supplies, advertising etc. A franchisee will pay a royalty fee each month out of their profits

A charity organization is a non-profit based companies, where profit will go to a special cause e.g cancer

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Location is a very important factor for a business to consider...

-Location is the most important thing for a business and can make the difference between success and failure
-Some businesses need to be near suppliers
-Might need to transport supplies also

Location will need to be considered by thinking about the following things..

- Labour
- Competitors in the area
- People have to travel there easily
- Land/Buildings nearby
- Image
- Natural Resources
- Language
- Customers

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Needs/Job Analysis
Job description
(A job description is a list of the general tasks or functions related to a certain position)
Person Specification
(Is an extension os the job description and it is a profit of the type of person needed to do a job)
Advertise Job
(Interviews, trials, test, psychomentric test, assessment centres)

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A one to one meeting between an employee and their line manager. They will discuss the performance of the employee and identify any necessary training.

Usually appraisals would take place after one, three, six months for a new employee. Then once every year.

Appraisals can help the employee and the employer...
- Can motivate the employee as they feel more valued
- Gives opportunities to the employee to share their ideas
- Can give the employer feedback on the way the business is running
- Allows the employee to give possible improvements etc

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Types of pay

Time rate:The workers are paid a set sum for the time they spend at work

Overtime Pay: Workers that work over their normal hours are paid more - usually time and 1/2 time or 1/4 time

Salary: The workers agree to be paid a certain amount over the year. This is then divided by 12 to get equal monthly payments

Piece Rate: This is based on how much a worker produces. They are paid per item that they produce, the more they produce... the more they get paid

Commission: This is paid to sales people. They are paid a percentage of how much they sell

Bonus:This is paid to workers an "extra" for meeting targets etc

Profit Sharing: Workers are paid a part of the profit for helping the business make high profits

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Trade Unions

A trade union is an organisation of employees formed to bargain with the employer

Benefits of joining a Trade Union
- Accidents at work can be helped and sorted
- They can help problems such as unfair discrimination, pension schemes
- They defend workers jobs, pay and conditions

Benefits for the business with employers in a Trade Union
- Workers more efficient because they feel safer in the environment they are working in because they are being defended

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Employment Law

Equal Pay Act 1970: Introduced to make sure men and women are paid the same as men when doing similar jobs

Race Relations Act 1976: Introduced to make an equality with race, colour, nationality and ethnic regions. This makes sure all workers get treated the same, regardless of the above

Sex discrimination Act 1975: Introduced to stop males or females being treated different to one another

Health and Safety Act 1974: Protects the worker from dangers in the work area by safety equipment, washing facilities, toilets and adequate breaks

Minimum Wage Degislation: Stops the workers being exploited by employers. It is for people over 18-21 and they get less wage than those over 22. There are exceptions for jobs such as the armed form etc.

Employments Right Act 1996: Awares the worker of the job title, the hours, details of the job, the pay, how much notice must be given to end the contract and important disciplanary roles

Disability Discrimination Act 1995: Gives equal opportunities to disabled people. The employers cannot discriminate against disabled people in any way

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Changes in the way people work

Working from home and communicating with employers via telephone, e-mail and the internet

Home Working
Sometimes used to describe teleworking, but more specifically working from home in more traditional jobs e.g small scale manufacturing

Flexible Working
When employees work irregular hours, maybe in late one day and then home late for the next day

When an outside company is hired to do a job for a business

Part Time Working
Employees work fewer hours than a full working week. Sometimes this may involve evenings and weekends

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Advantages of Flexibility

- More motivation and happier in the job
- You can have a better relationship with family members
- You will be in a more relaxed environment
- Less expense made over travel, save money

People also will consider flexible working for:
- Childcare
- Carer
- Sutdying
- Illness
- Lifestyle
- Relationships
- Hobbies
- Sports

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Advantages and Disadvantages of homeworking/telewo

- Better quality of productivity
- Less to stress about
- Nobody to worry about being late

- You don't have as much control on the work the person does
- Work could potentially be worse due to laziness or forgetting

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Extension strategies for a product

  • Advertise
  • New flavours
  • New packaging
  • Design Changes
  • Lower price
  • Samples
  • Offers
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Price Elasticity

Identifies products that are either luxuries or necessities

If a product is price elastic, it means that when there is a change in price - there is a greater change in quantity sold (demanded) and vice versa for a product that is price inelastic

Factors that effect price
- Costs
- Demand
- Economy
- Quality
- Value
- Perception
- Consumer Trust
- Type of product
- Fashion
- Quantity

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Advertising, Sales Promotion, Personal Selling, Direct Marketing, Public Relations, Social Networking.....

Advertising Methods
- Televsion - Large audience throughout the country, can be targetted
- Radio - Much cheaper than tele, a radio can be taken anywhere, good targetting
- Cinema - The audience will often watch adverts, can be targetted at audiences
- Newspapers - good targetting, colour can be added, local, regional and national
- Magazines - High quality colour, cosy effective, best medium for targetting
- Billboards and posters - Highly visual, can be targetted at particular areas
- Internet - One of the fastest growing media, can target particular groups
- Transport - Can be targetted at a certain area, cheaper than magazines
- Social Networking - Widely viewed by many people, can be constantly seen

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Increased output caused by extra effort from workers

Improved Quality as staff take more pride in their work

A higher level of staff retention - workers are keen to stay with the firm and reluctant to taking unecessary days off

Monetary factors - Some people work harder if offered more pay

Non Monetary Factors - Some people respond to incentives that have nothing to do with money e.g improved working conditions or chance of promotion

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Non-Pay methods of motivation

Job Rotation
Staff are switched between different tasks to reduce monotony

Job Enlargement
Staff are given more tasks to do of similar difficulty

Job Enrichment
Staff are given more interesting and more challenging tasks

Staff are given authority to make decisions about how they do their job

Putting Groups of workers in a team
who are responsible together for completing a certain task

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Five hierarchy/level of needs

The five levels of motivation described by Maslow: survival, safety, social, esteem and self actualisation.  (

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Payment methods

  • Time rate: staff are paid for the number of hours worked.
  • Overtime: staff are paid extra for working beyond normal hours.
  • Piece rate: staff are paid for the number of items produced.
  • Commission: staff are paid for the number of items they sell.
  • Performance related pay: staff get a bonus for meeting a target set by their manager.
  • Profit sharing: staff receive a part of any profits made by the business.
  • Salary: staff are paid monthly no matter how many hours they work.
  • Fringe benefits: are payments in kind, eg a company car or staff discounts
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  • Internal communications happen within the business.
  • External communications take place between the business and outside individuals or organisations.
  • Vertical communications are messages sent between staff belonging to different levels of the organisation hierarchy.
  • Horizontal communications are messages sent between staff on the same level of the organisation hierarchy
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Hierarchy refers to the management levels within an organisation.
Line managers are responsible for overseeing the work of other staff.
Subordinates report to other staff higher up the hierarchy. Subordinates are accountable to their line manager for their actions.
Authority refers to the power managers have to direct subordinates and make decisions.
Delegation is when managers entrust tasks or decisions to subordinates.
Empowerment sees managers passing authority to make decisions down to subordinates. Empowerment can be motivational.
The span of control measures the number of subordinates reporting directly to a manager.
The chain of command is the path of authority along which instructions are passed, from the CEO downwards.
Lines of communication are the routes messages travel along.

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This set of 30 revision cards covers many parts of the GCSE requirements including the people in business part. It has a test yourself facility and students can adapt the information to increase their interaction with it. It may highlight areas that need to be revised further elsewhere.

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