Business Studies Unit 1

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Reasons for Starting Up A Business

  • they want to be their own boss & make their own decisions
  • they want to keep all the profits or themselves, instead of working for owners who keep the profit
  • they have an interest of hobby that grows into a business
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Sources of Business Ideas

  • set up a business then decide what to do 
  • have a business idea & then set up a business
  • see a growing trend
  • see the idea working somewhere else, particularly another country
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What is a Business Plan?

  • a detailed statement, setting out the proposals for a new business or explaining how an existing business might be developed
  • business plan involves undertaking market research, analysing it & then presenting the information in such a way as to aid decision making. It should contain the following:
  • a summary outlining the proposals key features
  • a statment of the business's aims & objectives
  • market research data 
  • resouces required, staff, finance
  • brief information about the manager or management team of the business

Difficulties in planning:

  • nobody knows with certainty what will happen in the future
  • lack of experience of the entrepreneur in making the plan
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Choosing the Location of the Business

The following should be taken into consideration:

  • type of business: web-designer could set up at his house, flower delivery needs 2 b near potential customers. generally factories need 2 b near supplies & transport system, whereas shops need 2 b near customers
  • number of customers: shops, cafes need ti be in a population centre 
  • cost of location: may be costly in a city centre & established businesses may already have best location
  • competitors: generally wouldnt want to be close to them as its close to their market. 
  • availability of raw mateials
  • availability & cost of labour: some businesses want 2 be close to skilled workforce, some need to be near cheap labour
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Business Ownership

Sole trader 


Partnerships should have a deed of partnership that will: 

  • explain the partner's roles/repsonsibilities
  • if the profits aren't split equally, this needs to be stated
  • what salaries the partners will get

Private limited company 

Not for profit Organisations 

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  • ready established brand image
  • advertising carried out by the franchisee
  • training & guidance given
  • tried and trusted product


  • royalty has to be paid
  • start up capital has to be paid
  • other franchises can give you a bad name 
  • can't make your own decisions
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Business Objectives

Survival - this is particuarly important when business has first started trading, bc may have high costs. also businesses sales may be low as customers may not know about them, until thye become established & develop a brand image

Make a profit - the profit may be retained & used at a later date to expand the business 

Growth - this can be achieved in a number of ways: open more stores, increase market share, increase sales

Non-profit objectives - these could include the following:

  • chariable donations 
  • donations to schools, hospitals etc. 
  • sponsoring sports teams
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Sources of Finance

Own savings: the owner/s most likely use these first, as its their money to do what they like w & wont have to pay interest. the amount available may be limited depending on how much they have saved in the past, but if its a parnership there'l be more savings available

Loans from family & friends: may be cheap as no or very little interest charged. will depend on how wealthy they are, & could also lead to arguments 

2nd mortgage on private property: their private house may have high value, but their first mortgage will be relatively small. the amount obtained may be high, but interst will be charged & if business fails could end up losing the house 

Long term sources of finance: mortagage, bank loan, grants, sale of shares

Short term sources of finance: trade credit, bank overdraft

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  • 4P's: price, place, promotion, product
  • market research 
  • promotional campaign 
  • advertising - local as small business 
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Payment Systems

Wage (time based) 

  • paid per hour & usually at the end of the week
  • don't usually get paid when off sick
  • if work above set number of hours then over-time is paid
  • usually paid for manual type jobs


  • fixed monthly amount 
  • usually paid when off sick, certain to subject limits
  • usually paid for managerial type jobs 

Piece rate: when the worker is paid per amount produced. can encourage quicker working 

Commission: usually paid 2 sales people based on amount they sell 


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Ways of motivating the workforce: 

  • fringe benefits, e.g. compan car, staff discount etc. 
  • training 
  • promotion opportunities
  • regular praise & encouragemen 
  • working in teams 
  • socail activitvies
  • job rotation
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Employment Laws

Mainly to do with discrimination, sex, genfer, race, age, disability

Minimum wage law - decided by the age of the person. a rate for 16 years, 18 years & over 21 

Health & Safety at Work Act - ensure premises are safe for both customers & employees

laws are costly to implement in the short term but will lead to more motivated staff 

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Internal & external recruitment. 

  • Internal is cheaper, no recruitment procedure & could be motivational 
  • external will give a wider range of candidate with the right skills & could bring more ideas 

Recruitment Procedures

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Cash Flow

Improving cash flow:

  • paying suppliers at a later date
  • getting your debtors (customers that owe u money) to pay earlier
  • get an overdraft 
  • negotiate another source of finance 
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Methods of Production

Job Production - involves producing each product individually


  • products are usually of a high quality
  • workers can get more job satisfaction working on something till its finished


  • production & labour costs cna be high 

Batch production - involves producing 1 type of product, then changing to another type of produce


  • needs of different market segments can be met 
  • batches may be made to specific customer orders, may reduce cost of storage


  • takes time to switch production 
  • work can be repetitive & boring
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Types of Training

Induction training: takes place when the employee first starts & is used to familiarise the person w the reles & regulations of the business

On-the-job training: where the training is done while carrying out the job or watching someone else actually doing it. give the person actual experience of doing it, & it can hinder production until they are fully trained. 

off-the-job training: where the training is carried out away from the place of work. experts may be able to give specialist advice, but its usually more expensive because of travel fees, accomodation etc. 

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  • can mean the business can produce far more, so business will be able to sell more
  • internet can be used to sell things world-wide, increasing sales
  • may enable the business to cut labour costs, as machines will work longer & faster 
  • products may be of better quality, machine more accurate than a human 


  • can be expensive
  • can break-down & production can be lost
  • some people want hand made products
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Customer Service

What is good customer service?

  • prodcuts themselves should be reliable & safe
  • product information 
  • after-sales service - quick delivery, dealing w complaints
  • repairing goods free of charge 
  • employees
  • premises

Consumer protection laws: 

  • weights & measures act: physical content must be as described
  • labelling of food regulations - packaged food must state the ingredients 
  • sales of goods act - the goods should be as prescribed & of the expected quality
  • food safety act - not allowed to sell unsafe food 
  • data protection act - businesses that hvae your personal details cant give them to anyone else
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  • gives access to a wider market
  • save costs as a shop isnt needed
  • customers can pay via the internet, instead of sending cheques, which need taking to the bank
  • good form of advertising, and lots of info can be given
  • long-term very cheap to run 


  • not suitable for some products
  • expensive to set up in short-term 
  • not everyone has access to the internet 
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