Unit 1 - Business Environment

PRIMARY - extraction of raw materials

(e.g. farming, mining, fishing)

SECONDARY - manufacturing

(e.g. car manufacturers, building companies)

TERTIARY - providing a service

(e.g. hairdresser, bank, supermarket)

- not all currencies have the same value so we use exchange rates to convert    1 currency to another

- to convert from GBP to foreign currency, you multiply by the exchange rate

£1 = €1.39 so x1.39

(e.g. £20 × 1.39 = €27.80)

- to convert from foreign currency to GBP, you divide by the exchange rate

£1 = €1.39 so ÷1.39

(e.g. €278 ÷ 1.39 = £200)

· franchise - the right given by a business to another to sell goods using its                          name

· franchisee - business that agrees to sell under license of franchisor 

· franchisor - business that gives franchisees license to sell under its name

advantages

- free training + marketing

- part of established business

- easier to make money

- lower risk for new entrepeneur

disadvantages

- franchisee has to pay royalties (% of profits) to franchisor

- expensive to set up

- no individual business decisions without consulting franchisor

- other franchises set up locally are competition

(financial objectives are linked to money)

· business survival - ability to keep running

· profit - leftover revenue after costs are paid off

· sales - amount sold in a period of time

· market share - % of market that the business occupies

· financial security - ability to pay off costs + have enough money to survive

(non-financial objectives are linked to anything but money)

· social objectives - being ethical or eco-friendly

· personal satisfaction - feeling satisfied with business's success

· challenge - being taken out of comfort zone

· control - ability to make decisions

· independence - making own key business decisions

(quantity customers are prepared to buy at a given price)

factors that affect demand

· price - most important factor, customers won't buy a product if it's too expensive

· income levels - when a customer's income levels go up, so does their ability to purchase

· customer preferences + tastes - customers can be persuaded by advertisement

· competition - competition may have lower prices and better quality products

· fashion - products always come "in" and "out"

(business with 2 or more owners)

advantages

- usually quick to set up

- shared decision making

- shared responsibility for debt

disadvantages

- conflict among owners may occur

- risk of unlimited liability

- all owners have to hold up their responsibilities

- number of employees

- customer satisfaction

- market share

- social media followers / engagement

- revenue

- cost savings 

- profit

- number of new stores opened

- share value

- environmental impact

(% charged on loan or paid on savings)

an increase in interest rates can impact by:

- customers with debts have less income to spend because they are paying        more interest

- firms with overdrafts will have higher costs because they must now pay          more interest