Transcript Unit 1.1
Unit 1 An Introduction to Business Needs and Wants Needs Wants Water DVD player Food Computer Shelter More money Heat To learn Clothing Designer clothes These are essential for us to stay alive. These are luxuries which help to make life more comfortable. Goods and Services Goods Services These are what we buy in our everyday lives. They may be: A person or business does something for us, eg Tangible – can touch eg a pen Intangible – can not touch eg downloaded music/pay TV Durable – will last for a long time eg a television Non-durable eg a pint of milk A haircut; gardening; dry cleaning We may benefit from these indirectly: Fire brigade Police Hospital What do businesses do? Provide a range of goods and services Satisfy customers’ needs and wants Know the demand and supply for goods and services Use the Factors of Production to make the goods and services Create wealth Factors of Production These are the tools that a business needs in order for it to work properly: Land Labour Capital Enterprise For each of these the business receives a “reward”. Land All the natural resources which the land provides for us: Farmland – crops, animals Buildings – land needed for housing, businesses Water Coal-mining to provide heat oil/gas-refineries Labour Labour is physical and mental effort. People who use mental effort include: Accountants Bank Managers Teacher People who use physical effort include: Assembly workers, eg a car production line A baker – mixing of ingredients to make bread and cakes Capital Capital is “money” and the “things that can be purchased with money” to make and sell goods and services. To purchase a business, buildings and equipment To buy tools needed for the job To buy raw materials to make the products Enterprise Enterprise means having an idea for a new business and taking risks with the other factors of production to make the business a success: The land The labour The capital Rewards to Factors of Production Organisations: Sectors of the Economy Private Public Voluntary Sectors of the Economy: Private PRIVATE Sole Traders Partnerships Private Limited Companies (Ltd) Public Limited Companies (Plc) Franchise Financed by own money, bank loan, money from selling shares Owned by: Sole Trader/Partners/ Shareholders Sectors of the Economy: Private Aims of the Private Sector: To maximise profits To turn innovative ideas into successful businesses (ie to fill gaps in the market) To expand the business Sectors of the Economy: Public PUBLIC National and Local Government Services, eg Schools, Hospitals, Fire Brigade, Army Owned by the State Financed through taxation, eg council tax, business rates, income tax Sectors of the Economy: Public Aims of the Public Sector: To provide the same quality service to everyone in an area To make good use of taxpayers’ money and provide the services that an area needs East Lothian Council Website ELC is an example of Local Government. Log on to the website and create an information sheet about ELC Research Consider: Task services provided; who are these provided for; area they are located; where does ELC obtain funds to provide these services; Any other relevant information Sectors of the Economy: Voluntary VOLUNTARY Organisations like, charities, eg Oxfam, social and sports clubs Benefit the community and people less fortunate Financed by money from donations and/or gifts Sectors of the Economy: Voluntary Aims of the Voluntary Sector - Charities: To provide support for worthy causes, eg money, food, clothing To buy equipment, eg farm machinery for Africa To raise awareness of “good causes” Sectors of the Economy: Voluntary Aims of the Voluntary Sector – other non profit-making organisations To provide the best service and facilities for the members of welfare, social and sports organisations. Size of Business Businesses may be described as Small, Medium or Large SMALL ... Often owned and run by one person - a sole trader Or they may be run as a partnership - between 2 and 20 people They employ less than 50 people They usually sell their goods and services locally Examples of small businesses ... Opticians, solicitors, accountants Tradespeople - plumbers, electricians, hairdressers Small shops MEDIUM ... Usually owned and run by a group of people - these may be partners, directors or shareholders They employ between 50 and 250 people May have branches and sell goods nationally Examples of Medium-size businesses ... Manufacturers of clothing, furniture Car hire companies Theatres LARGE Usually owned by a large number of people - the shareholders - and run on their behalf by directors They employ more than 250 people May produce and sell goods internationally Examples of Large Businesses ... Car manufacturers eg Ford, Nissan Chainstores eg Marks & Spencers Finance companies eg HBOS plc Oil companies eg Esso Organisations: Sectors of Industry PRIMARY TERTIARY SECONDARY Sectors of Industry: Primary These are extractive industries which use the earth’s natural resources. Fishermen – fish/shellfish Farmers – wheat, beef, lamb, oranges, berries Refineries – oil, gas Coal miners – coal Sectors of Industry: Secondary These types of businesses are involved with making things (manufacturing), which go through several different stages. They use raw materials, semifinished goods to produce finished goods. Sectors of Industry: Secondary Stages of Production: Input Process Output This involves taking raw materials or semi-finished goods and putting them through processes to make finished goods. Sectors of Industry: Tertiary These are service industries. Examples: Banking Deliveries Nursing Mail deliveries Hair dressing/barber Insurance Types of Business Ownership A business can be formed in the following ways: Sole Trader – one person Partnership – 2 to 20 people Private Limited Company – Ltd Public Limited Company – Plc Franchise – already established “business name” Types of Business Ownership Sole Trader This is the most common type of business. It is owned, controlled and financed by one person. Examples of Sole Traders: Hairdresser Plumber Electrician Mechanic Sole Trader Advantages: Disadvantages: Decisions are made Unlimited Liability for quickly Profits are not shared Usually local, so can satisfy the needs of the area No special paperwork is required The affairs of the business are kept private debts Long hours Finance may be difficult to raise Prices may be higher than those of larger organisations Difficult to provide cover for holidays and illness Types of Business Ownership Partnership Owned by minimum of 2 and a maximum of 20 people called “partners”. This type of business is commonly found in professional practices: Vets Doctors Dentists Solicitors Partnership Advantages: Disadvantages: Can raise more capital Unlimited Liability for the Risks and responsibility Formal paperwork required (from partners) for the business are spread among the partners Can be a family affair and still keep the activities private debts of the business which has to be prepared for each new partnership Limited number of partners Disagreements among the partners on how to run the business Liability Unlimited Liability: Limited Liability: This means being This is only losing the responsible for all the debts incurred in the running of the business. This may mean that the owner could lose their personal possessions, eg their home. amount that you have invested in the business. You can be a “limited” partner and not be involved in the day-today running of the business. Your personal possessions are not at risk. Types of Business Ownership Private Limited Company (Ltd) Owned by Shareholders Minimum of 2 shareholders Not allowed to sell shares on the Stock Market Private Limited Company (Ltd) Advantages: Disadvantages: Types of Business Ownership Public Limited Company (Plc) Minimum of 2 shareholders required Shares are bought and sold on the Stock Market Can raise more capital than all the other types of business organisations Public Limited Company (Plc) Advantages: Disadvantages: Easier to raise capital Limited liability for shareholders Can employ specialists Special paperwork required Affairs are public Decision-making process may be slow Types of Business Ownership Franchise This is where a new business trades on an already established successful business. The new business pays for permission to copy the existing business. McDonalds Pizza Hut Franchise Advantages: Already established name which people recognise Guaranteed customers Cost less to set up Less chance of failure Disadvantages: Have to give a percentage of profits to business owner (franchisor) The franchise has to be run according to the rules set by the franchisor Little scope for personal ideas and methods East Lothian Council Website Business and Trade Community Life and Leisure Education and Learning Housing Research Jobs and Careers Task Law and Licensing Solution Planning and the Environment Social Care and Health Tourism and Visitor Attractions Transport and Streets ExtensionTask: Public Spending The Chief Financial Officer ensures that a budget is produced for East Lothian Council They have to produce a 'balanced' budget. Income from Central Government and Council Tax is not unlimited! You have £5 million to spend for this financial period on the following areas: Education Housing Police/Fire Services Transport Environment Justify how you are going to spend this money