Business activity

- non-profit, aims to improve human and environmental well being instead of making profit
- Some goods, services provided by organisations owned by central/local government
- to make money

F: survival, profit, sales, market share, financial security
NF: Social objectives (environmentally friendly) Personal satisfaction, achieving a challenge, Independence and control

*S*pecific - stating aims clearly
*M*easurable - measurable in numbers
*A*chievable - using people involved
*R*ealistic - achievable with resources available
*T*ime specific - stating period time to achieve it

-Technology
-Performance
-Legislation
-Internal reasons
- market conditions

Innovators
organised
Decision
Risk takers

Inincorporated - No legal distinction between owner + business. Everything carried out in name owner. Often small + owned by one person/small group.
Incorporated - Separate legal identity from owners. Can sue, be sued, taken over or liquidated - limited companies. Owners shareholders.

An individyual who trades under his or her own name
One owner.
Can employ many. Unlimited liability, totally independent

-Owner keeps profit
-Independent - has total control
-Simple to set up. No legal requirements
-Flexibility - can adapt quickly
-Can offer personal service as they are small
- Easier to solve problems

-Unlimited liability
-struggle to raise finance - too risky for lenders.
-Independence may be too much responsibility
-Long hours. Very hard work
-Often too small to exploit economies of scale
-No continuity - business dies with owner
- difficulty in descion making

Business owned by between 2 to 20 people own
May produce deed of partnership. Legal document stating partner's rights

-Easy to set up + run - no legal formalities
-Partners may specialize in the area of expertise
-More capital can be raised with more owners
- Better decision making

- Partners have unlimited liability
- Profit shared
- May disagree and fall out - conflicts
- Any partners' decision legally binding on all

A well-known company that allows individuals to use their business ideas for a royalty fee.
Developed successful business name + prepared for others to trade under it.
franchisor - person owning the franchises

-One-off start-up fee
-Ongoing fee (often based on sales)
-Contribution to marketing costs
-Franchisors may make a profit on some materials, equipment + merchandise supplied to franchisee.

-License to trade under brand name
-Start-up package - help, advice, essential equipment + branding materials
-Business training.
-Materials, equipment + support services needed
-Marketingg support for all franchisees.
-Exclusive geographical area to operate. ie. no competition from other franchisees in same group.

- Less risk tried, tested idea used
- Back-up support given
- Set-up costs predictable
- National marketing organized

-*Profit shared* with franchisor
-*Strict contracts* signed
-*Lack independence* - strict operating rules
-*Expensive way* to start business

-*Fast method* growth
-*Cheaper method* growth
-Franchisees take some *risk*
-Franchisees *more motivated* than employees

-*Profit shared* with a franchisee
- Poor franchisees *damage brand's reputation*
- Sharing confidential info can be risky if franchisee is not reliable
-*Cost* support for franchisees high

A business that aims to improve human + environmental well-being rather than make a profit.
-Have *clear social/environmental* mission
-Generate income through *trade or donations*
-*Reinvest* most profit
-*Accountable* and *transparent*

*Cooperatives*:
consumeretail cooperatives *owned + controlled by members*. They buy shares letting them elect directors to make key decisions. Any *profit given to members.*
*Charities* set up to provide help and raise money for the ones in need.

-Incorporated, limited liability - Raise capital by selling shares -Shareholders elect directors
-Sole traders + partnerships pay income tax but limited companies pay *corporation tax on profits
-To form a limited company, one must follow legal procedure. Memorandum of association and article of association.

Details about the company
-company name
-name + address registered office
-objectives + nature of its activities
-amount capital to be raised + number shares issued

*INTERNAL RUNNING*
-shareholder's rights depending share type
-procedures for appointing directors
-Time directors serve before re-election
-timing + frequency company meetings
-arrangements for auditing accounts

- ends in *Limited or Ltd*
- Shares transferred 'privately'. All shareholders must agree on transfer. They cannot be advertised for sale. Shares cannot be traded on the stock market.
-owners -famuly businesses, family members, friends *
-*Directors often shareholders*. Involved in management.

- limited liability - More capital can be raised -Control not lost to outsiders -Business continues if a shareholder dies -More status? - ie. than a sole trader.

-Financial information made public
-Costs money + takes time to set up
-Profits shared between more members
-Takes time to transfer shares to new owner
-*Cannot raise huge amounts of money*, like PLCs

PLCs larger than Ltd. Shares traded by the public on stock exchange. Anyone can buy.
limited liability

-Lawyers must ensure prospectus 'legally' correct
-Prospectus must be printed + circulated
-Bank may be paid to process share applications
-Advertising + admin expenses
-PLC must have minimum of *£50,000* share capital

-Large amounts capital can be raised
-Shareholders have limited liability
-Can exploit economies of scale
-Can dominate market
-Shares can be traded easily
-May have high profile

-Very high setting up costs
-Outsiders can take control by buying up shares
-More financial information made public
-More remote from customers
- shared profit

-Huge assets + turnover -Highly qualified + experienced executives + managers
-Powerful advertising and marketing capability
-Highly advanced technology
-Highly influential economically and politically
-Very efficient. Can exploit huge economies of scale
-Ownership + control centred in host country

- Large customer base
- lower costs
- higher profile
- lower taxes

Increase in income and employment
increase in tax revenue
increase in exports
tranfser of technology

Environmental damage
Exploitation of less developed countries
Repatriation of profits
Lack of accountability

State owned, Created by law, Incorporated
State funded , Provide public service, Public accountability

Avoid wasteful duplication
Keep control strategic industries
Save jobs
Fill in gaps left by private sector
Serve unprofitable regions

Cost to goverment
Inefficiency
Political interference
Difficult to control

transferring public sector to private sector
Sale of public corporations
Deregulation
Contracting out
Sale of land and property

To Generate income
To reduce inefficiency
As a result of deregulation
To reduce political interference

Growth
Size
Need for finance
Control
Limited liability

Type of business activity may influence choice of legal status.
Way in which business plans to use its profits may be important.
Different stakeholders ie. employees and shareholders can influence choice of organisation.

-Sole traders may be happy with *modest profit*May not want the responsibility for other objectives like growth
-Family businesses and other medium-sized Ltds may not wish to go public - afraid of *losing control* to outsiders.
-Most multinationals want to grow. Aim is often to get *bigger to dominate global markets.
Primary sector
Secondary sector

P: *extracting* raw materials from earth. ie:
Agriculture, Fishing, Forestry, Mining and quarrying
S: *Converting* raw materials into finished/semi-finished goods - manufacturing, processing, construction.
T: providing services. Transport

Three sectors *interdependent*. Rely on each other. Ie: primary sector, cereal farmers need bakers in secondary sector to sell wheat. Bakers need advertising agencies in tertiary sector for newspaper ads.

Decline manufacturing (Secondary sector)
-People spend more income on services than manufactured goods
-Fierce competition in producing manufactured goods from developing countries. ie. India, China etc
- public sector grows - provides services, adds to growth tertiary sector.
-Tech advances- machines replace people

- Proximity to the market, materials, labor, competitors.
- nature of the business: services, office-based businesses, manufacturing and processing, agriculture
- internet availability
- legal controls
Influence of legal controls on location

-*avoid congestion* Reduces strain on existing infrastructure.
-Minimise impact businesses have on *local communities.*
- locate where *unemployment high*. helps distribute jobs in country.
-Government use *financial incentives* to influence choice location - low rates, tax breaks etc.
-To attract *foreign manufacturers*

Trade barriers* control level imports into country. . To avoid trade barriers, like tariffs, businesses may decide to locate inside *trade bloc*. A trade bloc is group countries situated in the same region that join together + enjoy trade free of barriers

Defined as growing integration world's economy.'
-Goods/services traded freely across int borders.No gov laws prevent firms selling goods abroad.
-People can live/work in the country they choose
-High level interdependence between nations.
- Capital flows freely between different countries.
-Free exchange of technology + intellectual property across borders.

- Developments in technology, People can communicate easily
- Transport and travel is easier.
- Deregulation - there are fewer rules stopping people from selling and trading worldwide.
- increased Tourism, consumers want to experience things they have tasted abroad.
- Businesses want to make more money by selling abroad.

- only happen if gov are committed to it.
- Countries cannot trade if the government keeps int borders closed.
- People cannot be free to live and work abroad if the government does not allow it.
- Firms cannot develop their business worldwide if planning permission is denied

-Access to larger markets
- Lower costs
- Access to labour (shortage domestic labour, prevent, wages from rising , skilled staff)
- Reduced taxation

-Competition: More companies sell goods + services worldwide, some businesses have survival threatened.
- International takeovers Free movement capital - business one country can take over business in another.
- *Increased risk external shocks*. Interdependence resulting from globalisation can threaten businesses.

International trade
-countries can get *goods not produced domestically*.
-can get goods *more cheaply overseas.*
-More *consumer choice*
-Countries can sell off *surplus commodities.*

Fiscal policy: using changes in taxation and government expenditure to manage the economy
- income tax lowered - more spending in economy-businesses may increase production and expand
-Higher corp tax - businesses cut investmenteduce dividends. Countries cut corp tax to attract foreign businesses, provide jobs + improve living standards

-Change *law*
-Influence *int rates + exchange rates.*
-Change levels *gov expenditure + taxation*
-Introduce policies with direct impact on businesses. *(subsidies etc.)*
How can governments affect business activity?

Heavy expenditure large-scale infra projects = big benefits bus as the private sector gets most work.
Construction companies + their suppliers benefit most.

Gov must provide a legal framework so businesses can operate* + ensure vulnerable groups protected, stakeholders and businesses not exploited
Consumer protection, competition policy, Environmental legislation

-Protects jobs* if foreign competitors threaten the survival of domestic producers.
-Protects infant industries (new inds to be established)
-Prevents dumping (foreign producers sell goods below cost in a domestic market)
-Raises revenue from tariffs
Trade policy

-*Tarrifs*, import tax making them more expensive.
-*Quota*, physical limit on total into country
-*Subsidy*, giving financial support (grants, tax breaks) to exporters/domestic producers facing fierce competition from imports
-*Administrative barriers*, use strict health + safety/ env regulations + specifications making importing difficult.
Trade policy

Countries same region sign trade agreement to *reduceemove trade barriers*. Benefits include:
-Chance to specialize in goods + services they can produce more expertly at a lower cost.
-*Access to wider markets
-*Lower costs*, if economies of scale exploited when sales + output rise
-*Protection from large predatory multinationals* from the outside bloc.

Interest = cost borrowing money + reward to savers
Use interest rates to manage the economy - *monetary policy*.
Higher interest rates = more expensive to borrow money, demand in the economy likely to fall.
Lower interest rates - more demand econ - cheaper to borrow

-Costs rise for loans, Higher int rates = cut profits.
-*Purchase capital goods by borrowing discouraged - more expensive
-*Higher interest rates = demand in econ falls as consumers borrow less for spending*. Bus producing goods bought with borrowed money suffer most.

-Increased consumerawareness
-Changing demand patterns
-Increased number women at work
-More part-time workers
-Urbanisation

-Machines in Primary sector
-Robots in Secondary sector
- Increased efficiency, reduced costs
- development of social media

- Global warming
- Habitat destruction
-Resource depletion
- Sustainable development

- pressure groups
- changes in tax
change in governments

Revenue
Market share
Customer/owner/shareholder/employee satisfaction
Profit
Size of business
Growth

- Overtrading
- Investing too much in fixed assets
- allowing too much credit
- overborrowing
- seasonal factors
- unexpected expenditure
- external factors
- poor financial management

New entrants:
ineffective cost control
Ineffective marketing
Lack of business skills
Poor leadership