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Business in the real world (Business plans (An outline of what the…
Business in the real world
Stakeholders
Customers - They want quality goods, good service and competitive prices.
Government - They want profitability in business so they can charge more tax and the business can grow therefore more jobs are made
Suppliers - Profits mean more stock to be bought from them
Local community - They are a part of local business but also still need environmental consideration
Owners/Shareholders - They take a cut of profits as they have shares in the business
Managers - They want job security, chances for promotion and rewards too
Employees - They want job security, fair pay, promotions and good working conditions
Pressure groups - They fight for the rights of those affected by bad business ethics
Stakeholders influence
Owners are the most influential stakeholders as they make decisions in a firm
Stakeholders will often have conflicting opinions so a firm may prioritise some stakeholders opinions over others
A business can't ignore customers or workers interest, but if products are being sold elsewhere, the local community may not be as important
Sole trader
Have one owner
Mainly small businesses
Advantages
Easy to set up so they're good start up businesses
You get to be your own
Only you decide what is done with the profit
Disadvantages
You might have to work long hours and not get many holidays
Unlimited liability
Unincorporated - No separate legal identity, so if the business is sued you are being sued
Hard to raise money as banks see sole traders as risky
Unlimited liability - If business goes bust the owner is liable for all debts paying it back with whatever means necessary, the business is the same entity as those who own it
Partnership
Between two and twenty partners
Each partner has an equal share in profits and decision making
A deed of partnership specifies the terms between the partners eg how much profit they get
Advantages
More ideas and greater range of skills
More people to share the workload
More capital for the business
Disadvantages
Each partner is legally responsible for the actions of the other partners
Unlimited liability
Potential for disagreements as there are multiple people
Profits have to be shared so there may be less money than if you were alone
Ltd.
Private limited company
Shares can only be sold if all shareholders agree
Advantages
Limited liability
Company can continue trading after a shareholder dies
Easier to get a loan or mortgage
Owners are able to keep control as they decide who can buy shares
Disadvantages
More expensive as there's a lot of legal paperwork to do
Company legally obliged to publish its accounts annually
Limited liability - Shareholders can only lose the only they've invested as the business is a separate entity to the people owning it
PLC
Public limited company
Shares traded on the stock exchange
Advantages
More capital can be raised than any other structure
Helps expand and diversify the business
Limited liability
Disadvantages
Hard to get a lot of shareholders to agree on how the business should be run as most shareholders often have very little say unless they have a large amount of shares
Easy for someone to buy shares and take over the company
Accounts have to be made public, meaning anyone can see how the business is doing
More shareholders means more people wanting shares of profits
Business aims
Overall goals a business wants to achieve
Survival
Maximize profits
Growth
Increase shareholder value
Increase market share
Do what's socially and ethically right
Customer satisfaction
Business objectives
They are measurable steps on the way to achieving an aim
They act as targets to work towards
They can also help measure success in a business
Looking back on objectives over a period of time can help see if they were successful in achieving them
Factors affecting objectives
If a business is small it may focus on things like customer satisfaction to ensure customers return
Small businesses would be more concerned about survival and growth rather than increasing market share
A large business is more open to the public eye so may want to act ethically and protect the environment
If the market a business is in is highly competitive then customer satisfaction may be important
A business in a competitive market they would want to hold onto its market share rather than grow or maximise profits
Not for profit business would want to focus on social and ethical objectives rather than other objectives
Change in objectives
New legislation - Companies would have to adjust their objectives when new laws come into place, in 2016 the living wage was introduced the company may change its objectives relating to profit as wages were higher
Economy - A recession may cause a business to focus on surviving as there's no room to grow
Technology - As technology is updating, businesses should try and keep up, so time and money may invested into updating equipment and training staff to use them
Environment - If customers are concerned about a businesses effect on the environment, a business may focus on being environmentally helpful in order to retain customers
Business plans
An outline of what the business is going to do and how it will do it
Useful for starting businesses and if a firm wants to make a change
Has the owner think of what they will do, how its organised and resources needed
Can be used to convince people and banks to invest money
It helps an owner realise if the business was a bad idea early on
Helps a new business decide on objectives and aims
Making one can cost a lot of time and money, the benefit may not outweigh the cost in the end
Some may be too optimistic when planning, which will cause problems for the future
Managers may stick too rigorously to their plans, so if something that they haven't accounted for happens, things may go wrong when they stick to the plan
Sections of business plans
Personal details of the owner and other important persons, which many include CVs
Mission statement - Describes the broad aims of the company
Specific objectives
Product description - Includes details of the market and the competitors. Should include USP (unique selling point), marketing strategy, backed up by market research
Production details - How the firm will make its product or provide its service, should list equipment and location
Staffing requirements - What personnel, how many, job descriptions, and the expected wage bill
Finance - How much money needed to start up, cash flow forecast, projected profit and loss account and statement of financial position. Including ratios to show backers the likely return of their investment
Not for profit businesses
They don't try and make profit for the owners
They need to generate enough income to cover their costs, surplus income is put back into the business or used to fund projects
Many of these businesses have a charitable status and they get some tax relief and can apply for certain grants
Charitable businesses are hard to set up as they require a lot of rules to be followed, many are funded by just grants and donations which leads to a lack of a steady income
Social enterprises - A type of not for profit organisation, make money by selling products by use their profits to benefit society
Can be hard to manage as there's always uncertainty about how much finance they have and they may also rely on volunteers
They can be both incorporated and unincorporated
Bigger ones are incorporated and often limited by guarantee, meaning some of the members will pay a fixed amount of money on behalf of the business if it goes bust