Please enable JavaScript.
Coggle requires JavaScript to display documents.
Business, A business plan (Most small businesses have very limited…
-
A business plan
-
-
-
They launch products they believe customers want and competitors cannot match. Poor planning is a major cause of business failure.
A business plan is a report by a new or existing business that contains all of its research findings and explains why the firm hopes to succeed.
-
-
Drawing up a business plan forces owners to think about their aims, the competition they will face, their financial needs and their likely profits.
Business plans help to reduce risk and reassure stakeholders, such as banks.
-
What is a business?
-
-
There are many types of business in the UK. These range from small firms owned and run by just one self-employed person, through to large companies which employ thousands of staff all over the world.
-
Nearly half a million businesses start up each year. A business start- up is a new firm operating in a market for the first time.
-
Suppliers,customers and markets.
Businesses buy the products they need from suppliers – firms selling products to other businesses - and sell to customers.
-
Sometimes the customer and consumer are different people - for example, parents buy a pen for their child to use at school.
-
A market is any place where buyers and sellers meet to trade products - this can be a high street shop or a website.
-
Adding Value
In order to create goods and services, a business buys or hires inputs such as raw materials, equipment, buildings and staff.
-
-
-
A business adds value when the selling price of an item produced is higher than the cost of all the resources used to make it.
Taking a calculated risk
A new business starts out with few, if any, customers and is likely to face competition from existing firms.
To succeed it needs to plan its launch carefully and work out how to create a competitive advantage over its rivals.
To gain this advantage, it needs to offer a product which customers prefer to a rival's product.
Setting up a business involves risks and reward. Profit is the reward for risk-taking. Losses are the penalty of business failure.
An owner may decide to close a business if losses are being made, or if the level of profit is not enough to make trading risks or hours worked worthwhile.
Sole traders
-
-
A sole trader describes any business that is owned and controlled by one person - although they may employ workers. Individuals who provide a specialist service like plumbers, hairdressers or photographers are often sole traders.
Sole traders do not have a separate legal existence from the business. In the eyes of the law, the business and the owner are the same. As a result, the owner is personally liable for the firm's debts and may have to pay for losses made by the business out of their own pocket. This is called unlimited liability.
Why start a business
There are several reasons why entrepreneurs are willing to take a calculated risk and set up a business. Possible motives include:
Making a profit. A business does this by selling items at a price that more than covers the costs of production.
Owners keep the profit as a reward for risk-taking and enterprise.
-
Being able to make a difference by offering a service to the
community such as a charity shop or hospice.
The skill involved in wanting to start and run a business is called enterprise. The individual who sets up their own business is called an entrepreneur.
A new business needs its own name and a product. The challenge is to make goods and services that satisfy customers, are competitive and sell at a price that more than covers costs.
Product differentiation
Businesses operate in competition with each other. If the market is large enough to support many firms, a new business can open which imitates an existing idea. ‘Me too’ products can sometimes be successful.
However, businesses become more competitive by making products that stand out from the competition in terms of price, quality or service. This is called product differentiation.
-
Primary, secondary and tertiary sectors
There are three main types of industry in which firms operate. These sectors form a chain of production which provides customers with finished goods or services.
Primary production
This involves acquiring raw materials. For example, metals and coal have to be mined, oil drilled from the ground, rubber tapped from trees, foodstuffs farmed and fish trawled. This is sometimes known as extractive production
Secondary production
This is the manufacturing and assembly process. It involves converting raw materials into components, for example, making plastics from oil. It also involves assembling the product, eg building houses, bridges and roads.
Tertiary production
This refers to the commercial services that support the production and distribution process, eg insurance, transport, advertising, warehousing and other services such as teaching and health care.
The chain of production shows interdependence: firms rely on other businesses in different sectors for raw materials, components or distribution.
-
-