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3.1 What is business ? - Coggle Diagram
3.1 What is business ?
3.2.1 Understanding different business forms
Sole Traders
- An Individual training on their own.
Self employed
Unlimited Liability (full responsibility)
Minimal Legal Formalities
Advantages
Freedom
Profit
Simplicity
Savings on fees
Disadvantages
Risk
Time
Expertise
Finance
Vulnerability
Unlimited Liability
Non- Profit Organisations
- Set up to not make profit, have other aims such as community needs
Charities
- Make money through donations and business activities, Get tax reductions because of their not for profit structure
Mutua
l - Aim to offer customers the best possible value on products or services. Profits are reinvested into the business
Private sector
- Organisations are owned and run by private individuals, aim to make profit
Public Sector
- Organisations are owned and run by the government, Aim to provide services rather then profit
Private Limited Company
Can't sell shares to public
Don't have share price quoted on stock market
Shareholders may not be able to sell shares without permission of other share holders
Often small family business
No minimum share capital required
LTD
Public Limited Companies
Can sell shares to the public
Financial documents need to be shared to the public
Share prices can be quoted on stock exchange
Usually start as limited companies
Need over £50000 of share capital and if they are listed on stock exchange, at least 25% of this must be publicly available
Names end with PLC
Role of Share Holders
Provide Funds
In small LTDs, often directors of the company
In most PLCs shareholders are not involved in running the business
Receive a dividend
Have limited liability
Influence on share prices
Performance of company
Rumour of new product launches
Interest rates low
Economy is strong
3.1.3 Understanding the business operate within an external environment
Competition
- Many competitors increase the selling power of the supplier as they will have a range of firms wanting to buy their goods and services. Competition can encourage firms to compete on price, therefore lowering prices overall and increase demand in the market
Market Conditions
- Market in its decline = costs may be lowered as firms try to maintain sales
High level of demand = supplies may be in short supply allowing suppliers to increase costs
Market growing = demand will be increasing and vice versa
Income
- Rising incomes maybe as a result of higher wages which are a cost to a business
Income directly affects customer spending
Interest Rates
- Interest rates go up so will the price of repaying bank loans and overdrafts, Increase fixed costs of a business
Interest rates going up encourages customer saving and discourages spending
Demographic Factors
- Rising net migration has increased the size of workforce in the UK. Driven average wage costs down, lowering the costs of production
Migration has seen an increase in demand for a wide range of goods and services
Environmental Issues
- Fairtrade may increase cists, as business is making commitment to pay suppliers a fair price.
Businesses can use environmental issues and Fairtrade as a USP