BM Unit 1 - LO11 Higher Business Management Unit 1 Learning Outcome 1 Business in Contemporary Society

BM Unit 1 - LO12 What is Business Activity? n Using “resources” to produce goods and services which people require in order to satisfy their “wants”. n Any kind of activity that results in the provision of goods and services which satisfy human “wants”.

BM Unit 1 - LO13 Goods and Services Goods n Food n Clothing n Houses n Cars n TVs n Computers n Furniture n CD players Services n Hairdressers n Insurance n Gas and Electricity n Hotels n Leisure Clubs n Lawyers n Banking n Education

BM Unit 1 - LO14 Durable Goods Things that will last a long time and will be used regularly. n Cars n TV n Washing Machines n Cookers n Microwave Ovens n Refrigerators

BM Unit 1 - LO15 Non-Durable Goods Things that are “consumed” shortly after purchase. n Food n Drink n Clothing n Shoes n Newspapers n Magazines

BM Unit 1 - LO16 Inputs and Outputs Outputs Inputs Resources Raw materials Labour Machinery ‘Organisation’ Goods and Services

BM Unit 1 - LO17 Business Activity The Organisation (Internal) Inputs Land Labour Capital Enterprise Output Goods and Services Marketing People (Human Resources) Finance Production (Operations) External Influences eg Competition External Influences eg Government Policy

BM Unit 1 - LO18 Factors of Production n Land - raw materials, factory site n Labour - people with required skills n Capital - finance to buy equipment, machinery, computers, etc n Enterprise - organisation of the above factors, risk-taking, ideas

BM Unit 1 - LO19 Cycle of Business WANTS IDENTIFICATION PRODUCTION CONSUMPTION WANTS

BM Unit 1 - LO110 Sectors of Industry (Business Activity) PRIMARY (Extractive) Mining Fishing Farming Oil SECONDARY (Making goods) Manufacturing Construction Durables Non-durables TERTIARY (Services) Banking Insurance Tourism Distribution

BM Unit 1 - LO111 Organisations Types of Organisation Private Sector Profit-makingNon-profit-making Public Sector

BM Unit 1 - LO112 Private Sector Organisations Profit-making n Sole Traders (1) n Partnerships (2 - 20) n Private Limited Companies (50) n Public Limited Companies (no limit) n Franchises n Co-operatives Non Profit-making n Charities and Clubs

BM Unit 1 - LO113 Public Sector Organisations n Public Corporations BBC and Royal Mail n Bank of England n Local Authority Services Education, Housing, Police, Social Services n Central Government Departments Treasury, Defence, Health, Employment, Social Services, Environment, Transport, etc

BM Unit 1 - LO114 Business Objectives n Survival n Maximising profits n Growth n Good reputation n Maximising sales n Satisficing n Providing a service n Managerial objectives

BM Unit 1 - LO115 Enterprise and the Entrepreneur n Having and developing a business idea n Acquiring the necessary resources n Raising the finance to acquire resources n Risking losing the money invested Anita Roddick, Richard Branson, James Dyson, Marth Lane Fox

BM Unit 1 - LO116 Stakeholders Internal n Shareholders/ Owners n Managers n Employees External n Suppliers n Customers n Banks/lenders n Society/Local Community n National Government n Local Government n Taxpayers n Donors (Charities)

BM Unit 1 - LO117 Stakeholders’ Interests n Shareholders - dividends, capital growth n Managers - job security, fringe benefits n Employees - job security, pay and conditions n Suppliers - regular orders, prompt payment n Customers - low prices, high quality, good service n Banks - ability to make payments for loans n Government - payment of taxes, compliance with laws n Community - corporate responsibility

BM Unit 1 - LO118 Stakeholders’ Influence n Shareholders - voting rights at AGM n Managers - day-to-day decisions n Employees - possible industrial action n Suppliers - period of credit, level of discounts n Customers - taking their business elsewhere n Banks - granting of loans and rate of interest n Government - legislation, equal pay, minimum wage, etc n Community - protest movements, direct action

BM Unit 1 - LO119 Sources of Finance Long-term n Capital n Mortgages n Debentures n Sale and Leaseback n Venture Medium-term n Bank Loans Short-term n Overdrafts n Factoring n Trade Credit

BM Unit 1 - LO120 Government Help for Businesses n Local Enterprise Companies n Education/Business Partnerships n Business Start-up Scheme n Loan Guarantee Scheme n Reduced rate of Corporation Tax n Zero Rating (VAT) on Exports n Dept of Trade and Industry - advice, Trade Fairs n Export Credit Guarantee Department n EU - Regional Development Funds

BM Unit 1 - LO121 Other Sources of Help n The Prince’s Youth Trust - help for young people to set up in business n Local Authorities - ‘small business advisers’ n Trade Associations - ‘Association of Small Businesses’, ‘Scottish Motor Trade Association’, ‘ABTA’, etc n Local Chambers of Commerce

BM Unit 1 - LO122 Methods of Growth n Integration - 2 firms combining to become bigger n Merger - integration on equal terms n Take-over - one firm’s identity is lost in the take-over. Can be ‘friendly or hostile’

BM Unit 1 - LO123 Integration n Horizontal - firms at the same stage of production n Vertical - forwards towards the customer and backwards towards the raw materials n Lateral - firms with related goods not in competition with each other n Conglomerate/Diversifying - firms operating in completely different markets

BM Unit 1 - LO124 Reasons for Growth n Eliminate competition/increase market share n Achieving greater economies of scale n Security from hostile take-over - more assets n Cutting out “middlemen” n Securing sources of raw materials n Controlling distribution of products n Spreading risks - ‘not having all eggs in one basket’ n Smoothing seasonal fluctuations in sales

BM Unit 1 - LO125 De-integration n De-integration - conglomerate selling off firms to concentrate on “core” business n De-merger - subsidiary companies splitting away from the parent company and operating on their own n Divestment - selling off companies n Contracting out/out-sourcing - getting other companies to do work on your behalf n Management buy-out/buy-in - usually a struggling company sold to a management team

BM Unit 1 - LO126 Business as a “System” n Inputs - raw materials and other resources n Processes - transformation into goods n Outputs - the finished product/service to be marketed n Feedback - the reaction of the market A system is made up of 4 inter-dependent parts:- Any system is affected by the environment in which it operates

BM Unit 1 - LO127 Internal Pressures to Change n New personnel or management n New technology (the internet) n Change in financial position

BM Unit 1 - LO128 External Pressures to Change (the ‘PEST’ analysis) n Political/legal (legislation, planning, devolved Parliament, etc) n Economic (interest rates, foreign exchange rates, the Euro, etc) n Social (ageing population, role of women, greater general prosperity) n Technological ( , internet)