1. UNIT 1 1.1 - What do businesses do?
Business Management
UNIT 1
1.1 - What do businesses do?

2. What are goods and services?
Businesses make goods
Some examples of goods made
Computers
Cars
Washing Machines
Mobile phones
Sweets
Clothes
Seafood
DVD players
I-pods
Businesses provide services
Some examples of services provided
Banking
Insurance
Education
Hairdressing
Public transport
Entertainment – cinema

3. Goods and services can be described as
Tangible
goods – can be seen, touched and handled –
eg washing machine, car
Intangible
goods – cannot be touched or handled –
eg public transport, hair dressing

4. Goods and services can be described as
Durable
goods and services – long lasting –
eg clothes, education
Non-durable
goods and services – used up quickly –
eg sweets, cinema

5. WHAT ARE CAPITAL AND CONSUMER GOODS?
Goods sold to people (ie consumers – us) for their own use
Capital goods
Goods used by a business to make consumer goods and other capital goods

6. Difference between Needs and Wants
As consumers, we buy the goods offered by a range of organisations/
businesses.
The following are examples of goods we buy

7. WHAT IS A NEED? Food Shelter Clothing Drink
A NEED is something an individual must have in
order to survive – these are the basic needs or
wants
Food
Shelter
Clothing
Drink

8. What I really, really want, What you really, really want....
WHAT IS A WANT?
It is important to distinguish between what
we need and what we want
I’ll tell you what I want,
What I really, really want,
So tell me what you want,
What you really, really want....

9. WHAT IS A WANT? I-pod Sports Car Video Camera Expensive jewellery
A WANT is something an individual would like to
have, or wishes for – they are not essential
for survival
When a want is fulfilled it gives the consumer
Satisfaction. Examples are:
I-pod
Sports Car
Video Camera
Expensive jewellery

10. HOW DOES A BUSINESS KNOW WHAT WE NEED OR WANT?
A business will use Market research to identify what consumers need and want.
This information helps the business in decision making eg whether a new product/service should be developed

11. Types of business organisation

12. Sole Trader FEATURES OF SOLE TRADER Aims is to make a profit
Business owned and often run by one person
May employ other people in the business
Tend to be small businesses
Examples: Small shops, Car mechanics, Flower shop
Can you name 3 sole trader businesses in Oban?
Albany Stores, Esplanade Post Office, Flower basket.

13. Sole Trader ADVANTAGES: DISADVANTAGES: Owner keeps all the profits
Owner controls all the decisions
Easy to set up the business.
DISADVANTAGES:
Owner bears all the responsibilities
If owner cannot work the business may suffer – lack of cash
Owner may have difficulty obtaining finance
Owner has unlimited liability.

14. Partnership FEATURES OF PARTNERSHIP Aim is to make a profit
Business between two and twenty partners
Partners usually enter into a legal agreement called a Partnership Agreement which states
States share of profit
Which partner has most responsibility
Partners may invest different amounts of money
This will affect their share of profit
Examples: Dentists, vets and lawyers.
Can you name 3 partnership businesses in Oban?
Munros Garage, MacCamley and Laird, Stevenson Kennedy (lawyers)

15. Partnership ADVANTAGES:
Partners can share workload according to skills
Partnerships find it easier to raise finance than sole trader
Risks are shared between partners – risk of poor profit
DISADVANTAGES:
Profits shared between the partners – therefore smaller share
More people to run business – risks of disagreement
Partners usually has unlimited liability
Legal agreement needs to be set up.

16. What are Shares? Companies are owned by people who are shareholders
Anyone over 18 can buy shares
Shareholders are given a share of any company profits
The share of profits is called a dividend and is payable once or twice yearly

17. Private Limited Company
FEATURES OF PRIVATE LIMITED COMPANY
Aim is to make a profit
Name of the business will end with Ltd
Owned by shareholders – minimum of one
Shares in the company are owned privately
Run by a Board of Directors
Such companies are often family businesses.
Examples: MacQueen Bros had recently become a Private Ltd Company
Can you name 3 private limited companies in Oban?
Direct Footwear Services Ltd, MacQueen Ltd, Beaver Timber Ltd,

18. Private Limited Company
ADVANTAGES:
Owner keeps control of the business
Private limited company can raise more finance that a smaller business
Shareholders have limited liability.
DISADVANTAGES
Profits shared between more people
A legal agreement must be set up
Shares cannot be sold to the public, so raising finance can be more difficult than for a public limited company.

19. Public Limited Company (plc)
FEATURES OF A PUBLIC LIMITED COMPANY
Aim is to make a profit
Name of the business will end with plc
Owned by shareholders – minimum of two
Minimum share capital of £50,000
Shares in the company can be bought and sold on the Stock Exchange
Run by a Board of Directors
Examples: BP plc, Boots plc, Tesco plc.
Can you name 3 public limited companies operating in Oban?
Tesco plc, Boots plc, W H Smith plc

20. Public Limited Company (plc)
ADVANTAGES:
Public limited company can raise more finance than private
PLC can borrow more money
Shareholders have limited liability.
DISADVANTAGES:
PLC has no control over who buys its shares
Profits shared between many more people
Expensive to set up
Accounts must be published annually.

21. Limited and Unlimited Liability
Sole trader or unlimited partners have full responsible for the debts of the business.
If the business does not have enough money to pay its debts the owners or partners must pay the debts from their own personal funds.
May result in the owners having to sell their own possessions to raise the money.
Limited Liability
In a Private or Public Limited company the shareholders liability is limited to the amount they have invested, or agreed to invest in the company.
The will not have to sell their own possessions to pay the debts of the business.

22. Can you name 3 franchises in Oban?
What is a Franchise?
A franchise is an agreement or license between two parties which gives a person or group of people the rights to market a product or service using the trademark of another business.
Examples of a Franchise are:
McDonalds
Domino Pizza
Body Shop
Can you name 3 franchises in Oban?
Subway, BSM, Interflora

23. Franchise There are 2 parties to a franchise agreement:
Franchisor – the person owning the rights to the product or service being offered
Franchisee – person or group of people purchasing the rights to sell the product or operate the service.

24. Features of a Franchise
The Franchisee pays to copy the business idea, image, name of an existing company
A MacDonald’s burger in Fort William will be look and taste exactly the same as one bought in Glasgow
The franchisee pays a licence and shares profits with the franchisor
Franchisee is restricted on what they can charge for the goods and what they can sell.

25. Advantages of a Franchise
Reduces the risk of business failure
The business has been tested and proven on the market
Allows small businessman to compete with larger business concerns
Economies of scale
Support offered by franchisor – advertising etc
Trade under a recognised brand. Training provided by franchisor
No previous experience required
Exclusive territorial rights
Back-up provided for administration and trouble shooting.

26. Disadvantages of a Franchise
Franchisee may suffer from bad service provided by another of the franchisees in a different area
Highly specialised business and limited to what the franchisor wants to do – no room to expand products
If the franchisee wishes to sell their business they must gain consent of franchisor
Franchisee may not like the interference.

27. Can you give an example of a Public Ownership organisation in in Oban?
FEATURES OF A PUBLICLY OWNED ORGANISATION
Main aim is to provide a service
Funded by taxpayers
Controlled by government
Provide essential services for the whole population
Non profit making
Examples: BBC , National Health Service, Education Services
Can you give an example of a Public Ownership organisation in in Oban?
Local Government

28. Public Ownership ADVANTAGES: Less competition DISADVANTAGES
May not be as profitable as private sector businesses.

29. What is the aim of a Charity?
Aim to care for those in need or help

30. Main features of a Charity
Use donations from the public
Raise funds in other ways
Do not make a profit
Examples include Oxfam, RSPCA, and Save the Children

31. Sizes of Business Organisations
Small businesses
Often owned and run by one person
Or owned and run by a partnership
Sell goods or services locally
Employ fewer than 50 people
Eg hairdressers, electricians, computer trainers

32. Sizes of Business Organisations
Medium-sized Businesses
Owned and run by a group of people (eg partnerships, shareholders or directors)
Can sell goods and services locally and or nationally
Employ between 50 people and 250
Eg manufacturers – clothes, National car hire companies, theatres, insurance companies

33. Sizes of Business Organisations
Large Businesses
Owned by a large number of people eg shareholders and run by people appointed by them - directors
Produce and sell goods and services in several locations – often in several locations
Employ more 250 people – sometimes hundreds of thousands
Eg Car manufacturers – Ford; retail food outlets - Marks & Spencer; Banks; Oil companies

34. Local Business Features of Local business organisations
Small to medium sized
Services local markets
Employs small number of people
Has only a few outlets
For example
Mathesons Furniture
MacQueen Bros
Alba

35. National Businesses Features of National Business organisations
Have household names
Easily recognised eg logos
Employ large workforce
Have branches/factories in major towns and cities
For example
Boots The Chemist
River Island
Thorntons

36. Multi-National businesses
Features of Multi-national businesses
sell goods or provide services worldwide
operate in more than one country

37. The Economy can be divided into 3 Sectors:

38. SECTORS OF THE ECONOMY Private –
owned by sole traders, partnerships, limited companies and public limited companies –
financed by private monies from shareholders and banks
aims –
To maximise profits
To turn innovative ideas into successful businesses
To expand the business

39. SECTORS OF THE ECONOMY Public – owned by the state
financed by the state, eg through council tax, income tax
aims
To provide the same quality service to everyone in a country
To make good use of taxpayers’ money and provide the services that an area needs

40. SECTORS OF THE ECONOMY Voluntary –
owned by those taking part in the activities
financed by donations, gifts and fund raising activities
aims
To provide support for worthy causes
To provide the best service and facilities for the members of welfare, social and sports organisations.

41. SECTORS OF INDUSTRY

42. SECTORS OF INDUSTRY Oil Production Fishing Forestry PRIMARY SECTOR –
agriculture, fishing, mining
This involves the extraction of raw materials
Oil Production
Fishing
Forestry

43. SECTORS OF INDUSTRY Car manufacturing Engineering manufacturing
SECONDARY SECTOR –
manufacturing
This involves the manufacture of goods
Car manufacturing
Engineering
Shipbuilding

44. SECTORS OF INDUSTRY Insurance Hairdressing service Leisure
TERTIARY SECTOR –
service
This involves the provision of services
Insurance
Hairdressing
Leisure
Public Transport
Education
Fire Service

45. PRODUCTION AND CONSUMPTION
Production is the process of making goods so that they can either be consumed, or further processed before being consumed eg before a jumper can be knitted thefarmer must produce the wool, the sheep is sheared, the wool is then washed spun, dyed, packaged and knitted into the final garment.
Consumption is when the customer purchases the goods or services produced by the business.

46. PRODUCT-LED AND MARKET-LED PRODUCTION
Products and services can be supplied to the market for
a variety of reasons:
Product-led – a business makes/produces goods and
provides services, basically because they are good at it.
Market-led - a business makes/produces goods and
provides services to meet identified consumers’ needs.

47. THE PRODUCTION PROCESS/CHAIN
The production process will follow several stages and
involves the transformation of raw materials into
finished articles:
INPUT –
raw materials
PROCESS –
Manufacturing
stages
SOLD TO
CUSTOMERS
OUTPUT–
Finished goods

48. Example of the production chain
The production of a cake for tea:
The farmer – produces wheat
The miller – produces flour
The baker – makes the cakes and adds the cream
The retailer – sells the cakes to Ms MacIver
Ms MacIver’s son eats the cakes

49. Another example of the production chain
Farmers rear sheep to obtain wool
Sheep sheared – wool - basic raw material produced
Wool delivered to spinning factory
Wool is washed, spun, dyed and packaged
Wool delivered to textile company
Skilled workers use machinery to ‘knit’ the jumper
Manufacturers package the final product
Delivered to the retailers – world wide
Retailer sells the jumper to the customer.

50. Factors of production
Resources required to produce goods and services can
be divided into 4 main groups knows as the Factors of
Production.
LAND – site of factory/premises
LABOUR – people employed to produce the goods
CAPITAL – money required to purchase
ENTERPRISE – idea provided by the owner

51. LAND Buildings – land needed for housing, businesses Water
Farmland – crops,animals
Buildings – land needed for housing, businesses
Water
Coal-mining to provide heat oil/gas-refineries

52. Labour is physical and mental effort.
People who use mental effort include:
Teachers
Bankers
People who use physical effort include:
Assembly workers, eg a car production line
A baker – mixing of ingredients to make bread and cakes

53. CAPITAL
Capital is the money and the things that can be purchased with money to make and sell goods and services.

54. ENTERPRISE
Enterprise means having an idea for a new business and taking risks with the other factors of production to make the business a success

55. CREATING WEALTH
Creating wealth occurs at each stage of the production process.
Value is added by each producer eg
miller adds to the value of the wheat by processing it
Baker adds to the value of the processed wheat by making it into cakes
The total value of the cake is much more than the value of the raw materials used in its production
Therefore each stage creates more total wealth than the previous stage

56. Wool prices are about 50 pence per kilogram and for most farmers the value of the wool does not cover the cost of shearing.
Finished product - £55!

57. Topics Covered Goods and services Tangible and intangible
Durable and non-durable
Consumer and capital
Needs and Wants
Types of organisation
Sole Trader
Partnership
Shares
Private Ltd Co
Public Ltd Co
Limited/Unlimited Liability
Franchise
Public ownership
Charities
Size of Organisations
Sectors of the Economy
Sectors of Industry
Production and Consumption
The Production Chain
Factors of Production
Creating Wealth