Define
A need
is something we have to have to live e.g. food, water, clothing
How to increase value added?
reducing the cost of raw material, or increasing the price by offering better quality products, better packaging...
are the problems with expansion
Difficult to control, Poor Communication, Expansion costs, Integrating with another business is more difficult than expected
A business formed by two or more people with shared responsibilities and shared capital investment.
Partnership
Characteristics of an entrepreneur
Hard-working, Risk Taker, Creative, Optimistic, Self-confident, Innovative, Independent, Effective Communicator
We need a business Plan
Helps to inform business decisions and minimise risks. Requirement of application for finance - banks can assess entrepreneurs’ experience, plan & associated risks, and make a judgement on suitability for loan
are the drawbacks of using Number of people employed to measure a business size
some companies use very few people in operations but produce high output, They use machines: Capital intensive, Companies that hire only part-times
Seeks the benefit of the society, control prices, for safety reasons like weapon industry
Internal Growth
Occurs when a business expands its existing operations. The growth is often paid for by profits from the existing businesses. Such as increase hiring, open up new branches etc.
Businesses want to grow
higher profits, more status quo, reduce average cost, and higher market share
ways to measure business size
Number of people employed, Value of output, Value of sales, Value of Capital employed
Being a conglomerate
The business has diversified activities in more than one industry, reduces risk and transfer of ideas from one business to the other.
Opportunity Cost
When making a choice, the next best alternative we had to give up
Business fails
Lack of management skills, Changes in the business environment, poor financial management, Over-expansion
is de-industrialisation
The movement of an economy from depending on the secondary sector to depending on the tertiary sector.
Horizontal Integration
Value Added
the difference between the selling price of a product and the cost of bought-in raw materials & components.
Diseconomies of scale, personal life of the owner, personalized experience, niche product
What ways can government support small businesses
reduce taxes, give grants, training for employees, premises with lower prices
Vertical backward Integration
Reduced costs (cuts out margin on supplies), better access to raw materials (restrict competition’s access), potentially better quality