National Year 10 Business

Chapters: 4

1. 3.1 Business in the real world

3.1.1 Purpose and nature of business · 3.1.2 Business ownership · 3.1.3 Business aims and objectives · 3.1.4 Stakeholders · 3.1.5 Business location · 3.1.6 Business planning · 3.1.7 Expanding a business

Purpose and Nature of Business – A business provides goods (things) or services (actions) that customers need or want, usually to make a profit. People start businesses to earn profit, to be their own boss, to meet a need they have spotted, or to help others. Every business uses four factors of production: land, labour, capital and enterprise. Because resources are scarce, every choice has an opportunity cost: the next best option given up. Businesses work in the primary (raw materials), secondary (making things) and tertiary (services) sectors. Entrepreneurs organise resources and take risks; their reward is profit. Business aims include survival, profit, growth, market share, customer satisfaction and social or ethical aims, and they change as the world changes.
Types of Business Ownership – A sole trader is owned by one person: easy to start, all profit kept, but unlimited liability and limited money. A partnership has two or more owners who share money, skills, decisions and profit, usually with an agreement (deed), and normally unlimited liability. Limited companies are owned by shareholders and have limited liability: owners can lose only what they invested. A private limited company (Ltd) sells shares privately, usually to family and friends; a public limited company (plc) sells shares to the public on a stock exchange and can raise much more money but must publish accounts and risks takeover. Not-for-profit organisations use any surplus for their cause. Owners choose a structure based on size, risk, money needed and control.
Business Aims and Objectives – An aim is a general goal; an objective is a clear, measurable target with a deadline. The mission says why the business exists. Common objectives are survival, profit, growth and market share. New firms usually aim to survive; settled firms push for profit and growth. Objectives change with the firm's size, the economy, competition and the owners' wishes. Success can also be judged by customer satisfaction, staff well-being and ethical or green goals, not only profit.
Stakeholders in Business – A stakeholder is any person or group affected by a business or able to affect it. Internal stakeholders (owners, managers, employees) are inside the firm; external ones (customers, suppliers, the local community, government, lenders) are outside. Each wants something different, so one decision can please some and upset others: this is stakeholder conflict. Firms use stakeholder mapping (power and interest) to decide whom to involve most, and manage relationships by communicating and consulting.
Business Location – Location is where a business sets up. The right place lowers costs and brings in customers. The main factors are: nearness to the market (customers), to labour (workers with the right skills at a fair wage), and to raw materials; transport links; the cost of land, rent and wages; and competitors nearby. Shops and services usually locate near customers; heavy, bulk-reducing industries near raw materials. Online firms are freer, but still need cheap space, good internet and delivery links.
Business Plan: How to Plan a New Business – A business plan is a written document that says what a business will do, who its customers are, how it will reach them, who will run it and how the money will work. Owners use it to think clearly, to spot risks early and to persuade banks or investors to lend or invest. A typical plan has these parts: executive summary, business idea and aims, market research (customers), competitors, marketing (the 4 Ps), operations and team, and a finance section. The finance section uses a few simple sums. Fixed costs stay the same whatever you sell (rent). Variable costs rise with each unit (ingredients). Total cost = fixed + variable. Revenue = price × units sold. Profit = revenue − total cost (a negative answer is a loss). The break-even point is the number of units where revenue equals total cost: fixed costs ÷ (price − variable cost per unit). A plan is a guess about the future, so it should be checked and updated often.
Business Growth and Economies of Scale – Firms grow organically (from inside: new stores, selling online, franchising, outsourcing) or externally (mergers and takeovers). Growth lowers average unit cost (total cost ÷ output) through economies of scale, such as purchasing (bulk discounts) and technical (bigger, better machines). If a firm grows too big, diseconomies of scale appear: poor communication, coordination and motivation push unit cost up again. Some firms then retrench, getting smaller to cut costs.

2. 3.2 Influences on business

3.2.1 Technology · 3.2.2 Ethical and environmental considerations · 3.2.3 The economic climate · 3.2.4 Globalisation · 3.2.5 Legislation · 3.2.6 Competitive environment

E-business: Meaning, Scope and Benefits – E-business means doing all business activities (buying, selling, production, finance, HR, supply) through computer networks and the internet. E-commerce, online buying and selling, is only one part of it. Its scope covers B2B, B2C, C2C and intra-B links. It is cheaper to start, open 24 × 7, fast and global, but it lacks the personal touch and has security risks.
Ethical and Environmental Considerations in Business – Ethics means doing what is morally right. A business often faces a trade-off: the cheaper choice gives more profit, the fair choice costs more. Businesses also affect the environment through pollution, waste and traffic congestion. They can reduce harm by recycling, using less packaging and planning deliveries. Sustainability means using scarce resources no faster than they can be replaced. Ethical and green choices often raise costs in the short run but can build trust, loyal customers and profit in the long run.
The Economic Climate and Business – The economic climate is how well the whole economy is doing. Three things matter most for a business. Interest rates: the price of borrowing. When they rise, loans cost more, people and firms borrow and spend less, and sales fall; when they fall, the opposite happens. Employment: when more people have jobs, incomes and spending rise; when unemployment rises, spending falls but workers are easier to hire. Consumer spending: it depends on income and confidence; essentials hold up when incomes fall, while luxuries are hit hardest.
International Business – International business is any business activity that crosses national borders: trade in goods and services, licensing, franchising, joint ventures and foreign direct investment (FDI). Firms go abroad to find new customers, cheaper inputs and growth, but face risks: exchange-rate changes, trade barriers (tariffs, quotas, embargoes), customs rules, political and economic risk, and cultural differences that may force them to adapt their products and communication. Trade agreements and organisations reduce barriers and make countries interdependent; technology and e-commerce let even small firms sell worldwide.
Business Law: The Rules Every Business Must Follow – Business law is the set of rules made by government and enforced by courts that a business must follow. It decides the legal form of a business and who pays its debts (liability), when a promise becomes a contract, how workers must be treated (wages, equality, safety), what customers can demand (goods that work and are as described), and how disputes are settled.
The Competitive Environment: Rivals, Risk and Five Forces – The competitive environment is the market a business shares with its rivals. A firm studies rivals' strengths and weaknesses (price, quality, service, location, brand) to find its own advantage. Every business faces risk, where the chance of a bad result can be estimated, and uncertainty, where it cannot. Entrepreneurs accept risk because of possible rewards: profit, independence and pride. Porter's five forces explain how much profit an industry allows: rivalry, threat of new entrants, threat of substitutes, supplier power and buyer power. The stronger the forces, the lower the profit.

3. 3.3 Business operations

3.3.1 Production processes · 3.3.2 Procurement · 3.3.3 Quality · 3.3.4 Customer service

Production Methods – Firms choose how to make things by how many they need. One-off (job) production makes a single item to order; batch production makes a set of identical items, then switches; mass (flow) production makes huge numbers on a line; continuous production runs non-stop. Lean production and just-in-time cut waste and stock. Quality control checks products against a target size with a tolerance (for example 50 ± 0.5 mm), and quality assurance builds quality into every stage.
Supply Chain and Procurement: Suppliers, Stock Control and JIT – A supply chain is every business and step that moves a product from raw materials to the final customer. Goods move forward; money and information (orders) move back. Procurement means buying the right inputs at the right price, quality and time. Businesses choose suppliers on price, quality, reliability and flexibility. To control stock they either keep a buffer stock (safe but costly) or use just-in-time (cheap to store but risky if a delivery is late). The re-order level = daily usage × lead time + buffer stock. Logistics gets goods to the right place on time; outsourcing hands a task to another firm.
Quality Management in Business – Quality means a product or service is fit for purpose and meets what customers expect. Firms manage quality by checking finished goods (quality control), by building checks into every stage (quality assurance), and by making every worker responsible for small, constant improvements (TQM and kaizen). Good quality raises sales and reputation and cuts waste, but it costs money and training.
Customer Service: Keeping Customers Happy – Customer service is all the help a business gives customers before, during and after they buy. Good service means a friendly welcome, quick replies, sound product knowledge, listening through a consultation, and after-sales help such as delivery, repairs, guarantees and returns. Handling complaints well can turn an unhappy customer into a loyal one. Good service brings repeat customers, good reviews and word-of-mouth, and lets a business charge more; poor service loses customers and harms reputation.

4. 3.4 Human resources

3.4.1 Organisational structures · 3.4.2 Recruitment and selection · 3.4.3 Motivating employees · 3.4.4 Training

Organisational Structure: Hierarchy, Span of Control and Delegation – An organisational structure shows who is in charge of whom. The hierarchy is the levels of authority; the chain of command is the path orders travel down and reports travel up. Span of control is the number of people reporting directly to one manager. A tall structure has many levels and narrow spans; a flat one has few levels and wide spans. Delegation passes a task and the authority to do it to someone lower down. In a centralised business the top makes the key decisions; in a decentralised one, decisions are spread to local managers. The structure affects how quickly and clearly communication flows.
Recruitment and Selection – Recruitment is finding people and getting them to apply for a vacancy. Selection is choosing the best applicant. A firm first writes a job description (what the job is) and a person specification (what kind of person it needs). It can recruit internally (staff already in the firm) or externally (people from outside). It then selects using application forms or CVs, shortlisting, interviews, tests or tasks and references, and offers a contract: full-time, part-time, zero-hours or temporary.
Directing: Guiding People to Do Their Best – Directing is the management job of guiding, telling, motivating and leading people at work. It has four elements: supervision, motivation, leadership and communication. Maslow shows that needs come in five levels. Incentives can be financial or non-financial. Leaders can be autocratic, democratic or free-rein. Communication can be formal or informal, and barriers can be removed with simple remedies.
Staffing: Recruitment, Selection and Training – Staffing means filling posts with the right people and keeping them skilled. It is a part of Human Resource Management. Its process runs from estimating manpower needs to recruitment, selection, placement, training, appraisal, promotion and pay. Recruitment finds applicants from internal or external sources. Selection picks the best through tests, interviews and checks. Training builds job skills on the job (induction, apprenticeship, internship, coaching) or off the job (vestibule, classroom, case study).