Understanding Business

1. Understanding Business 2012-13

2. Contents • Needs/Wants & Goods/Services • Risks • Factors of Production • Entrepreneurs • Sectors of Industry • Sectors of Economy • Business Plan • Sources of Finance • Business Aims • Private Sector Orgs • Public Sector Orgs • Third Sector Orgs

3. Write down something that you really really want.

4. Needs and Wants Clip Clip2 • A needis anything essential we must have to stay alive. We need food, drink, clothing and shelter. • A want is anything not so essential but something we would still like to have. We want a television, a foreign holiday or designer clothes.

5. Task Show the difference between needs and wants. You can do this using a PowerPoint, poster or a comic strip. Software: Microsoft PowerPoint Comic Life Microsoft Word Microsoft Publisher

6. Why do businesses exist?

7. Businesses exist to satisfy our needs and wants. They provide:

8. Goods and Services • A good (product) is something made by a business that you can touch or see. • Examples - a car, a football, a pair of boots. • A service is something you cannot hold or touch. Often a service allows one person to use skills they have to help others. • Examples - haircut, life insurance, cinema attendant.

9. Task PowerPoint We will now see slides of various businesses. Do they provide a product or a service or both?

10. Opportunity Cost When something is Scarce and we can’t have everything we want, we have to make CHOICES. For example: • which TV programmes will I watch tonight? • which pair of jeans will I buy? • which courses will I choose to study? When we make a CHOICE, this means that we decide to give up something in order to get something else. We choose the option that will give us the most pleasure and satisfaction. The cost of choosing something is the things that we gave up to get it. This is known as OPPORTUNITY COST.

11. Why Start A Business? You might start off with very big ideas Only 50% of new businesses starting up survive after 3 years. Given the risk, why would people want to start up a business in the first place?

12. Independence – Own Boss Made Redundant – Redundancy Money To Invest You Keep All Profits Your Firm = Your Deadlines You Have A Good Idea – Can’t Persuade Others Difficulty Finding Employment

13. Innocent Drinks The story of the Innocent drinks company - the highs and lows for the founders. It shows the motives behind founding the company, the excitement of start-up, and the integrated nature of the process. The financial aspects are also briefly covered. http://www.bbc.co.uk/learningzone/clips/financial-aspects-of-business-start-up/8490.html

14. Being Your Own Boss The big advantage of starting your own business is that you get to order everyone else around – and decide what to so with all the profits. But there are problems:

15. Problem One The business may take time to produce a profit – the owner’s income may be small and vary from week to week.

16. Problem Two There is no-one else to take the blame if anything goes wrong – the owner must be prepared to take responsibility.

17. Problem Three Owners of new firms generally work very long hours – for example, completing the firm’s accounts in the evening.

18. Problem Four As the business grows the owner needs to learn to delegate responsibility to subordinates – not easy if the owner has built the firm up single-handed.

19. Factors of Production Land – natural resources eg water, trees, fruit, fish Labour – human workers – mental and physical effort Capital – money, buildings and machinery Enterprise – the development of ideas and drive for implementation

20. Job Description Details about the job including: job title, main duties and responsibilities, working conditions Person Specification Qualities and skills expected of potential candidates – usually split into essential and desirable

21. Entrepreneurs

22. What is an Entrepreneur An entrepreneur is an individual who develops a business idea and takes on the associated risks and responsibilities.

23. Qualities of an Entrepreneur • Calculated risk taker • Competitive • Confident • Creative/inventive • Determined • Good communication • Hard working • Patient • People skills (respect) • Planning/organisation • Positive attitude • Spot problems • Willing to learn

24. Entrepreneur Case Study • Watch the clip on SuperJam • Write down relevant information about becoming an entrepreneur. Task – From the website below pick one other company of your choice and write down information relevant to becoming an entrepreneur. www.tinyurl.com/entrepreneurvideos

25. Types of Business

26. Sectors of Industry Organisations involved in the extraction of the earth’s natural resources Organisations involved in the manufacturing of raw materials to be turned in to finished goods Organisations involved in the selling of goods and providing services.

27. Sectors of Economy PRIVATE SECTOR Owned and run by private individuals/groups Sole Trader, Partnership, Private Limited Company (Ltd), Public Limited Company (Plc), Franchise PUBLIC SECTOR Owned by the taxpayer and run by the Government NHS, Education, Police, local councils services THIRD SECTOR Owned and run by private individuals with the purpose of helping a group or raising awareness for a cause. Charities, Non-profit making organisations

28. Types of Business Organisation • In the previous slide we have looked at sectors of the economy: • Private • Public • Voluntary • If you were to start your own business it would be in the private sector and it would be called a Sole Trader

29. Sole Trader • A sole trader is the most common type of business. It is owned, controlled and financed by one person. • Examples of sole traders are: • Plumber • Electrician • Mechanic • Hairdresser However, anyone can start up their own business doing whatever they want.

30. Sole Trader In pairs write down as many advantages and disadvantages of being a sole trader that you can think of – 3 minutes • Advantages • Make your own decisions • Profits are not shared • No special paperwork required • Disadvantages • Long Hours • Hard to raise finance • Unlimited Liability for debt • Hard to cover illness/holidays

31. Planning Your Business** The Business Plan **

32. Ideas for a New Business Task 1 • You have decided that you would like to start your own business and become a sole trader. In order to begin any business you must make a Business Planlaying out your business aims. • First you must decide what business you would like to set up. • Decide on 3 businesses you would like to start? • Make a list of the pros and cons for each business? • Choose a business and briefly detail what this business will do. …some ideas are on the next slide….

33. Possible Ideas?Can you think of some better ones? Task 1 • Refreshment stand at local sports events • Child care • Shopping service for seniors • Pet sitting • Delivery services • House cleaning service • Selling used clothes • Jewellery making • Travel services • Musical group • Computer support: setting up computers/internet connections for others • You might even… add value to an existing product (packaging, new Marketing local crafts design, new customers, different size)

34. Billy’s Business Plan More than the idea It’s great having the ideas… but you must be prepared for the hard-work and dedication taking your business forwards.

35. Barclays Business Lounge Business Lounge Video It’s great having the ideas… but you must be prepared for the hard-work and dedication taking your business forwards.

36. What is a Business Plan? The business plan is a tooldesigned to help you find and explore opportunities. It also provides you with a way to analyse potential opportunities continuously. A business plan is personaland should never be prepared professionally by others. No one knows you or your ideas better than you do. It is the process of seeking the answers to important questions about your enterprise that are importantas you try to realise the dream of owning your own business.

37. Time for researchPreparation is essential Task 2 and 3 • Working within the time available, complete the template document which will get you thinking about your business. • You may not have all the answers at the moment, but be as detailed as you can be… • Next week you will start to write your business plan, before presenting your idea in Lesson 3/4.

38. Writing the Business PlanConvince others… Task 4 • Using the Guideline Document, create your business plan. • You will submit this business plan for marking by ‘The Bank Manager’ • Use a fresh document and your IT skills to prepare a professional and informative document.

39. The ‘Elevator’ PitchBe straight to the point! Watch the Video… Prepare Your Pitch – Task 5 • What are the key factors about your business? • What do people need to know?

40. Business Aims and Objectives Why do businesses have aims? What aims might they have? How do they communicate these aims?

41. Business Aims and Objectives • What is an aim? An aim is where the business wants to go in the future, its goals. It is a statement of purpose, e.g. we want to grow the business into Europe. • What is an objective? Business objectives are the stated, measurable targets of how to achieve business aims. For instance, we want to achieve sales of £10 million in European markets in 2014.

42. Why have aims? BRIEF Task: Why do you think businesses have aims… discuss with a partner and write down as many reasons as you can in 2 minutes.

43. Why have aims? Suggested Answers: • Separate your company from others – make it stand out • Indicate the direction the company is heading in • Might use aims as part of a slogan • Customer service • Quality • Customer support • What employees should believe

44. Why have aims? Customers Competition As you work through this unit… think who different companies aims and objectives are directed at… Employees Aims are often directed at:

45. Possible Aims BRIEF Task: What aims might a company have… again 2 minutes to discuss and come up with as many ideas as possible

46. Possible Aims Provide a High Quality Service Growth Survival Eliminate Competition Increase Market Share Be Socially Responsible Increase Profitability Value for Money Suggested Answers: Did you have any others?

47. Do Aims and Objectives Change? YES! Over time due to internal and external pressures… more about this later.

48. Communication of Aims? BRIEF Task: How do businesses communicate their aims?… discuss with a partner and write down as many reasons as you can in 2 minutes.

49. Communication of Aims? and in its Mission Statement… Suggested Answers: Business Plans Company Handbook Company Website Company Letterheads/Brochures Annual Report Adverts (newspapers, TV etc)

50. Mission Statement • A mission statement is a statement that defines the purpose of a company – what it stands for i.e. what broad products or services it intends to offer customers. • The mission statement also gives readers a window on the raison d’être (the main purpose)of the company. • An effective mission statement should be concise enough for you to describe your company’s purpose and ideals in less than 30 seconds. • Where would I see a Mission Statement? Mission Statements typically appear in business plans or alternatively will appear in the ‘Corporate Relations’ or ‘About us’ sections of websites.