Primary Research (field research)– this is done first hand by the business e.g. questionnaire of existing customers. Secondary research (desk research)–

Unit 1 Revision Presentation

Primary Research (field research)– this is done first hand by the business e.g. questionnaire of existing customers.

Secondary research (desk research)– this is using information that has already been gathered by another organisation e.g government statistics.

Topic 1.1 Spotting a Business Opportunity

Quantitative research – provides numbers that can be analysed e. g questionnaire results shown as a bar chart.

Qualitative research – in depth and gives opinions e.g. a focus group discuss what they think of a new product


A market map is a way of analysing existing business in the market.

It is a diagram that divides the market into quarters - existing businesses are mapped on the diagram and a gap is identified.


Low price

FashionableFunctional

High Price

Competitors are businesses that try to sell to the same group of customers.

Added value is to change a product or process to make it more appealing to customers and allow the business to sell it for a higher price. e.g turning a potato into an oven chip.

Convenience, speed, branding, quality, design can give the business added value.

USP = Unique Selling Point

A franchise is when the use of a business model is sold to another person or business. e.g Subway, Dynarod.

The franchisor sells the business model and receives payment.

The franchisee buys the business model and uses it. (remember ‘I see a franchisee’)


Franchises reduce the risk for new businesses as they provide a recognised brand and business model.

Franchises can be expensive and may set conditions such as profit sharing


Location may be physical or electronic. Low costs- including rent and transport

costs. The market - availability to customers. Competitors- close to or away from? Footloose- can locate anywhere.


Enterprise – is taking the initiative to get something done.

Business enterprise is setting up and running a business.

Topic 1.2 Showing Enterprise

Deliberate creativity – techniques that help creative thinking. e.g mind maps, lateral thinking, brainstorming.

Creativity can be learned. Important for new ideas, added value,

USPs, competitive advantage. Innovation – bringing a new idea to

market. Invention – discovering a new

product/service or technique.


A patent – a legal protection for new invention or idea to prevent a competitor from using the idea.

Copyright - a legal protection for something artistic or literary that has been created. e.g logo, brand names, scripts.


Calculated risk- looking at the percentage chances of success v.s failure and taking the least risky option.

A method of choosing from a number of possibilities

Based on information provided.


Objectives – what the business is trying to achieve.

Financial objectives – related to money made by the business e.g costs, revenue or profits.

Non financial objectives – related to other motives e.g survival, reputation, enjoyment.

Topic 1.3 Putting a Business Idea into Practice

Objectives should be SMART Specific - Measurable Agreed Realistic Time based e.g all staff will work to increase the sales

of a new pizza restaurant by 20% in the next 6 months.


Enterprise skills include risk- taking, determination, creativity, motivation, creativity, good communication


Fixed costs do not change with the number of goods or services produced e.g. rent for a shop.

Variable costs do change according to the number of goods and services produced e.g. buying the stocks to be sold.

Total costs = fixed costs plus variable costs.


Sales volume is the number of goods and services sold over a given period of time.

This can be forecast based on previous sale figures or market research.

Sales volumes may vary according to time and seasons.

Sales revenue is found by price x no of goods or services sold in a given time period..


Cost is how much the business pays to provide a good or service.

Price is the amount charged to a customer for the good or service.

Profit is sales revenue – total costs over a period of time.

Profit allows a business to survive and expand.

Loss can cause a business to close.


Cash flow forecast – a table to record the money flowing in and out of the business each month.

Any inflows are recorded and a monthly total is calculated.

Any outflows are recorded and a monthly total is calculated.

Net cash flow = monthly inflow – monthly outflow.

This can be positive or negative (in brackets)

The net cash flow is added to the opening balance. The answer is the closing balance.

This closing balance becomes the opening balance for the next month.

Cash inflows will be from sales revenue, bank loans or the sale of assets or shares.

Cash outflows will be costs including loan repayments.

You will need to complete the gaps on a cash flow forecast.


Short term finance – less than one year.

Owners savings – no interest or conditions attached.

Short term bank loan, including an overdraft – relatively high interest rate, must show business plan, suitable if no savings.

Trade credit – pay for stocks once goods or services sold.


Medium tern finance – 1 – 5 years.

Medium term bank loan

Leasing and hire purchase – cheaper than buying equipment in one payment. Leasing means borrowing equipment, hire purchase means buying in instalments.


Long term finance – over 5 years. Long term bank loan – lower rates of

interest, usually in form of a mortgage; a loan for property.

Shares – suitable for expansion but only available for companies.

Venture capital – an individual who buys shares in return for profuts.


Marketing mix – getting the right mix of product, price, promotion and place to sell to customers and achieve objectives.

Sole trader – setting up on your own, keeping all the profits, taking all of the risks including unlimited liability.

Unlimited liability – the business debts can be paid from the sale of personal possessions.

Topic 1.4 Making the start-up effective

Company – the business is registered and given its own legal status.

Accounts have to be produced. Invited individuals can invest in the

business by giving money in return for a ‘share’.

Shareholders receive profits. Shareholders have limited liability. Limited liability – debts can only be paid

from the business possessions and not from personal possessions.

A private limited company has the initials ltd after the name e.g Jarrold and Sons ltd.

The business name can be copyright protected.

The reputation of the business is associated with the name.

A good reputation helps attract finance.


Accounts have to be kept including a cash flow forecast and a trading account to show profit or loss.

Most businesses over a certain size have to pay Value Added Tax at 20% of the value they have added to the product.

Companies pay Corporation tax on their profits.

Sole traders pay income tax on their profits. Business owners pay national insurance to

the government for each of their employees.


Customer satisfaction leads to repeat purchase and customer loyalty.

Repeat purchase leads to sales revenue, cash inflow and more profit.

Recommendations by customers are ‘word of mouth’ promotion.

Customer satisfaction gives a competitive advantage.


Customer service – putting the customer at the heart of the business.

The customer is always right.

More than the legal requirements of Health and Safety Laws and Consumer Protection Laws.

Includes after sales service- guarantees, dealing with complaints effectively.

Recruitment may be internal, for present employees or external, for new employees.

Job description - person specification – advertisement - application forms/ CVs – short-listing for interview – interview/ aptitude test –selection.

References will be taken for selected candidates.


Employers must follow equality legislation.

No discrimination on the grounds of age, gender, race, disability, religious belief or sexual orientation.


Commodity markets deal in raw materials e.g copper, coffee, wheat.

These products are not branded so the price is standard.

Price is determined by demand and supply. Price rises – caused by a fall in supply and

an increase in demand. Price falls – caused by an increase in

supply and a fall in demand.

Topic 1.5 Understanding the economic context

An increase in commodity prices increases costs to businesses.

This may lead to product prices rising and sales revenue and profits falling.


Interest rates are influenced by the Bank of England.

At present low interest rates are good for businesses with loans as the repayments will be smaller.

Costs and cash outflows will fall.

Low interest rates also encourage consumers to spend on credit and store cards which boosts sales.

Exchange rates are used by businesses exporting and importing.

To find the foreign currency price for an export a business will multiply the pounds by the exchange rate.e.g If £1 = $2 then a £100 Olympic ticket can sell for $200 in the USA.

To find the UK price for an import a business must divide the foreign currency price by the exchange rate.e.g a $60 pair of Levi jeans will cost £30.

S-Strong- this means the pound is worth more e.g £1 =$2 becomes £1 = $3

P-Pound I-Imports C-Cheap E-Exports D-Dear

SPICED

Business cycles are the changes in the income of the UK.

A recession means that the national income( measured by GDP) is falling.

Businesses may face reduced demand. Profits may fall leading to bankruptcies. Businesses have to adapt their marketing

mix.


A stakeholder is an individual or group that is affected by a business.

Customers, employees, suppliers, banks, the government, the local community, shareholders.NB- a shareholder is only one type of stakeholder.

Stakeholders have conflicting interests.E.g customers want lower prices, employees want higher pay and the shareholders want more profit.

Documents

Primary Research (field research)– this is done first hand by the business e.g. questionnaire of existing customers. Secondary research (desk research)–