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BM Unit 1 - LO11 Higher Business Management Business in Contemporary Society.

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Presentation on theme: "BM Unit 1 - LO11 Higher Business Management Business in Contemporary Society."— Presentation transcript:

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2 BM Unit 1 - LO11 Higher Business Management Business in Contemporary Society

3 BM Unit 1 - LO12 What is Business Activity? n Using “resources” to produce goods and services which people require in order to satisfy their “wants”. n Any kind of activity that results in the provision of goods and services which satisfy human “wants”.

4 BM Unit 1 - LO13 Goods and Services Goods n Food n Clothing n Houses n Cars n TVs n Computers n Furniture n CD players Services n Hairdressers n Insurance n Gas and Electricity n Hotels n Leisure Clubs n Lawyers n Banking n Education

5 BM Unit 1 - LO14 Durable Goods Things that will last a long time and will be used regularly. n Cars n TV n Washing Machines n Cookers n Microwave Ovens n Refrigerators

6 BM Unit 1 - LO15 Non-Durable Goods Things that are “consumed” shortly after purchase. n Food n Drink n Clothing n Shoes n Newspapers n Magazines

7 BM Unit 1 - LO16 Inputs and Outputs Outputs Inputs Resources Raw materials Labour Machinery ‘Organisation’ Goods and Services

8 BM Unit 1 - LO17 Business Activity The Organisation (Internal) Inputs Land Labour Capital Enterprise Output Goods and Services Marketing People (Human Resources) Finance Production (Operations) External Influences eg Competition External Influences eg Government Policy

9 BM Unit 1 - LO18 Factors of Production n Land - raw materials, factory site n Labour - people with required skills n Capital - finance to buy equipment, machinery, computers, etc n Enterprise - organisation of the above factors, risk-taking, ideas

10 BM Unit 1 - LO19 Cycle of Business WANTS IDENTIFICATION PRODUCTION CONSUMPTION WANTS

11 BM Unit 1 - LO110 Sectors of Industry (Business Activity) PRIMARY (Extractive) Mining Fishing Farming Oil SECONDARY (Making goods) Manufacturing Construction Durables Non-durables TERTIARY (Services) Banking Insurance Tourism Distribution

12 BM Unit 1 - LO111 Organisations Types of Organisation Private Sector Profit-makingNon-profit-making Public Sector

13 BM Unit 1 - LO112 Private Sector Organisations Profit-making n Sole Traders (1) n Partnerships (2 - 20) n Private Limited Companies (50) n Public Limited Companies (no limit) n Franchises n Co-operatives Non Profit-making n Charities and Clubs

14 BM Unit 1 - LO113 Sole Trader Advantages n Keep all profits n Complete Control n Choose Hours of Work n Personal Service n Easy Set-up Disadvantages n Unlimited Liability n Finance (restricted) n No shared ideas/problem solving n Illness/Holidays

15 BM Unit 1 - LO114 Partnerships Advantages n Different Expertise n Increased Capital n Shared Workload n Stronger Position to raise Finance ( Disadvantages n Unlimited Liability n Profits Shared (not necessarily 50/50) n Disagreements n Partnership Agreement

16 BM Unit 1 - LO115 Limited Company (Ltd) Advantages n Shareholders – Limited Liability n Control Retained (eg family) n Finance from new shareholders/ lenders Disadvantages n Sharing of Profits n Legal Procedures n Can’t sell shares to the public n Companies Act n Copy of Annual Accounts to Companies House

17 BM Unit 1 - LO116 Public Limited Company Advantages n Large amount of capital available n Domination of market n Easy to borrow money n Shares can be resold easily Disadvantages n Set-up Costs – eg prospectuses and underwriting n Companies Act n May become too large (efficiency) n No Control over Shareholders n Annual Accounts published

18 BM Unit 1 - LO117 Multinationals Large businesses with outlets or production facilities in a number of different countries

19 BM Unit 1 - LO118 Multinationals (Benefits) n Taxation or Grant incentives n Lower wage rates n Higher skilled workforce n Legislation (relaxed) n Rate of Corporation Tax n Can operate competitively (locally) n Increased Market Share n Save on costs of transportation n Avoiding Trade Barriers n Selling Globally (without licenses)

20 BM Unit 1 - LO119 Multinationals (Costs) n Legislation may be too restrictive n Local currency may be weak (converting profits back) n Lack of technical expertise n Poor infrastructure n Cultural difficulties n Political Instability n Exploitation (eg low wages) n Forcing local businesses out n Major functions remain at HQ usually – close a subsidiary

21 BM Unit 1 - LO120 Franchise n A business run by one firm under the name of another n The franchisee’s licence permits them to use the franchiser’s name, publicity materials, décor and uniforms etc.

22 BM Unit 1 - LO121 Franchise Advantages n Entering new markets quickly n Keep a % of profits n Protection from competition n Established reputation n Brand name and back-up services n Ideas shared and all benefit Disadvantages n Reliant on franchiser to maintain image n Profits shared n Strict rules n Reputation depends on the franchiser and other franchisees

23 BM Unit 1 - LO122 Public Sector Organisations n Public Corporations BBC and Royal Mail n Bank of England n Local Authority Services Education, Housing, Police, Social Services n Central Government Departments Treasury, Defence, Health, Employment, Social Services, Environment, Transport, etc

24 BM Unit 1 - LO123 Voluntary Organisations n To be recognised as a charity must have one of the following as an aim: u To relieve poverty u Advance education u Advance religion u Activities beneficial to community n Charities are exempt from paying certain taxes eg VAT

25 BM Unit 1 - LO124 Business Objectives n Survival n Maximising profits n Growth n Good reputation n Maximising sales n Satisficing n Providing a service n Managerial objectives

26 BM Unit 1 - LO125 Enterprise and the Entrepreneur n Having and developing a business idea n Acquiring the necessary resources n Raising the finance to acquire resources n Risking losing the money invested Anita Roddick, Richard Branson, James Dyson, Martha Lane Fox

27 BM Unit 1 - LO126 Stakeholders n Individuals or groups of people who have an interest in, and stand to be affected by, the success or failure of an organisation

28 BM Unit 1 - LO127 Stakeholders Internal n Shareholders/ Owners n Managers n Employees External n Suppliers n Customers n Banks/lenders n Society/Local Community n National Government n Local Government n Taxpayers n Donors (Charities)

29 BM Unit 1 - LO128 Stakeholders’ Interests n Shareholders - dividends, capital growth n Managers - job security, fringe benefits n Employees - job security, pay and conditions n Suppliers - regular orders, prompt payment n Customers - low prices, high quality, good service n Banks - ability to make payments for loans n Government - payment of taxes, compliance with laws n Community - corporate responsibility

30 BM Unit 1 - LO129 Stakeholders’ Influence n Shareholders - voting rights at AGM n Managers - day-to-day decisions n Employees - possible industrial action n Suppliers - period of credit, level of discounts n Customers - taking their business elsewhere n Banks - granting of loans and rate of interest n Government - legislation, equal pay, minimum wage, etc n Community - protest movements, direct action

31 BM Unit 1 - LO130 Functions of Managers n Planning – action plan n Organising – arranging resources n Commanding – delegation of tasks n Co-ordinating – staff and resources organised to meet plans n Controlling – keeping plans on track

32 BM Unit 1 - LO131 Skills of Managers n Interpersonal – relationship with others n Informational – gathering, processing and communicating information n Decisional – solving problems and allocating resources

33 BM Unit 1 - LO132 Sources of Finance Long-term n Capital n Share Issue n Mortgages n Debentures n Sale and Leaseback n Venture Medium-term n Bank Loans n Hire Purchase Short-term n Overdrafts n Factoring n Trade Credit n Grant

34 BM Unit 1 - LO133 Government Help for Businesses n Local Enterprise Companies n Education/Business Partnerships n Business Start-up Scheme n Loan Guarantee Scheme n Reduced rate of Corporation Tax n Zero Rating (VAT) on Exports n Dept of Trade and Industry - advice, Trade Fairs n Export Credit Guarantee Department n EU - Regional Development Funds

35 BM Unit 1 - LO134 Other Sources of Help n The Prince’s Youth Trust - help for young people to set up in business n Local Authorities - ‘small business advisers’ n Trade Associations - ‘Association of Small Businesses’, ‘Scottish Motor Trade Association’, ‘ABTA’, etc n Local Chambers of Commerce

36 BM Unit 1 - LO135 Methods of Growth n Integration - 2 firms combining to become bigger n Merger - integration on equal terms n Take-over - one firm’s identity is lost in the take-over. Can be ‘friendly or hostile’

37 BM Unit 1 - LO136 Integration n Horizontal - firms at the same stage of production n Vertical - forwards towards the customer and backwards towards the raw materials n Lateral - firms with related goods not in competition with each other n Conglomerate/Diversifying - firms operating in completely different markets

38 BM Unit 1 - LO137 Reasons for Growth n Eliminate competition/increase market share n Achieving greater economies of scale n Security from hostile take-over - more assets n Cutting out “middlemen” n Securing sources of raw materials n Controlling distribution of products n Spreading risks - ‘not having all eggs in one basket’ n Smoothing seasonal fluctuations in sales

39 BM Unit 1 - LO138 De-integration n De-integration - conglomerate selling off firms to concentrate on “core” business n De-merger - subsidiary companies splitting away from the parent company and operating on their own n Divestment - selling off companies n Contracting out/out-sourcing - getting other companies to do work on your behalf n Management buy-out/buy-in - usually a struggling company sold to a management team

40 BM Unit 1 - LO139 Business as a “System” n Inputs - raw materials and other resources n Processes - transformation into goods n Outputs - the finished product/service to be marketed n Feedback - the reaction of the market A system is made up of 4 inter-dependent parts:- Any system is affected by the environment in which it operates

41 BM Unit 1 - LO140 Internal Pressures to Change n New personnel or management n New technology (the internet) n Change in financial position

42 BM Unit 1 - LO141 External Pressures to Change (the ‘PEST’ analysis) n Political/legal (legislation, planning, devolved Parliament, etc) n Economic (interest rates, foreign exchange rates, the Euro, etc) n Social (ageing population, role of women, greater general prosperity) n Technological ( , internet) n Environmental n Competitive


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