THE BUSINESS ENVIRONMENT

THE BUSINESS ENVIRONMENT
Unit 29 THE BUSINESS ENVIRONMENT LO1 - Know the range of different businesses and their ownership

LO1 - Assessment Criteria
Learning Outcome (LO) The learner will: Pass - The assessment criteria are the pass requirements for this unit. The learner can: Merit - For merit the evidence must show that, in addition to the pass criteria, the learner is able to: Distinction - For distinction the evidence must show that, in addition to the pass and merit criteria, the learner is able to: 1 Know the range of different businesses and their ownership P1 Describe the type of business, purpose and ownership of two contrasting businesses M1 Analyse the type of business, purpose and ownership of two contrasting businesses D1 Evaluate the effect of a selected business changing its ownership status P2 Describe the different stakeholders who influence the purpose of two contrasting businesses 2 Understand how businesses are organised to achieve their purpose P3 Describe how two businesses are organised P4 Explain how their style of organisation helps them to fulfil their purposes 3 Know the impact of the economic environment on businesses P5 Describe the influence of two contrasting economic environments on business activities within a selected organisation M2 Analyse the impact of changes in demand and supply on a selected business D2 Evaluate to what extent a selected business is likely to be affected by changes in the economic environment 4 Know how political, legal and social factors impact on business P6 Describe how political, legal and social factors are impacting upon the business activities of the selected organisations and their stakeholders

Assessment Criteria P1, P2, M1, D1
This unit will help the learner to have an understanding of the range of different businesses that can exist in an economy. Learners will discover the different purposes that such organisations can have and the different forms of ownership that can exist. They will also be able to appreciate the role of the different stakeholders involved in such businesses. Learners will have an understanding of the different ways in which businesses are organised to achieve their purposes and they will also be able to appreciate that businesses can have a variety of different aims. This unit will also help the learner to have an understanding of the way in which the wider environment can impact on businesses in terms of both the economic environment and the political, legal and social framework in which businesses operate. P1 - Learners could write a newspaper article that describes the type of business, purpose and ownership of two contrasting businesses. Guidance: It would be advisable for the tutor/learner to choose the two businesses to be compared carefully. Businesses that are very different may lead to a meaningless comparison. Ideally, the two businesses chosen should have some similarities but have sufficient differences to allow learners to progress to the merit and distinction requirements. M1 - Learners will need to analyse the reasons for the differences in ownership of the two contrasting businesses. D1 - Learners will need to evaluate the impact that a change in the legal structure might have on a business P2 - Learners could create a report that describes the different stakeholders, both internal and external, who can influence the purpose of the two contrasting businesses.

LO1 - Know the range of different businesses and their ownership
Learners should be encouraged to focus on businesses that they are already familiar with or have an interest in, such as through part- time employment, work experience or as customers. The two businesses must offer a contrast, so careful consideration should be given when choosing. For example, the contrast might be the sector that the business operates in; one could be in the primary or secondary sector and the other could be in the tertiary sector. Alternatively, the contrast could be between a business in the private sector and one in the public or voluntary sector. This could provide a good opportunity for group work, with perhaps different groups investigating different businesses in the local area and using the information they find to produce wall charts or posters to build up a visual map of the local business environment. Learners should be able to distinguish between internal stakeholders, such as employees and owners, and external stakeholders, such as customers and suppliers. They should examine the influence of the different stakeholders on the businesses, especially in terms of the possible conflicts of interest between different stakeholders. It might be useful if learners focused on particular issues that illustrated such conflicts. The use of local newspaper articles highlighting local issues, such as planning applications, could be used to stimulate discussions about the impact on two contrasting businesses and how their different stakeholders might feel. Alternatively different stakeholders could be invited to talk to the learners.

LO1 - Know the range of different businesses and their ownership - Markets
Throughout this project you will be dealing with two businesses which will be your examples. You need to choose 2 different businesses that have something in common, business sector, purpose, audience, and it needs to be companies you can talk about from prior experience and capable of being researches in terms of function, stakeholders and economic climate influences. These businesses need to something that can be seen from research, they can be local or global as long as the second company has something in common. Task 1 - P1.1 – Describe and explain the purpose, history and function of 2 businesses from any sector that have commonality. Purpose Audience Products History Rivals

Local National International Global Markets
LO1 - Know the range of different businesses and their ownership - Markets Not all businesses are huge multinational corporations that deal with customers all over the world, some are small organisations just dealing with local customers. Companies can operate within the local, national, international or global market. These markets will have an impact on the current and future of the businesses in terms of funding, government support, bail-outs, legal ramifications and ownership, all of which we will go into more detail later. Task 2 - P1.2 – Explain with examples the term ‘Business Markets’ Task 3 - P1.3 – Explain the different markets/areas that businesses can operate in (give examples) - Click on the links below for additional information Task 4 - M1.1 – Show evidence of the market that your two chosen businesses deal in and describe what it means to them to be in that market. Local National International Global Markets

A local business is a small shop which serves a local community with a limited customer base. Manufactures would deliver their goods directly to the local provider who then sells it to local people. They can benefit from a website as it will increase there presence in the business community and can boost them on their way to becoming national, but normally they have no presence. Local business has local everything including, local customers, local deliveries from local cash and carries, local stake holders these factors make it a local business. They tend to rely on local suppliers for their goods and use local procurement and transport to receive and deliver their goods to the customers. A company like a corner shop, fish ‘n’ chip shop or a small independent car dealer will supply locally, use suppliers in the local area and tend to deal with customers within a small radius (1-2 miles).

A national business is bigger than local. As a result of this the target market is larger making it national. They store goods in warehouses all over the country and supply to their local shops. As they are bigger they have a broader range of products, services and business interests. A national business sells to the whole nation they will have a number of stores an example of this is like Tesco’s with a standardised policy and standardised uniform with similar rules, wages and hiring policies. They advertise in this country targeting national customers. They tend to rely on National suppliers for their goods and use national procurement and transport to receive and deliver their goods to the customers. A company Like Eddie Stobart will supply nationally as it is a logistics company. They have customers all over the nation and are very well known. They have their own finance team meaning more security and privacy in the company and potentially more savings on costs.

An International business is in more than one country for example they could be national in England and France. Examples of this are Tiscali this business is only European. Advantages of being an international business are more money and less chances of failing. The downside is that they have to be aware of multiple international laws they supply goods to, including complicated tax laws, sales of goods and differing versions of British laws. An advantage for Tiscali is if they are not doing so well in one country they have got so many other countries to fall back on. They tend to rely on international suppliers for their goods and use international procurement and transport to receive and deliver their goods to the customers with a standardised policy and standardised uniform with similar rules, wages and hiring policies. For a company like Amazon this also means template websites so it is easy to change country without reprogramming everything.

A global business is a store in every continent making it bigger than international. This increases the recognition of the business. The customer base is recognised all over the world making its sales at a peak. Examples of global businesses are McDonald’s this is worldwide franchise. This means that they have standardised everything which include food, clothing, good working conditions and marketing with a standardised policy and standardised uniform with similar rules, wages and hiring policies. They have these procedures to insure McDonald’s carry out a professional restaurant service. They tend to rely on global suppliers for their goods and use global procurement and transport to receive and deliver their goods to the customers. The downside is that they are subject to global trends, international laws, disfavour and corporate blame for globalisation.

LO1 - Know the range of different businesses and their ownership - Purpose
The purpose of every business is not just to make money though money drives their growth and recognition. Some people see this as their aim, to make money, to grow, and make money, to help others, and make money, to make better goods, to make money. Business purpose if the overriding aim of a company. For instance schools are a business, they are there to educate, money allows them to do this. Hospitals are there to heal, money allows them to keep the doors open. Task 5 (P1.5) – Explain in your own words the term ‘Business Purpose’ Task 6 (P1.6) - Explain the different business purposes (give examples) - Click on the links below for additional information Task 7 - M1.2 - Show evidence of the business purposes that your 2 chosen businesses focus on (justify your arguments) Make a Profit Supply of products and/or services Free Goods or Service At Cost Below Cost Difference between profit and not-for-profit organisations

Offering goods and services
LO1 - Know the range of different businesses and their ownership - Purpose Businesses operate for different reasons, not all exist to make a PROFIT, although that is generally what we think of when considering why businesses exist. At costs – Businesses that sell products or service at the original price paid, as opposed to the retail price. Products or services sold during the end of sale periods, due to end of line stock or new launches. Businesses are willing to get rid of the stock at cost so that inventory is reduced / assets are reduced for loss-leaders Profit Non-Profit Offering goods and services Companies could be subsidised and sell goods or offer services at: Cost Below Cost Price Voluntary or charity – Free Goods and Services

Toyota produces cars and Walkers produces crisps.
LO1 - Know the range of different businesses and their ownership - Purpose All businesses exist for a purpose. In other words, they all do something - and have a reason for doing it. They may produce or supply goods, offer a service to their customers or do both. Toyota produces cars and Walkers produces crisps. Retailers such as Next and HMV sell goods made by other organisations. Solicitors provide legal services and banks provide financial services. Tesco supplies a wide range of goods which it sells, both in its stores and online. It also offers financial services, such as its own credit card, personal loans and various types of insurance, in addition to providing a home-delivery service for its online shoppers. Your local garage may sell cars and service them as well. Hairdressers often sell hair and beauty products as well as cutting and styling hair. Free Goods or Services – Businesses and members of the public that provide the opportunity to offer free goods, services, or time to help UK charities, such as voluntary support and assistance providers.

Profit Based Organisations Not-For-Profit Based Organisations
LO1 - Know the range of different businesses and their ownership - Purpose Below cost – Businesses that sell products or services at a discounted level. In this instance, it could be subsidised by another organisation, such as: NHS Prescriptions – subsidised by the Government for all the residents of UK In Melton Mowbray, the Working Men’s Club is subsidised by Pedigree Pet Foods (part of Mars Corporation) to reward the employee or ex-employees of the business Difference between profit and not-for-profit organisations – Profit Based Organisations Not-For-Profit Based Organisations Services Offer the public/consumers a service Sales Pro-active through telesales and other means Powers of Persuasion Marketing Pro-active through the aggressive marketing tools available – Internet / TV Ads / etc... Word of mouth Employees Paid for based on knowledge and skills Volunteers Taxation Liable / responsible for other schemes (pensions / medical / etc...) Tax Breaks

Primary Secondary Tertiary
LO1 - Know the range of different businesses and their ownership – Sector Whether a company is profit or non-profit, Public Limited or Privately owned, Charity or Supplier, it will belong to one of three Business sectors, it either sources goods or a service (Primary), prepares goods or a service (Secondary) , or sells goods or service (Tertiary). It is possible to be a member of all three categories like Shell, or two like Nike but there are political, social, ethical and commercial implications in all three sectors that need to be addressed by businesses that make them different. Task 8 - P1.7 – Explain in your own words the term ‘Business Sectors’ Task 9 - P1.8– Explain what each of the business sectors mean (give examples) - Click on the links below for additional information Task 10- M1.3 – Show evidence of the business sector that your 2 chosen businesses deal in Primary Secondary Tertiary

Businesses can also be split into different sectors namely:
LO1 - Know the range of different businesses and their ownership – Sector Businesses can also be split into different sectors namely: PRIMARY – the collection/acquiring of raw materials, such as farming and mining SECONDARY – the production/manufacturing raw materials into useful products, such as Dairy Crest or Barratts, the house builders TERTIARY – service provider that compliment and support the production/distribution of useful products, such as retailers and banks The names of the sectors show that they are linked as a sequence – often referred to as the chain of production. Primary is the first stage, secondary is the second and tertiary is the third. You can see how this works on the illustration below. Some businesses might fall into 2 or more sectors – organisations that deal with diamond and oil (petrol/diesel) Oil and Diamond organisations such as De Vere, BP, etc... These type of business: Research and Develop sites to find required raw products (drilling and expediting different sources) Manufacture the product(s) to meet the needs of customers (refining oil to filter out diesel and petrol / refine the raw rocks to represent the various types of precious jewellery) Directing selling the product(s) to the public

LO1 - Know the range of different businesses and their ownership – Sector
The primary sector includes all those businesses which produce or obtain raw materials or natural products from the land or the sea. There are four main categories in this sector. Agriculture, Hunting and Forestry - This category covers the production of crops, such as vegetables and cereals and animal farming as well as landscape gardening and horticultural businesses. Forestry and Logging - This category includes all businesses involved with planting, conserving and felling timber as well as Christmas tree growers such as Festive Forestry at Although the overall woodland area and the amount of softwood grown in Britain has increased in the past ten years, Britain does not grow enough to meet its needs and imports wood from abroad. Fishing - This group includes fishing fleets as well as fish farms, such as trout hatcheries, salmon farms and freshwater mussel growers. Mining and Quarrying - This group includes coal mines, oil and natural gas extraction, quarrying of all types of stone, slate, gravel, sand and clay and salt production. The primary sector involves growing, extracting or converting natural resources into raw materials.

The secondary sector includes all those businesses which manufacture, process or assemble products. This sector also covers energy production and the construction industry. Manufacturing - This includes all businesses which make or produce goods in the UK, regardless of their size or what they make. The Office of National Statistics divides manufacturing companies into different product groups. This is helpful because it enables you to see which types of manufacturers are thriving and which are not. Engineering - Engineers are employed in manufacturing industries, mainly in relation to the design and functioning of machinery and equipment. Light engineering companies make small items where precision is important, such as scientific equipment. Heavy engineering companies make goods comprising large sections of metals, such as ships or cranes. Energy production - In addition to products, we all need electricity, gas and water. This group includes those that produce and distribute these services, such as Powergen and London Energy. This also includes regional water companies, such as Anglian Water Services and water collection and bottling companies. In the future Britain is looking at obtaining more energy from alternative sources, such as wind farming and tidal energy. These businesses, too, will be classified in this group. Construction - This group includes house builders and civil engineering companies. Between them they construct all types of buildings as well as motorways, bridges, roads and railways. Also included are electricians who work on building sites and plumbers, plasterers, joiners, painters and glaziers. The secondary sector manufactures goods. It converts raw materials into products for sale to businesses and private individuals.

Product groups Food products, beverages and tobacco, e.g. meat and poultry, fish freezing, fruit and vegetable processing, dairy products and ice cream, breakfast cereals, pet food, bread, sweets, chocolate, wines, mineral water, soft drinks, beer and tobacco. Textiles and textile products, e.g. cotton and woollen goods, soft furnishings, carpets, knitted and leather clothes. Leather and leather goods, e.g. handbags, luggage and footwear. Wood and wood products (excluding furniture), e.g. sawmilling, wood containers, plywood and veneers. Pulp, paper products, publishing and printing, e.g. paper, cartons and boxes, wallpaper, book and newspaper publishing, reproducing sound or video recordings or computer media, Coke, refined petroleum products and nuclear fuel processing Chemicals, chemical products and man-made fibres, e.g. chemicals, industrial gases, dyes, plastic, synthetic rubber, paint, printing ink, soap, pharmaceuticals, detergents, manufacturing unrecorded media (e.g. blank CDs), perfume, glue, man-made fibres. Rubber and plastic products, e.g. rubber tyres, plastic tubes and packaging, plastic floor coverings

Product groups Non-metallic mineral products, e.g. glass, ceramic goods (such as sinks, baths and tiles), bricks and cement manufacture, finishing of ornamental and building stone. Basic metals and fabricated metal products, e.g. iron, steel, aluminium, lead, zinc, tin and copper goods, central heating radiators and boilers, cutlery, tools, locks, wire, screws. Other machinery and equipment (Engineering industries), e.g. pumps, compressors, furnaces, ventilation equipment, agricultural machinery, power tools, earth-moving machinery, domestic appliances. Electrical and optical equipment (Engineering industries), e.g. office machinery, computers, electric motors, batteries, electric lamps, televisions and radios, medical and surgical equipment, cameras, watches and clocks. Transport equipment, e.g. motor vehicles, trailers, caravans, motor vehicle parts and accessories, ships, boats, trains, aircraft and spacecrafts, motorcycles and bicycles Other manufacturing not listed above, e.g. furniture, mattresses jewellery, musical instruments, sports goods, games and toys, brooms and brushes; recycling of scrap metal.

This Tertiary sector includes every type of business that offers a service including Government owned establishments. Private services are purchased by businesses and individuals. They are offered by privately owned businesses including retailers, accountants, banks, communications companies, consultants, private clinics and hospitals, publishers, transport and distribution firms, travel agencies and many others. Public services are provided locally and nationally by the government and local authorities, for example education, emergency services, housing, law and order, defence and military activity, social services, local planning, recreational facilities and so on. Voluntary and not-for-profit services are provided by charitable and voluntary organisations in areas such as social care, community health care, global development, environmental and wildlife protection. The tertiary sector provides services to businesses and individuals.

Main groupings Wholesale and retail trade, e.g. all wholesalers and retailers, including market stalls and dispensing chemists, plus repair/maintenance businesses such as garages, watch repairers, cobblers. Hotels and restaurants including camping sites, youth hotels, holiday centres, take-away food shops and stands, pubs and bars. Transport, storage and communication, e.g. taxis, furniture removals, freight transport by road, rail, sea, canals and air, all passenger transport, pipelines, cargo handling and storage, travel agencies and tour operators, post and courier services, telecommunications. Financial services, e.g. banks, building societies, finance houses, insurance companies and pension funds. Real estate, renting and business activities, e.g. estate agents, car hire firms, all rental firms, computer consultants, software developers, office equipment repairers, solicitors, accountants, market research companies, quantity surveyors, architects, advertising agencies, recruitment companies, security firms, industrial cleaners, photographers, secretarial agencies, call centres, debt collectors, exhibition organisers.

Main groupings Public Administration and Defence, e.g. government agencies which oversee health care, education and other services, defence activities, the justice system, the police and fire service. Education, e.g. all schools, colleges and universities, driving schools, private training firms. Health and Social work, e.g. hospitals and nursing homes, doctors, dentists, vets, social workers. Other community, social and personal service activities, e.g. Sewage and refuse disposal, professional organisations and trade unions, religious and political organisations, film and video production and distribution, radio and television, theatres, fair and amusement parks, news agencies, libraries, museums, sports centres, dry cleaners, funeral directors, hairdressers, beauty therapists, gyms and fitness centres, nature reserves.

LO1 - Know the range of different businesses and their ownership – Owner
Any type of business can be categorised within the Public, Private or Voluntary/Charitable sectors. Task 11 - P1.09 – Explain in your own words the term ‘Business Ownership’ - Click on this link for additional information Task 12 - P1.10 – Explain the different ways that companies can be owned (give examples) - Click on the links below for additional information Task 13 - M1.4 – Show evidence of the type of business ownership that your 2 chosen businesses focus on Public Government Departments Government Agencies Private Private Limited Company Public Limited Company Sole Trader Partnership Franchises Worker Cooperatives Voluntary/Charities Charitable trusts

Many people in the UK own their own business – such as the hairdressers, newsagents and greengrocers in your own area. The manager of your local Pizza Hut or KFC may own the business, but as a franchise. All these are small businesses, run and operated by the owners. Other people own larger businesses. In some cases they may work there every day and control the way it operates. In others, they may never go near the business. Instead they have shares in the business and are called shareholders. They business may then be run by paid directors. Some people, such as solicitors or accountants, jointly own a business in partnership with other people. Others may set up in business as a cooperative with no single boss or leader. In some cases the business may be publicly owned and controlled by the state, on behalf of the people. Or it may be controlled by trustees, who oversee the business affairs. This is the case with charities, the main type of organisation in the voluntary sector – so called because both paid staff and volunteers may be employed.

Advantages of Incorporation Disadvantages of Incorporation
LO1 - Know the range of different businesses and their ownership – Owner Private companies - are typically small family businesses that want to keep the control of the business within the family. Public companies - are the well known national and international companies like Vodafone and Corus Steel. Advantages of Incorporation Disadvantages of Incorporation Potential for limited liability is one of the most important advantages of the corporate form of business structure. The liability of corporate debt is generally limited to the amount of money each investor has invested. A corporation can theoretically have perpetual existence. A shareholder may freely sell, trade or give away his stock unless this right is formally restricted by corporate decision Taxation can be both an advantage and a disadvantage. due to the organizational structure in a corporation, a certain degree of individual control is necessarily ;lost by incorporation The technical formalities of corporation formation and operation must be strictly observed in order for a business to reap the benefits of corporate existence. the initial state fees that must be paid for registration of a corporation can be very high Corporations are also subject to a greater level of governmental regulation than any other type of business entity. Profits are subject to double taxation when distributed to shareholders in the form of dividends.

The following table compares these different types of private sector organisations: Sole Trader Partnership Private Company Public Company Franchise Who Owns the Business 1 owner Partners Shareholders Franchisee Size Small Fairly small Normally small but can also be large Large Small but maybe part of a very large organisation Liability Unlimited Mostly Unlimited Limited Profits for? Owner Divided between franchisor and franchisee Access to Capital Usually fairly limited Less than PLC Extensive Limited by owner’s capital Disadvantage Hard work Disagreements between partners Limited Capital Maybe taken over Franchisee has to share profits with franchisor

Public ownerships: are businesses owned by the state
LO1 - Know the range of different businesses and their ownership – Owner Public ownerships: are businesses owned by the state Some enterprises in the UK are owned or controlled by the state such as government departments and organisations funded by the government. They include the following. Government departments - deal with different matters at national level. These include education, the NHS, social security benefits, defence, the police and prison service, environmental issues and concerns, major road building programmes and the collection of taxes. Local authorities - provide services for the local community. These vary, depending upon the area, so that the services in a rural community are different from those offered in a city. The range of services offered is shown in the diagram below.

Private Ownership - An entrepreneur is a person who risks his or her own money to built up successful business. Private ownerships are businesses owned by individuals who aim to make a profit. Private organisations are owned by individuals, often known as entrepreneurs, who take the risks involved with running the business. If the business is successful, the owner(s) make a profit. There are four main types of privately owned organisation A sole trader is the name for the smallest type of business. It is owned by one person, even though there may be several employees. A sole trader is personally responsible for every aspect of the business, from keeping the premises clean to doing the accounts and paying the tax due on the profits. Examples include plumbers, decorators, hairdressers and some local retailers. The sole trader can keep all the profit each year, after paying tax. A partnership is owned and run by two or more people. The partners are then jointly responsible for running the business. Most partnerships are small, such as local accountants, solicitors, doctors and vets. However, a few larger organisations are run on the basis that the employees become partners when they join the company.

A Private limited company is easily identified because its name always ends with the abbreviation ‘Ltd’. The owners each own a share of the business and are therefore known as shareholders. If the company is successful the shareholders will receive a financial reward in the form of dividends. Many private companies are family businesses in which the owners have two roles. As well as being shareholders they are also directors and run the company. A Public limited company is the largest type of business. These companies end their name with the letters ‘plc.’ The shares are usually traded on the Stock Exchange and can be owned by members of the public and institutional investors, such as large banks or insurance companies. The directors are paid a salary to run the company and may, or may not, own shares. Selling shares to the public means that this type of company can raise large amounts of money to expand or develop the enterprise.

Private Co-Operative - Two variations on these types of businesses are given below. Franchises - In this situation a small business is started using the name of a larger organisation. The owner of the small business (the franchisee) pays the larger company (the franchisor) a share of the profit and a fee to use the name. In return, he or she is given help and support to run the business. Examples of franchise businesses include Prontoprint, Kentucky Fried Chicken, Body Shop and Benetton. Workers’ cooperatives, where the business is jointly owned and run by the workers. All the profits are shared and the owners make joint decisions about how the business should be run. Workers’ cooperatives in Britain are normally quite small, unlike the CRS – the Cooperative Retail Society – which is owned by its customers and operates all over the country.

Who owns the enterprise Who controls the enterprise
LO1 - Know the range of different businesses and their ownership – Owner Types of Private Businesses The main types of business organisation in the private sector are illustrated in the chart below: Type of Enterprise Who owns the enterprise Who controls the enterprise Sources of finance Sole Trader 1 person Owner’s savings, bank loans and overdrafts, profits Partnership 2+ owners The partners Partners savings, bank loans and overdrafts, profits Company 2 to any number of shareholders Major decisions and day-to-day running by directors Shares, bank loans and overdrafts, venture capital and profits Franchise Franchisee with license from franchisor Franchisee with steering guide from franchisor Franchisee’s savings, borrowing, profits

Types of organisation in the private sector:
LO1 - Know the range of different businesses and their ownership – Owner Types of organisation in the private sector: Typical sole traders include tradesmen such as plumbers, electricians, television repair people etc. Nowadays lots of people are setting up their own businesses by creating small web-based companies working from home. Partnerships are typically found in professional services such as accountants, solicitors, doctors, dentists etc, where the partners can share expertise and skills. They can also share the workload, organising work rotas to allow for time off and holidays. Partners also pool their capital. Companies are owned by shareholders that each contributes a stock of money into a central pool. This pool of capital is then used to provide a core sum of finance, which is then added to by borrowing and other forms of finance. Directors run the company on behalf of shareholders who receive a share of the profits as dividends. Examples include Portakabin, Argos, Polestar and Cadbury Schweppes. Franchises are licensing arrangements whereby an individual or group can buy the right to trade and produce under a well known brand name in a given locality. The franchisee benefits from working for themselves while having the privilege and reputation associated with a much larger group. Coca-Cola franchises some of its bottling operations, and you will all be familiar with McDonald's. Many of the McDonald's outlets are franchised.

Advantages Disadvantages
LO1 - Know the range of different businesses and their ownership – Owner Sole traders - like small corner stores and newsagents. If you call out a plumber or electrician they have a good chance of being a sole trader, although they may also be part of a franchise arrangement or a partnership. This is the simplest and the most widely used structure for business. It is the least regulated type of the various business structures. For tax and legal purposes the business is the owner. Advantages Disadvantages Sole owner has total control over the operations of this business Least regulated form of business Other than records for tax purposes there are no legal requirements as to how the business must be operated Usually one only needs to obtain a license or pay a fee to a local registering authority. All of the personal and business assets of the sole owner are at risk in the sole proprietorship A judgment against the sole proprietorship could reach into the personal assets of the sole owner Liability insurance premiums are very high. perhaps too costly for the resources of the sole owner Due to the structure it may be difficult to obtain a loan. if there is insufficient collateral a sole proprietor may have to mortgage a loan or place another piece of personal property as collateral When the sole owner dies often the business ceases to exist due to the lack of structure in this business form

Advantages Disadvantages
LO1 - Know the range of different businesses and their ownership – Owner Partnership - your doctor or dentist may well be in partnership, as well as solicitors that help your family to buy a house or to make out a will. The limited partnership is a hybrid type of business structure. It contains elements of both a traditional partnership and a corporation. The limited partnership form of business structure may be used when some interested parties want to invest in a partnership but want only limited liability and do not wish to exercise any control over the business activities of the partnership. A limited partnership consists of two types of partners; the general partner; one or more people who actively manage the partnership; and the limited partner; one or more people who invest in the partnership but take no active role in the management of the partnership. The general partners are at personal risk for their conduct of the partnership whereas the limited partner risks only that which he has invested in the partnership. Advantages Disadvantages The limited partner, as long as he remains passive, has no personal liability and risks only that which he invests. This low risk for the limited partner and the fact that the limited partner shares in the profits and tax deductions with no duties regarding the active conduct of business may make it easier for the partnership to find investors. There is always a chance for a lack of continuity and clear cut guidelines amongst the partners concerning who does what and how to conduct business. General partners maintain full personal risk. The limited partner risks losing the benefits of the limited partner status if they take any active role in the conduct of the activities of the partnerships

Corporate Structure: A Concise Explanation
LO1 - Know the range of different businesses and their ownership – Owner The Corporation - A corporation is an artificial entity created by filing Articles of Incorporation with the Secretary of State. This gives the corporation existence and a legal right to conduct business in the state of incorporation. Corporations are more complex than either a partnership or sole proprietorship and are subject to more regulation by the state. The internal rules of the corporation which outline the mechanics of the operation and management are called the by-laws. Corporate Structure: A Concise Explanation Shareholders: They own share in the business but do not engage in the direct management of the operation except by electing the directors of the corporation and by voting on major corporate issues. Directors: They may be shareholders, but as Directors they do not own any of the business. As group known as the Board of Directors, they are jointly responsible for making the major business decision for the corporation as well as appointing the officers of the corporation. Officers: they may be shareholders and/or directors, but, as officers, they do not own any of the business. They are responsible for the day-to-day operations of the corporate business. Usual titles for the different corporate officers are: President, vice-president, Secretary and treasurer.

Franchising - In the United States almost half of all retail sales are made through firms operating under the franchise system like McDonald's which has a brand franchise. Franchising is becoming increasingly popular in this country. Franchising is really the 'hiring out' or licensing of the use of 'good ideas' to other companies. A franchise grants permission to sell a product and trade under a certain name in a particular area. If I have a good idea, I can sell you a licence to trade and carry out a business using my idea in your area. The person taking out the franchise puts down a sum of money as capital and is issued with equipment by the franchising company. The firm selling the franchise is called the franchisor and a person paying for the franchise is called the franchisee. Where materials are an important part of the business (e.g. confectionary, pizza bases, and hair salons) the franchisee must buy an agreed percentage of supplies from the franchisor, which thus makes a profit on these supplies as well as ensuring the quality of the final product. The franchisor also takes a percentage of the profits of the business, without having to risk capital or become involved in the day-to-day management. The franchisee benefits from trading under a well-known name and enjoys a local monopoly. Training is usually arranged by the franchisor. The franchisee is his or her own boss and takes most of the profits. Franchises - are commonly found in Quick Service Restaurants such as McDonald's as well as in other food outlets, and services such as 24 hour plumbing.

Criteria for Judging the Success of Business Businesses come in a variety of forms. For example, one important distinction is between private and public sector businesses. Then within each sector there are a number of different types of business. In the public sector, public corporations are government owned businesses such as the BBC, which are then managed independently of the government but to pre- set aims and objectives. Municipal enterprises are local government enterprises. In the private sector, there are sole traders, partnerships, private companies, public companies, and franchise organisations. Every company must register with the Registrar of Companies, and must have an official address. Private companies have Ltd after their name. They are typically smaller than public companies although some like Portakabin and Mars are very large. Shares in a private company can only be bought and sold with permission of the Board of Directors. Shareholders have limited liability. A public company like Cadbury Schweppes has their shares traded on the Stock Exchange. The main advantage of having shares traded on the Stock Exchange is that large amounts of capital can be raised very quickly. One disadvantage is that control of a business can be lost by the original shareholders if large quantities of shares are purchased as part of a takeover bid. In order to create a public company the directors must apply to the Stock Exchange Council, which will carefully check the accounts.

Charities and Voluntary - Voluntary organisations are not- for-profit organisation that provides a service, such as a charity, and is run by professional staff and volunteers. A Surplus in the voluntary sector, is the amount remaining from donations and fund-raising activities after essential expenses have been paid. Voluntary organisations, including charities, are so called because many staff, such as many of those you see in charity shops in your town, may work there without being paid. They are also called ‘not-for-profit’ organisations because they focus on using their income to provide a service to those in need. They aim to make a surplus every year, after necessary expenses, which is used to support and promote their own particular cause.

LO1 - Know the range of different businesses and their ownership – Change
When a company decides to change ownership from something as simple as a partnership becoming a single owner company through a buyout, a private owned company being bought out by a larger company into a share owning corporation, or a Franchise going independent, a lot of legal issues and business functions will change along with it. For example when Unilever bought Ben and Jerry’s, a well known Partnership, the status of the company changed considerably. The Partnership became part of a share agreement. Ben and Jerry had a place on a board of Directors and decisions became negotiated. Click here. Similarly when Bodyshop, a well known environmentally friendly, ethos, environmental and ethically friendly driven company was bought by L’Oreal, things changed. See here. When Lloyds TSB was rescued to the degree of a 95% bailout, there should have been a change in ethos and business practice but large payments were still made to managers and underhand practices were still known to be happening. See here. Task 14 – D1.1 – Using examples, discuss the impact that a change in ownership can have on business functions and practice with companies. Task 15 – D1.2 – Using your companies as examples, discuss the impact a change in ownership might have on business functions and practice in terms of the extent of liability and limitations to operation.

Task 16 - P2.1 – Explain in your own words the term ‘Stakeholder’
LO1 - Know the range of different businesses and their ownership – Stakeholders Stakeholders are people or groups who can affect (influence) or are affected by the organisation They can be seen as being either Internal or External to the organisation, or both! Task 16 - P2.1 – Explain in your own words the term ‘Stakeholder’ Task 17 - P2.2 – Explain the different types of stakeholders available (give examples) Identify and Discuss how the different types of groups might have different agendas with regards to what they want from the business Task 18 - P2.3 – List and explain the different stakeholders that exist for your two chosen businesses. Identify the influence they have on the functions of the business. Managers / Employees (I) Shareholders (I) Customers (E) Suppliers (E) Owners (I) Trade Unions / Employer Associations (E) Local and National Communities (E) Government (Local and Central) (E)

LO1 - Know the range of different businesses and their ownership – Stakeholders
Managers as Stakeholders (I) –Managers are one of the more influential stakeholders within companies, also the ones left to blame for the success or failure. Their business function is to overlook and run the company, so ultimately if the companies fail then they fail. Their standard function is to: Organise – Staffing, deliveries, products, premises, day to day functions. Make Decisions – what happens, who does what, who gets hired, who gets fired. Plan – short, medium, long term, setting objectives, carrying them out. Control – day to day, week to week, making things happen, making people do things. Accountable to the Owner(s) – Chain of command, success or fail. They want the company to succeed because: Better chance of promotion Successful company may reward them by paying them higher salaries Giving them a bonus Better fringe benefits If company fails they could lose their job

Communicating with employees about what you're doing is critical
LO1 - Know the range of different businesses and their ownership – Stakeholders Employees (I) are the make-or-break stakeholders - ignite their passion and your organization will accomplish a great deal. A business needs staff or employees to carry out its activities Employees agree to work a certain number of hours in return for a wage or salary Pay levels vary with skills, qualifications, age, location, types of work and industry and other factors Communicating with employees about what you're doing is critical excited to learn green initiatives So how can you do a better job of engaging them in those efforts? Want the company to succeed: A failing company will: More likely to get better pay Chance of promotion Better facilities Threaten their jobs Freeze their pay Possibly cut their wages

Best quality available Good service Innovative products
LO1 - Know the range of different businesses and their ownership – Stakeholders Customers (E) have a stake in any business which they buy goods and services from: They want low prices Best quality available Good service Innovative products Firms must understand and meet the needs of their customers, otherwise they will fail to make a profit or, indeed, survive Analyzing customer/stakeholder expectations will allow us to answer the questions: To whom are we accountable? Who has an interest in what we do or in a particular issue and its outcome? Who can influence us? Are there any "non-obvious" customers/stakeholders who can limit our options or change our plans?

Owners and Shareholders - The number of owners and the roles they carry out differ according to the size of the firm In small businesses there may be only one owner (sole trader) or perhaps a small number of partners (partnership) In large firms there are often thousands of shareholders, who each own a small part of the business Put money into the business so: Want to make money from the business Interested in the company making a profit Want a good dividend Want their shares to increase in price Suppliers (E) - Firms get the resources they need to produce goods and services from suppliers Businesses should have effective relationships with their suppliers in order to get quality resources at reasonable prices This is a two-way process, as suppliers depend on the firms they supply Want the company to succeed: A failing company will: More orders for them More success for their business Falling orders for them Less profit Job losses

Trade unions and Employer Associations (E) and collective bargaining can provide workers with a valuable safeguard against exploitation and victimisation. This is particularly so in less wealthy countries and in less profitable industries which usually have poorer employment conditions. Employee associations take many forms: employment committees, labor organizations, recreational and social organizations, clubs, and athletic groups. Certain employee associations, such as labor organizations, are legally protected by employees’ right Employee committees that deal with the terms and conditions of employment are illegal if they are controlled or dominated by management. Legal committees serve many useful functions including getting employee input and involvement and organizing social recreational activities.

The business often supplies goods and services vital to the local area
LO1 - Know the range of different businesses and their ownership – Stakeholders Firms and the Communities (E) they exist in are also in a two- way relationship The local community may often provide many of the firm’s staff and customers The business often supplies goods and services vital to the local area But at times the community can feel aggrieved by some aspects of what a firm does In the close vicinity of a business, they can impact on the local area for: Creates jobs for people living locally The local area will suffer if a business fails and is a large employer Business might buy from local suppliers Provide a service to local people or businesses It could pollute the local environment

Want the company to succeed: A failing company will:
LO1 - Know the range of different businesses and their ownership – Stakeholders Government (E) - Economic policies affect firms’ costs (through taxation and interest rates) Legislation regulates what business can do in areas such as the environment and occupational safety and health Successful firms are good for governments as they create wealth and employment Want the company to succeed: A failing company will: Business pays taxes – the more profit the business makes the more taxes it pays Workers are made unemployed Government will have to pay them unemployment benefit

All stakeholders have an expectation of the company they deal with and to get what they want they can influence a company in terms of products, pricing, ethical implications and strategy. Task 19 - P2.4 – Discuss the Investment and Return of different stakeholders that exist for your 2 chosen businesses. Stakeholder Investment Return Customers Value for money, good service, quality Owners/shareholders: Satisfying/maximising return on investment Managers Status, performance bonuses Employees High wages, conditions of work Suppliers To sell a lot at a high price, repeat orders, customer loyalty Pressure groups To force a reduction of environmental impact

Owner v customer: Profit v service e.g. conflict over opening hours
LO1 - Know the range of different businesses and their ownership – Stakeholders From the previous task we discussed the investment and return Stakeholders get from loyalty and continued business with your 2 companies. But when that investment is not reciprocated, then conflicts occur within businesses. Stakeholder Conflict – Refusal to invest, withdrawal of support, share dumping causing a devaluation of the company Owner v customer: Profit v service e.g. conflict over opening hours Shareholder v worker: Profits v high wages Owner v management: “Divorce between ownership (profits) and control” i.e. The owners have little power over managers Employer v employee Employees see their hard work reflected in higher profits for the employer Employers look for greater efficiency – more output for lower costs Task 20 - P2.5 – Discuss with evidence the conflicts that might or have arisen with your 2 chosen businesses.

Task List Task 1 - P1.1 – Describe and explain the purpose, history and function of 2 businesses from any sector that have commonality. Task 2 - P1.2 – Explain with examples the term ‘Business Markets’ Task 3 - P1.3 – Explain the different markets/areas that businesses can operate in. Task 4 - M1.1 – Show evidence of the market that your two chosen businesses deal in and describe what it means to them to be in that market. Task 5 (P1.5) – Explain in your own words the term ‘Business Purpose’ Task 6 (P1.6) - Explain the different business purposes (give examples) Task 7 - M1.2 - Show evidence of the business purposes that your 2 chosen businesses focus on. Task 8 (P1.9) – Explain in your own words the term ‘Business Sectors’ Task 9 (P1.10) – Explain what each of the business sectors mean (give examples) - Click on the links below for additional information Task 10 - M1.3) – Show evidence of the business sector that your 2 chosen businesses deal in

Task List Task 11 - P1.12 – Explain in your own words the term ‘Business Ownership’ Task 12 - P1.13 – Explain the different ways that companies can be owned (give examples) - Click on the links below for additional information Task 13 - M1.4 – Show evidence of the type of business ownership that your 2 chosen businesses focus on Task 14 – D1.1 – Using examples, discuss the impact that a change in ownership can have on business functions and practice with companies. Task 15 – D1.2 – Using your companies as examples, discuss the impact a change in ownership might have on business functions and practice in terms of the extent of liability and limitations to operation. Task 16 - P2.1 – Explain in your own words the term ‘Stakeholder’ Task 17 - P2.2 – Explain the different types of stakeholders available (give examples) Task 18 - P2.3 – List and explain the different stakeholders that exist for your two chosen businesses. Identify the influence they have on the functions of the business. Task 19 - P2.4 – Discuss the Investment and Return of different stakeholders that exist for your 2 chosen businesses. Task 20 - P2.5 – Discuss with evidence the conflicts that might or have arisen with your 2 chosen businesses.

THE BUSINESS ENVIRONMENT

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