Business in the Real World - GCSE Revision

Introduction

• Revision presentation by Mr. Evans for Unit One: Business in the Real World.
• Important for GCSE as it appears in both papers at the end of the course.

What is a Business?

• An organization that uses resources to trade goods and services aiming for profit.
• Utilizes land, labor, and capital organized by enterprise and management in a production process.

Resources and Opportunity Cost

• Businesses have limited resources: land, labor, capital.
• Decisions required on resource allocation.
• Opportunity Cost: The next best alternative forgone.

Sectors of Production

• Primary Sector: Extraction of raw materials.
• Secondary Sector: Manufacturing.
• Tertiary Sector: Providing services to consumers.

Business Location Factors

• Proximity to market (customers).
• Availability of raw materials and labor in the area.
• Competition and costs of setting up.

Liability

• Unlimited Liability: Owners are fully responsible for business debts (e.g., sole trader).
• Limited Liability: Owners' personal assets protected, only lose the invested amount.
  • Limited liability companies (public or private) offer this protection.

Types of Business Ownership

• Sole Traders: Owner makes all decisions, keeps profit, but has unlimited liability.
• Partnerships: More skills, shared responsibility, still unlimited liability.
• Private Limited Companies: Limited liability, registered at Companies House, cannot sell shares publicly.
• Public Limited Companies: Can sell shares on the stock market, easier to raise finance.

Not-for-Profit Organizations

• Exist for reasons other than profit-making.

Stakeholders

• Individuals or groups affected by the business.
• Different stakeholders may have conflicting aims.

Business Plan

• Clarifies aims and objectives.
• Helps in organizing the business and raising finance.
• Includes a cash flow forecast.

Financial Concepts

• Total Revenue: Money from selling products.
• Fixed Costs: Do not change with production volume (e.g., rent).
• Variable Costs: Change with production volume (e.g., raw materials).
• Total Costs: Sum of fixed and variable costs.
• Profit: Calculated as total revenue minus total costs.

Business Growth

• Organic Growth: Growing the business using internal methods.
• Inorganic Growth: Acquiring another business (e.g., Jaguar Land Rover acquisition).

Economies of Scale

• Economies of Scale: Cost advantages due to increased output.
  • Benefits from bulk buying.
  • Diseconomies of scale occur when control becomes difficult and costs increase again.

This is a brief overview of key concepts in Unit One: Business in the Real World.