hi this is mr. Evans business this is a recording of a previous video that had very bad sound quality so hopefully this one will be better this is a revision presentation and something very quickly go through Union one business in the real world for GCSE it's really important that you know this unit in everything that's assessed in it because it comes up in both papers at the end of the course so what is a business this is the first thing we learn it's an organization that uses its resources to trade goods and services with the aim of making a profit in other words a business has land labor capital and those facts of production are organized by the enterprise and management into a production process they're combined in the production process and businesses make outputs which are goods and services usually with the aim of making a profit or at meeting customers want and need businesses have limited resources there is limited land labor and capital available and therefore decisions have to be taken about how you're going to use them you can't do you can't spend three hundred thousand on the computers and an advertising campaign if you've only got three hundred thousand pounds this concept is known as opportunity cost the next best alternative forgone all businesses face it because businesses have to choose how to allocate their resources in order to best make a profit businesses are either in the primary secondary or tertiary sectors of production the primary sector involves extracting raw materials in the secondary sector they're manufactured in something and in the tertiary sector the tertiary sector provides services to final consumers businesses when they set up they need to decide where they're going to locate this is the physical place from where they're going to trade and businesses will consider how close they are to customers which is the proximity to the market the availability of raw materials in the local area the availability of Labor the amount of competition and the costs incurred in setting up in that area so that's part of the location factors where a business is going to go right probably the most difficult and important concept in this unit is that of liability some businesses have unlimited liability where the owners of the business are entirely responsible for all of the debts of the business so in this case I've given the example of I've run a plumbing company as a sole trader I have some materials are used for the business that are worth ten thousand pounds and then I have my personal assets my bank account for my house if the business were to get into financial trouble I borrowed some money from a bank and I couldn't pay back that bank would take my house the the equipment the alternative is set up a limited liability company either a public or private limited company that would give me limited liability whereby I invest ten thousand pounds in the business okay if that business were to not be able to meet its debt obligations yes the business would go into liquidation I would lose my ten thousand pounds but my personal assets would be protected okay key concept that you need to understand businesses can be only the sole traders where the owner gets to make a little decisions and keep profit but they have unlimited liability and kind of limited skills and capital a partnership is when two or more people run a business so we get more skills in the business we get we get a bit of cover to help us out we're in or something but we've still got unlimited liability and there's more chance of argument obviously in a private limited company these businesses benefit from limited liability so the shareholders of the company can only lose the money that they've invested in the business and the business is its own separate legal entity that employs people and it goes on even if the owners of the business change which is good if you've got really good brand name however you need to register the company's house which can be costly you need to data and you don't get the opportunity to sell your shares on the stock market where as a public limited company the only difference between the public in the private company well there are some but it tends to be around the fact that the public limited companies can sell their shares on the stock market anyone can become an owner which makes it easier for them to raise finance not-for-profit organizations are huge number of organizations that exist for different reason other than making a profit businesses will have stake holders okay the stake holders on the specification are these ones here the first five here they're people their group two people who have an interest in the business because it has an effect on them these stakeholders might all have different aims and therefore they can come into conflict with each other so once we have decided we're going to start business we know what sort of ownership we're going to do we're going to make a business plan why because it's basically gonna help us clarify our aims set our objectives know how we're going to organize the business but crucially they are gonna help us raise finance if we're trying to get a loan from a bank to start a business they can all see a business plan a cash flow forecast if I'm trying to raise money on the stock market from investors they're also going to see one the business plan will lay out our aims and objectives which is what we're going to organize our resources in order to achieve these might change as a business it goes over time so starting from just surviving breaking even to growing to the maximizing profit and shareholder value all meanwhile we might have social and ethical aims which are aimed to benefit the wider community you need to know total revenue you need to know how to calculate it this is the amount of money of business gets from selling its product its fixed cost stay the same no matter how much a business makes so grant would be an example doesn't matter how many cakes I'm making my bakery I make no cakes the landlord stored rent if I make a million cakes that landlord still wants that same amount of rent variable costs however change in proportion to the raw materials for my cakes fine no cakes has been no money on raw materials to make a million cakes I spend a lot of money on raw materials total costs them all added together profit is calculated by total revenue minus total cost must learn that formula absolutely off by heart once we have established our business we may want to grow our business we can do to organically where we use these methods to grow our business ourselves or we can simply spend a lot of money on another company like Jack your Land Rover did and we take over another business when we grow one of the benefits of the businesses we get economies of scale this shows the average unit costs falling as we increase our output okay that's a benefit of graphical economies of scale it happens because we get benefits from bulk buying raw materials and things like that however we get to a point where the organization becomes more difficult to control and it actually increases our costs again and we starts off a different discipline into scale so that's a very brief overview