National 5 Course Notes Flashcards
What are the sectors of the economy?
o PRIVATE - sole traders, partners, private limited companies
o PUBLIC - government organisations
o THIRD - charities and social enterprises
What are the sectors of industry?
- SECTORS OF INDUSTRY
o PRIMARY
o SECONDARY
o TERTIARY
What do businesses do ?
A BUSINESS is an organisation that is formed to provide
GOODS and SERVICES.
What type of things do businesses provide ?
Businesses provide goods and services.
what type of goods and services do businesses provide ?
Businesses provide tangible goods
and intangible services
what are tangible goods ?
This means that they can be seen and touched.
what are intangible services ?
These are things that are done for others.
Services are INTANGIBLE. This means that
they CANNOT be seen and touched after they
are provided.
What are some examples of goods ?
- Car
- Newspaper
- Washing Machine
What are some examples of services ?
- Hairdresser
- Cleaner
- Taxi Driver
- Bank
WHAT TYPES OF GOODS AND SERVICES DO BUSINESSES PROVIDE?
Durable
Non-Durable
Consumer
Capital
What is a non-durable good or service ?
These goods and services DO NOT last for a long period of time.
What is a durable good or service ?
These goods and services last for a long period of time.
What is a consumer good or service ?
These goods and services are consumed by
individual private PEOPLE to satisfy their needs and wants.
What is capital good or service?
These goods and services are consumed by
BUSINESSES so that they can provide other
goods and services.
what are examples of durable products/services ?
- Car
- Computer
- Fridge
- Washing Machine
what are examples of non-durable products/services ?
- Newspaper
- Cinema Ticket
- Meal
what are examples of consumer products/services ?
- Food
- CD’s
- Games
- Clothing
what are examples of capital products/services ?
- Robotics
- Tools
- Vehicles
How do businesses provide goods and services ?
Businesses have to work to provide goods and services through
a process known as PRODUCTION.
What stages are in the production process ?
STAGE 1
INPUT
STAGE 2
PROCESS
STAGE 3
OUTPUT
What happens in the input stage ?
At the input stage, a business will have to gather together items that it will need to
make a good or service.
what are raw materials ?
RAW MATERIALS are the parts that have to be “put together” to make the good or service. For
example, a business making cars will need to get the body, wheels, engine, etc before they can
make a car.
description of the factors of production ?
FACTORS OF PRODUCTION are RESOURCES (useful things) that are used to put the raw
materials together in order to make a good or service.
what are the factors of production?
CAPITAL
ENTERPRISE
LAND
LABOUR
what is CAPITAL in the factors of production?
Capital describes MONEY and all of the EQUIPMENT it can be used to buy.
Capital has to be paid for through INTEREST (extra money paid from
borrowing or lost through spending). Capital is a MAN MADE resource.
what is ENTERPRISE in the factors of production?
Enterprise covers all of the IDEAS for goods and services a business has and
the ORGANISATION OF RESOURCES undertaken by it in order to make these
ideas turn into real goods and services. Enterprise earns PROFITS.
what is LAND in the factors of production?
Land is the Earth and all of the NATURAL RESOURCES in it or on it (eg oil,
wood, animals, crops, etc). Land is paid for through RENT (money paid for
the use of the land).
what is LABOUR in the factors of production?
The second factor of production is labor. Labor is the effort that people contribute to the production of goods and services. Labor resources include the work done by the waiter who brings your food at a local restaurant as well as the engineer who designed the bus that transports you to school.
Why should businesses be careful about what factor of production they pick?
Land is the Earth and all of the NATURAL RESOURCES in it or on it (eg oil,
wood, animals, crops, etc). Land is paid for through RENT (money paid for
the use of the land).
what is the PROCESS stage?
The process stage is the most important stage of production because it creates WEALTH. Wealth is
the value of goods or services available.
At the process stage, a business transforms the raw materials into the good or service that it is
producing. It does this through the use of the factors of production. For example, a business making
cars will use capital and labour to build the body of the car, add the engine and mechanics, add the
seats and windows, etc.
why does production create wealth?
Production creates wealth because the TOTAL VALUE of the good or service produced should be
more than the cost of the raw materials and factors of production used to make it. This increase in
wealth from production is known as VALUE ADDED, and is can be calculated as follows.
what is VALUE ADDED = OUTPUT VALUE – INPUT VALUE ?
For example, when a chip shop buys £1 of potatoes and produces £5 of chips, the value added (and
increase in overall wealth) from production is £4 (£5 – £1).
Production should always aim to create wealth because if it doesn’t then it has been a waste of the
money spent on raw materials and factors of production it used.
what is the output stage ?
At the output stage, a business will have created the final good or service that it wants to provide.
For example, a business making cars will now have the finished working car.
However, for many goods and services, the output stage for one business is the start of the input
stage for another.
This is because production and wealth creation for these goods and services has to be repeated in
several different “linked” businesses before they are finally ready. This is because most businesses
do not have the skills or materials to carry out every process required to completely create a good
or service.
When this is the case, all of the businesses whose production processes are “linked” together to make
one good or service are said to form a PRODUCTION CHAIN.
give an example of a production chain ?
start chain = farmer
inputs = seeds
process=farming
output = wheat
why do we use businesses to provide goods and services?
In every ECONOMY (an area where goods and services are produced and used) there are CONSUMERS.
These are people who buy goods and services to satisfy the following.
what is a need ?
These are BASIC goods and services that we
must have if we are going to be able to
SURVIVE.
examples of needs?
- FOOD
- CLOTHING
- SHELTER
what is a want ?
These are goods and services that we DO NOT
need to have to survive – they are only
wanted by us because they would make our
lives easier or provide pleasure. They are
sometimes called LUXURIES. Consumers’
wants are usually thought to be UNLIMITED
because when someone satisfies one want,
then they will start to think of another one
which they believe will make them even
happier.
what are some examples of wants?
- Holidays
- Jewellery
- Fancy Clothes
- Car
what is consumption ?
This process of consumers creating or buying and then using up goods and services to satisfy their needs
and wants is called CONSUMPTION.
It is possible that consumers could produce all of the goods and services that they need for themselves.
In some developing economies this has to be the case because consumers do not have any other choice.
This is because there may be only a limited amount of goods and services available and/or they do not
have the money to make purchases.
However, most economies usually prefer to satisfy consumers’ needs and wants though having
businesses provide goods and services for the following positive reasons.
why do economies usually prefer to satisfy customer’s needs and wants?
they prefer it because of the following positive reasons :
EFFICIENCY
ECONOMIC
BENEFITS
SOCIAL
BENEFITS
SOCIAL COST
OPPORTUNITY
COST
what is efficency ?
Almost every business SPECIALISES in providing certain goods and services. This means
that the business does what it is best at. Specialisation means that businesses can be
EFFICIENT. This means that they use minimum inputs for maximum outputs and so can
produce their goods and services quickly, with little wastage and to a good standard
because “practice makes perfect” for them!
For the economy this EFFICIENCY means that more goods and services can be made with
the limited factors of production it has available.
what are economic benefits?
Economic benefits are MONEY based advantages that occur for a business itself or the
people living and working around it. They happen due to the efficiency from using
businesses to produce goods and services instead of self sufficient individuals.
Examples of economic benefits that can arise include:
* MORE EMPLOYMENT
* MORE WAGES FOR STAFF TO USE TO BUY GOODS AND SERVICES
* MORE WEALTH FOR BUSINESS OWNERS
* MORE TAXES FOR GOVERNMENT TO PROVIDE SERVICES WITH
* MORE GOODS AND SERVICES TO CHOOSE FROM
what are social benefits?
Social benefits are things that IMPROVE the QUALITY OF LIFE for the people living and
working around a business because it is producing there.
Examples of social benefits include:
* INCREASED SATISFACTION OF THEIR NEEDS/WANTS
* MORE LEISURE TIME BECAUSE WE DON’T HAVE TO DO EVERYTHING FOR OURSELVES
* POSITIVE ACTION TO IMPROVE WORKING CONDITIONS (eg Fairtrade businesses)
* BETTER FACILITIES (eg schools, roads to support businesses)
Even though most economies agree that the use of businesses can result in benefits, some
people feel that certain businesses can instead cause the negative impacts (known as
EXTERNALITIES).
what are the names of these?
SOCIAL COST
OPPORTUNITY
COST
These externalities mean that economies should keep an eye on the activities of the businesses in them
to make sure that they have more benefits than costs for the economy and the people in it.
what is social cost ?
Social costs are things that WORSEN the QUALITY OF LIFE for the people living and
working around a business because it is producing there.
Examples of social costs include:
* NOISE POLLUTION
* WATER AND AIR POLLUTION
* TRAFFIC CONGESTION
* OVERCROWDING DUE TO LOTS OF PEOPLE MOVING NEAR THE BUSINESS
what is opportunity cost ?
OPPORTUNITY COST exists when you have to make a choice. It measures the amount of
extra “benefit” that you lose out on when you sacrifice one thing in order to get
something that you desire more. For example, imagine you were thirsty and only had
enough money for a bottle of water or a carton of fruit juice. You decide to buy the water
rather than the fruit juice. This decision has an opportunity cost because choosing only
the water means you have lost out on the extra benefit from getting the fruit juice too.
This idea means that businesses that make bad production decisions will create a negative
“opportunity cost” for society. This is because they will have wasted valuable limited
resources and so society will have lost the benefit these resources could have provided if
they had been used in a better way.
what is a business cycle?
A business cycle is the process of businesses using the factors of production to produce goods and services that will
satisfy the needs and wants of consumers.
what is the order of the business cycle?
Consumers have
NEEDS and (NEW and
UNLIMITED) WANTS.
Businesses identify
consumers NEEDS and
WANTS and decide to
make GOODS and
SERVICES to satisfy
them.
Businesses employ the
FACTORS OF
PRODUCTION to
PRODUCE the desired
goods and services and
increase WEALTH.
Wages from
employment allow
consumers to
CONSUME goods and
services.
how to satisfy consumers needs and wants ?
- FIND OUT WHAT CONSUMERS WANT
- DESIGN GOODS AND SERVICES THAT WILL PROPERLY MEET CONSUMERS NEEDS AND WANTS
- PRODUCE THE GOODS AND SERVICES DESIRED BY CONSUMERS TO A PROPER STANDARD
- TREAT CONSUMERS IN A POSITIVE WAY WHEN THEY ARE BUYING FROM THE BUSINESS
- MANAGE THE MONEY OF THE BUSINESS SO THAT IT CAN CONTINUE TO SATISFY CONSUMERS
how do businesses aim to satisfy consumers needs and wants?
The main way that many businesses try to achieve these things is by employing different teams of
specialised workers (known as FUNCTIONAL DEPARTMENTS or AREAS) to each take on some of these jobs.
However, in some small and medium sized businesses, there are not always specific departments for each
of these jobs and so it can sometimes be certain individuals who become responsible for them.
what are the main functional activities that are undertaken in a business ?
1 MARKETING
2 OPERATIONS
3 HUMAN RESOURCE MANAGEMENT (HRM)
4 FINANCE
what is marketing ?
and how is it achived ?
The marketing function is responsible for finding out what consumers want and then designing
goods and services that will properly meet their needs and wants.
This will be achieved through activities such as:
* Carrying out MARKET RESEARCH (info on customers and competitors)
* Designing appropriate features for the PRODUCT to be sold
* Deciding on a PRICE that consumers will pay
* Deciding the best PLACE to sell to product to consumers
* Deciding how to PROMOTE the product to let consumers know about it
what is operations?
and how is it achived ?
The operations function is responsible for producing the product that marketing has designed to
a proper standard for consumers.
This will be achieved through activities such as:
* Organising QUALITY raw materials and factors of production
* Completing the PROCESS stage of production to high standards
* Making enough finished goods and services to meet consumers DEMAND
* Getting finished goods and services DELIVERED to consumers on time
what is HUMAN RESOURCE MANAGEMENT (HRM) ?
and how is it achieved ?
The HRM function is responsible for making sure that staff effectively help operations produce
goods and services to a proper standard for consumers. They also have to ensure that members
of staff treat consumers in a positive way when they are buying from the business.
This will be achieved through activities such as:
* RECRUITING AND SELECTING well qualified staff
* MONITORING and SUPPORTING the work of staff
* Providing staff with TRAINING to improve their operations skills
* Providing staff with CUSTOMER SERVICES TRAINING
* Ensuring staff follow CUSTOMER SERVICES POLICY properly
* DISCIPLINING staff who cause problems for other worker and consumers
what is finance ?
and how is it achieved ?
The finance function is responsible for providing and managing the money that marketing,
operations and HRM need for their work. This will ensure that not too much is spent and so the
business can afford pay its’ bills and so continue providing for consumers.
This will be achieved through activities such as:
* RECORDING FINANCIAL (money) TRANSACTIONS
* PAYING BILLS and WAGES
* Creating documents to MANAGE CASHFLOW (money in and out)
* Creating documents to TRACK PROFITS
* Creating documents to TRACK BUSINESS VALUE
Are all businesses the same ?
Although all businesses are involved in satisfying consumers’ needs and wants through the business
cycle, there are different types of business.
The main factors which make businesses different from each other can be seen below.
* BUSINESS SIZE
* ECONOMIC SECTOR (business ownership and purpose)
* OBJECTIVES
* SECTOR OF INDUSTRY (business output)
Many businesses formally record information about their specific differences in a document called a
MISSION STATEMENT. This is to make sure that all people involved with the business understand how it
is organised and are encouraged to think POSITIVELY about it because they know how it is likely to affect
them.
Information about the differences between businesses is very important because they will affect the way
it is MANAGED and run. For example, a business set up to make money for the owner would not usually
decide to provide products for free because this would lose money instead of making more.
how many workers should there be to be considered a small business ?
These businesses are made up of between 1 and 50 workers.
how many workers should there be to be considered a medium business ?
These businesses employ between 50 and 250 workers.
how many workers should there be to be considered a large business?
These businesses employ more than 250 workers.
what are the 3 economic sectors ?
PUBLIC SECTOR, PRIVATE SECTOR and THIRD SECTOR.
what is the public sector of economy ?
PUBLIC SECTOR ORGANISATIONS
The main features of Public Sector organisations are as follows.
* They are set up and owned by different levels of GOVERNMENT on behalf of the public who
have elected them.
* They are run by paid workers and managers and have their progress checked by members of
the Government.
* They are set up to provide goods and services that should improve the quality of life for any
member of the public that uses them.
* Examples of the goods and services that are provided by public sector organisations include
the HEALTHCARE, EMERGENCY SERVICES, EDUCATION, DEFENCE, ROADS AND TRANSPORT
and the WELFARE STATE.
* Most public sector goods and services are free (or only cost a small payment). Public goods
and services are usually free because the money the Government needs to provide them is
collected through the following TAXES.
Tax Payer Example Taxes
INDIVIDUAL * INCOME TAX (money paid from wages earned)
- COUNCIL TAX (money paid for the use of Local Council Services)
- STAMP DUTY (tax on buying a house)
BUSINESS * CORPORATION TAX/INCOME TAX (money paid on business profits)
* VALUE ADDED TAX [VAT] (money paid on most goods you buy)
* DUTIES (extra taxes above VAT on specific items – eg alcohol)
U1.1 – Understanding Business: Business Activity
© BEST Ltd Licensed to: Blairgowrie High School
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The main levels and types of small to medium sized UK public sector organisations that provide these
goods and services can be seen below.
a DEVOLVED GOVERNMENT
In Scotland, Wales and Northern Ireland, some Government policies and public services are different
from those in England. This is because the UK wide Central Government has set up a Devolved
Government for these areas which has powers to make decisions for their own areas on certain
things known as DEVOLVED MATTERS.
In Scotland, the devolved Scottish Government can develop and implement policy on devolved
matters such as health, education, justice, business, rural affairs and transport. The work of the
devolved Scottish Government is managed by the First Minister, the Scottish Cabinet and Parliament.
b LOCAL AUTHORITIES
Local Authorities are responsible for supporting central and devolved Government policies about the
delivery of public goods and services by managing their day-to-day delivery at a local level.
Examples of Local Authority services include local refuse collections, Sports Centres and Libraries.
The work of Local Authorities will be managed by elected LOCAL COUNCILLORS.
what is the private sector of economy ?
Private Sector organisations are set up and owned by the individuals who have invested their own
personal money (known as CAPITAL) in them. They are set up to provide goods and services only to
consumers who can afford to pay for them. This is so that these businesses can make extra money
(called PROFIT) for the private benefit of their owners.
what are the main types of small to medium sized private businesses ?
SOLE TRADER
PARTNERSHIP
PRIVATE LIMITED COMPANY
what is a sole trader?
A sole trader is a self-employed person who owns and runs their own business as an individual.
what are the main features of a sole trader ?
The main FEATURES of a sole trader are as follows.
- Sole traders only have ONE owner who invested and organised all of the start up capital for the
organisation. - In a sole trader, the single owner has the authority (power) to make all decisions themselves.
- Sole traders usually only sell to consumers in a fairly small LOCAL area.
- Sole traders usually only employ a few workers and sometimes only consist of the owner alone.
what are the Advantages of being a sole trader?
The main ADVANTAGES of being a sole trader are as follows.
* Quick decisions can be made in the business because they are all made by the single owner
without interference. This can allow the business to respond to situations that might need dealt
with quickly, eg chance to invest in an idea.
* There are few laws or rules that have to be followed when setting up a sole trader. This means
sole trader businesses can be easier for people with little business experience to set up and
operate.
* All of the profits from the business can be kept by the single owner. This means that a
successful sole trader can make the owner lots of money quickly. Money taken out of the
business by the owner is known as DRAWINGS.
* Sole traders do not have to share information about their business with anyone (except the
Government for paying taxes). This means they can keep their information about performance
and profits private.
what are the disadvantages of being a sole trader?
The main DISADVANTAGES of being a sole trader are as follows.
* The single owner has UNLIMITED LIABILITY for any money owed by the business. This means
that if the business runs out of money, the debt is NOT limited to the money in the business and
so the sole trader will have to pay the rest of the debt using their own money and from the sale
of their assets (valuable things, eg house).
* All losses in the business will have to be accepted by the owner alone which could mean the end
up with far less money than they once had.
* There may be no-one else to share the decision making and work of the business and so this can
be stressful for the owner.
* The skills of the owner might limit what the business is able to do.
what is a partniship ?
A partnership is a type of business that has between 2 and 20 owners. Owners of a partnership are referred to as partners.
Partnerships tend to be found in professional practices such as solicitors, accountants and dentists.
what are the main features of a partnership?
- A partnership usually has between 2-20 owners who have each invested some of the start up
capital for the organisation. Each of these owners is called a PARTNER. - In the case of PROFESSIONAL PARTNERSHIPS (eg accounting and legal partnerships) there is no
limit to the maximum number of owners. - In a partnership, each of the different partners will have a say in the decision making of the
business. The specific amount of control each partner has over decision making will be set out in
a PARTNERSHIP AGREEMENT. - A Partnership Agreement is a legal document that all partners sign when the partnership is
created. This document sets out all of the partnership’s rules about work to be done and the
sharing rights for decisions, profits and losses. Usually the partnership agreement will set out
these rights based on the amount of money invested (eg a partner who invests 50% of the capital
will normally get 50% of the decision making votes). - Partnerships usually only sell to consumers in a fairly small LOCAL area. However, they can
become big enough to have several premises and so sell to a NATIONAL (countrywide) market. - Partnerships may only employ a few extra workers in addition to the partners and sometimes
only consist of the partners alone.
What are the advantages of a partnership?
The main ADVANTAGES of a partnership are as follows.
* Any losses in the business will be shared between all the partners. This means each individual
owner will take a smaller personal loss in a bad year.
* The decision making and work of the business can be shared between the partners which means
less stress for each owner.
* The skills of the different partners can allow the business to expand and make more profit.
* There is more money available in the business because it has several partners investing. This can
allow the business to provide better goods and services.
* Partners do not have to share information about their business with anyone (except the
Government for paying taxes). This means they can keep their information about performance
and profits private.
What are the Disadvantages of a business?
The main DISADVANTAGES of a partnership are as follows.
* The partners have UNLIMITED LIABILITY1
for any money owed by the business. This means that
if the business runs out of money, the debt is NOT limited to the money in the business and so the
partners will each have to pay the rest of the debt using their own money and from the sale of
their assets (valuable things, eg house).
* It can be hard to make quick and easy decisions in the business because there has to be
agreement between all the partners before something can be done. This can mean the business
can find it hard to respond to situations that might need dealt with quickly.
* The profits from the business are shared between all the partners. This means that each owner
can take less money from the business (DRAWINGS) than they would have done if they were
working on their own.
what are Limited partners ?
Some partners are known as LIMITED PARTNERS – this means they do not get a say in decision
making but they DO NOT have unlimited liability and so will only lose the money they have invested in
the business if things go badly.
what is a private limited company?
A private limited company has limited liability. This means that the business is seen as a separate legal entity from its shareholders. Therefore, shareholders are not legally responsible for paying the debts of the business. They only risk losing the capital they invested into the business if it fails.
A private limited company is controlled by a board of directors. This is a group appointed by the shareholders who oversee the running of the business.
what are the main features of a private limited company ?
The main FEATURES of this type of private sector business are as follows.
* A private limited company usually has at least 2 owners who have each invested some of the
start up capital for the organisation. Each of these owners is called a SHAREHOLDER – this is
because they each have a SHARE of the business.
* Shareholders will receive proof of their ownership through a SHARE CERTIFICATE. A share
certificate is a legal document which shows that a person owns part of a company.
* In a private limited company, shares can only be bought PRIVATELY from existing shareholders.
* Private limited companies must create MEMORANDUM AND ARTICLES OF ASSOCIATION when
they are created to outline all of the rules of the company and information about how many
shares will be available in it.
* Each share will entitle its’ owner to a share of any profits in a good year. This extra money for
the owner is known as a DIVIDEND. Dividends are usually given out as a percentage of the
original cost of a share. For example, a shareholder with £1 shares in a business may get a 3%
dividend at the end of the year – this means they will get 3p profit back on each share.
* Decision making in a limited company is made by group of senior managers known as the
BOARD OF DIRECTORS.
* In a private limited company, the Board of Directors may be the shareholders who take these
jobs for themselves or they can be separate people who are employed by the shareholders.
Shareholders might decide to employ Directors because they may be unable to manage the day
to day running of the business due to other commitments.
* Private limited companies may only sell to consumers in a fairly small LOCAL area. However,
they can become big enough to have several premises and so sell to a NATIONAL (countrywide)
market.
* Private limited companies may employ the shareholders as the Board of Directors and extra
workers to carry out day to day tasks. However, they can consist entirely of non owners who
have been employed by the shareholders to operate the company.
* Private limited companies must register and update details about their Directors, Secretary,
Shareholders and profits with COMPANIES HOUSE. This is a Government body which keeps track
of all companies in the UK and makes sure that they are following legal rules about the running
of companies. Companies House provides each company with its’ own unique COMPANY
NUMBER to help manage this process. If private companies do not follow the rules of
Companies House then they will be fined and can be forced to stop working.
what are the advantages of a private limited company?
The main ADVANTAGES of being a private limited company are as follows.
* The shareholders have LIMITED LIABILITY for any money owed by the business. This means that if the
business runs out of money, the debt IS limited to the money in the business and so the shareholders
can ONLY lose the money they have invested in the business.
* There can be lots of money available in the business because it can have lots of shareholders
investing. This can allow the business to provide better goods and services.
* The decision making and work of the business can be shared between the Board of Directors which
means less stress for each individual.
* The different skills of the Board of Directors can allow the business to expand and make more profit.
* Any losses in the business will be shared between all the shareholders. This means each individual
owners will take a smaller personal loss if the business fails.
what are the disadvantages of a private limited company ?
The main DISADVANTAGES of being a private limited company are as follows.
* Private Limited companies have to follow the legal rules in the COMPANIES ACTS. For example, they
must include the term “Ltd” after their name in all documents so that people know that there is
limited liability and so they may not get all debts repaid. This can mean that limited companies can
be complicated and difficult for people with little business experience to set up and operate.
* Private Limited companies have to share some information about their business by registering it
annually with Companies House. This means they cannot keep all their information about
performance and profits private.
* It can be hard to make quick and easy decisions in the business because there has to be agreement
between the Board of Directors before something can be done. This can mean the business can find it
hard to respond to situations that might need dealt with quickly.
* The profits from the business are shared between all the shareholders as dividends. This means that
each owner makes less money than they would have done if they were working on their own.
what is THIRD SECTOR business?
The Third Sector consists of non-governmental organisations which have been set up to provide goods
and services to benefit specific groups that they feel need special assistance.
The main types of small to medium sized third sector businesses (ie organisations with LESS THAN 250
employees) in the UK
what are the main features of Scottish charities?
CHARITY
The main FEATURES of Scottish charities are as follows.
- Charities are organisations which have been set up for the sole purpose of PROVIDING
PUBLIC BENEFIT in Scotland (or elsewhere) though one or more of the following recognised
CHARITABLE PURPOSES2
.
o THE PREVENTION OR RELIEF OF POVERTY
o THE ADVANCEMENT OF EDUCATION
o THE ADVANCEMENT OF RELIGION
o THE ADVANCEMENT OF HEALTH
o THE SAVING OF LIVES
o THE ADVANCEMENT OF CITIZENSHIP OR COMMUNITY DEVELOPMENT
o THE ADVANCEMENT OF THE ARTS, HERITAGE, CULTURE OR SCIENCE
o THE ADVANCEMENT OF PUBLIC PARTICIPATION IN SPORT
o THE PROVISION OF RECREATIONAL FACILITIES
o THE ADVANCEMENT OF HUMAN RIGHTS, CONFLICT RESOLUTION OR RECONCILIATION
o THE PROMOTION OF RELIGIOUS OR RACIAL HARMONY
o THE PROMOTION OF EQUALITY AND DIVERSITY
o THE ADVANCEMENT OF ENVIRONMENTAL PROTECTION OR IMPROVEMENT
o RELIEF OF AGE, ILL-HEALTH, DISABILITY, FINANCIAL BASED HARDSHIP
o THE ADVANCEMENT OF ANIMAL WELFARE
* Charities DO NOT make their money by trading and earning profits – they encourage the
public to give them money to pay for their work through the use of advertising campaigns,
fundraising events, etc. This money which is given by the public is known as a DONATION.
* Charities can also raise some money for their work by setting up a separate special
CHARITABLE TRADING ARM. This is a part of the Charity which raises money through paid
for activities such as restaurants and shops but gives it all back to the main part of the
Charity as a donation.
* In Scotland, official charities are registered with the Government’s OFFICE OF THE SCOTTISH
CHARITY REGULATOR (OSCR) and are given special CHARITABLE STATUS.
* Charitable status means the charity does not have to pay as many taxes on the money that it brings
in. This is so that it can maximise the money it has to support its’ cause.
* Once registered with OSCR, charities must meet a number of legal responsibilities set out in charity
law, including reporting to them on an annual basis.
* The work and status of a charity can be tracked with the OSCR through a unique CHARITY
REGISTRATION number. This can help prevent people pretending to be a charity and so cheating
the public out of money they intended to go to a “real” good cause.
* Charities will have volunteer and paid employees who are managed by a group of managers know
as TRUSTEES.
Examples of charities operating in Scotland include, overseas support charities (such as SCIAF and Mary’s
Meals), scout groups, cancer support charities, churches, nurseries and private schools.
What is a social enterprise?
Social enterprises are businesses which trade for a social or environmental purpose.
Social enterprises primarily have a social or environmental aim. For example, Social Bite use any profits generated from their cafes to invest into projects which aim to relieve homelessness within Scotland.
Many social enterprises will have a combination of both paid employees and volunteers working for them.
what are the main features of a social enterprise ?
The main FEATURES of Scottish social enterprise organisations are as follows.
* Social Enterprises legally cannot be part of a public sector organisation.
* Social Enterprises are different from public sector organisations because they have been set up
to openly generate funds in order to benefit only a SPECIFIC social, environmental or cultural
issue.
* Social Enterprises are different from charities because they aim to generate their funds through
GRANTS (money from agencies that doesn’t need paid back) and PROFIT MAKING trading
activities.
* Social Enterprises are different from private sector businesses because they have an ASSET
LOCK on both their profits and assets. This means that Social Enterprises MUST use all of their
profits and money from the sale of assets (if it is closed down) for the purpose of its social
mission.
* Social Enterprises must be run in an ETHICAL manner which reflects their aim to be of benefit to
society. This will be seen though actions such as offering their staff satisfactory wages, terms
and conditions, and clear environmental policies.
* Social Enterprises will have volunteer and paid employees who are managed by a BOARD OF
DIRECTORS.
what are the main types of social enterprises in Scotland?
social firms = These Social Economy organisations are set up to specifically create NEW JOBS for severely
disadvantaged people in the labour market (eg individuals with learning difficulties).
CO-OPERATIVES = A co-operative is a group of people (known as MEMBERS) who want to work together
in a jointly owned social enterprise organisation in order to help them meet their
common needs. Examples of co-operatives include the Cooperative grocery store,
insurance company and travel firms.
INTERMEDIATE
LABOUR MARKET
COMPANIES = These Social Economy organisations provide TRAINING and WORK EXPERIENCE for the
long term unemployed and other disadvantaged groups. The aim is to assist these
groups to re-enter the labour market through the provision of this paid work together
with high quality training, personal development and active job-seeking.
COMMUNITY
BUSINESS = These are social enterprise organisations that are set up in a particular geographical
area and focus on PROVIDING GOODS AND SERVICES to that area. They are trading
organisations which are set up, owned and controlled by the local community and
which aim to be a focus for local development and create self supporting jobs for local
people.
CREDIT UNION = Credit unions are finance co-operatives that help people to SAVE and BORROW money
at reasonable rates.
what are the main objectives of a public sector business?
Public sector businesses are usually set up to achieve the objective of providing a
PUBLIC SERVICE. This means that they provide their goods and services in order to
improve the quality of life for any member of the public who needs or wants to use
them.
what are the main objectives of a private sector business ?
Private sector businesses are usually set up to achieve the objective of MAXIMISING
PROFITS for their owners. This means that they only intend to provide their goods
and services to consumers who can afford to pay a price for them which will make
extra money for the business.
what are the main objectives of a Third sector business?
Third sector businesses are usually set up to achieve the objective of SOCIAL
RESPONSIBILITY. This means that they undertake activities which will improve the
quality of life for particular members of society that they think need extra help.
What does enterprise involve ?
Enterprise involves all of the following activities.
- COMING UP WITH IDEAS FOR NEW PRODUCTS (INNOVATION)
- ORGANISING THE RESOURCES NEEDED FOR PRODUCTION
- COMPLETING PRODUCTION AND ACTUALLY PROVIDING THE PRODUCT
- ACCEPTING THE RISK THAT THIS NEW PRODUCT COULD FAIL
People who are willing to be enterprising are called ENTREPRENEURS. Examples of
famous Scottish entrepreneurs include Michelle Moone and Tom Hunter. Successful
entrepreneurs usually have the following skills and qualities. - CREATIVITY
- FLEXIBILITY
- UNDERSTAND WHEN AND HOW TO USE INITIATIVE AND INNOVATION
- A POSITIVE ATTITUDE TO CHANGE
- BEING ABLE TO EVALUATE RISK TO HELP MAKE GOOD DECISIONS
- HAVE THE ABILITY TO PERSUADE OTHERS TO HELP THEM IN THEIR VENTURE
It is particularly important that a country has entrepreneurs in all sorts of
organisations who will help them develop new products for the following reasons. - THERE WOULD BE NO NEW GOODS OR SERVICES WITHOUT ENTERPRISE
- SOCIETY WOULD FAIL TO ADVANCE WITHOUT NEW GOODS AND SERVICES
- WITHOUT ENTERPRISE SOME NEEDS AND WANTS WILL BE UNSATISFIED
- SATISFACTION FOR SUCCESSFUL ENTREPRENEURS CAN ENCOURAGE FURTHER
BENEFICIAL ENTERPRISING ACTIVITIES
what are the organisations in the PUBLIC SECTOR ?
- Central Govt
- Devolved Govt
- Local Govt
what organisations are in a PRIVATE SECTOR business ?
- Sole Trader
- Partnership
- Private Limited Company
what are the organisations in a THIRD SECTOR business ?
- Charity
- Social Enterprises
what are the sectors of industry ?
There are 3 different industrial sectors –
PRIMARY SECTOR, SECONDARY SECTOR and TERTIARY SECTOR.
what is the primary sector ?
Primary sector industry involves extracting raw materials from the environment or growing raw materials, e.g. mining and farming.
what is the secondary sector ?
Secondary sector industry involves manufacturing products, e.g. factories and house building.
what is the Tertiary sector ?
Tertiary sector industry involves any business which provides a service, e.g. gyms and hotels.
what is the primary sector responsible for ?
PRIMARY SECTOR BUSINESSES
Primary sector organisations are responsible for EXTRACTING (getting) from the Earth the RAW
MATERIALS (eg WOOD, OIL, COAL, etc) needed for the input stage of production.
what is the secondary sector responsible for ?
SECONDARY SECTOR BUSINESSES
Secondary sector organisations are responsible for MANUFACTURING GOODS using the RAW
MATERIALS from the PRIMARY sector.
what is the tertiary sector responsible for ?
TERTIARY SECTOR BUSINESSES
Tertiary sector organisations are responsible for PROVIDING SERVICES. This includes sales for the
GOODS from the SECONDARY sector).
what are some exaples of a primary sector business ?
Examples of primary sector businesses include:
* FARMERS
* OIL WORKERS
* FISHERMEN
* FORESTRY WORKERS
what are some examples of a secondary business ?
Examples of secondary sector businesses include:
* CAR MANUFACTURER
* FURNITURE MAKER
* NEWSPAPER
* COMPUTER MANUFACTURER
what are some examples of a tertiary business?
Examples of tertiary sector businesses include:
* SALESPEOPLE
* HAIRDRESSERS
* BANKS
* LAWYERS
what is the public sector set up to achieve ?
PUBLIC SECTOR Public sector businesses are usually set up to achieve the objective of providing a
PUBLIC SERVICE. This means that they provide their goods and services in order to
improve the quality of life for any member of the public who needs or wants to use
them.
what is the private sector business set up to achieve ?
PRIVATE SECTOR Private sector businesses are usually set up to achieve the objective of MAXIMISING
PROFITS for their owners. This means that they only intend to provide their goods
and services to consumers who can afford to pay a price for them which will make
extra money for the business.
what is the Third sector business set up to achieve ?
THIRD SECTOR Third sector businesses are usually set up to achieve the objective of SOCIAL
RESPONSIBILITY. This means that they undertake activities which will improve the
quality of life for particular members of society that they think need extra help.
WHAT INFLUENCES BUSINESS ACTIVITIES?
DECISIONS are choices that have to be made about what to do when you are faced with several different
options and cannot do them all. For example, if you only had enough money for either a Snickers or a
Mars bar, you would have to make a decision about which one to buy as you cannot have both.
Businesses have to make different decisions about the following issues so that they can continue and
succeed.
* WHICH BUSINESS TYPE THEY WILL BE IN THEIR ECONOMIC SECTOR
* WHICH OBJECTIVES THEY WILL PURSUE
* WHICH INDUSTRIAL SECTOR THEY WILL OPERATE IN
* HOW BIG THE BUSINESS WILL BE
* HOW TO PRODUCE THEIR GOODS AND SERVICES
* HOW TO MAXIMISE BENEFITS AND MINIMISE EXTERNALITIES
* HOW TO SATISFY THE NEEDS AND UNLIMITED WANTS OF CONSUMERS
The KEY (main) factors which can create the need to make such decisions and also influence their results
are:
* INTERNAL STAKEHOLDERS
* EXTERNAL STAKEHOLDERS
* INTERNAL ENVIRONMENTAL FACTORS
* EXTERNAL ENVIRONMENTAL FACTORS
This process of making decisions that will help a business progress in response to key factors is what
BUSINESS MANAGEMENT actually is.
What are internal stakeholders ?
INTERNAL STAKEHOLDERS are people INSIDE OF A BUSINESS who are interested in
influencing its’ activities because they affect them in some way.
what are the internal stakeholders?
OWNERS
MANAGER
STAFF
what are the OWNER’s interests as a internal stakeholder?
The owners of an organisation are
interested in making sure that it
ACHIEVES THE OBJECTIVE that they
set it up for.
what are the MANAGERS interets as a internal stakeholder?
The managers of a business are
interested in making it successful so
that they can KEEP THEIR JOBS and
maybe get BETTER CONDITIONS (eg
wages).
what are the STAFF’S interest as an internal stakeholder ?
The workers of a business are
interested in helping to make it
successful so that they can KEEP
THEIR JOBS and maybe get BETTER
CONDITIONS (eg wages).
what are OWNER’S influnced by as an internal stakeholder ?
- Owners influence the activities of a
business by being able to MAKE
DECISIONS that managers and staff have
to work to achieve. - Owners have a HIGH level of influence
because no one else in the business has
the authority to overrule their decisions.
what are a MANAGER’S influences as an internal stakeholder?
- Managers influence the activities of a
business by MAKING DECISIONS to help
it achieve the objectives the owners
have set. - The level of influence of a manager
VARIES with their level of AUTHORITY.
For example, top managers can overrule
decisions of managers below them in the
organisation.
what are the STAFF’S influences as an internal stakeholder ?
- Staff can positively influence the
activities of a business by WORKING
HARD to support the decisions of owners
and managers in - Staff can negatively influence the
activities of a business by INDUSTRIAL
ACTION (such as a STRIKE). - The level of influence of staff VARIES
with NUMBER of them involved in an
action. For example, all staff having a
strike will have more impact than only 1
worker.
whats an External stakeholder ?
EXTERNAL STAKEHOLDERS are people OUTSIDE OF A BUSINESS who are interested in
influencing its’ activities because they affect them in some way.
what are the external stakeholders ?
GOVERNMENT
BANKS
CUSTOMERS
SUPPLIERS
SOCIETY
what is the governments intrests as an external stakeholder ?
Government wants to make sure that
businesses are paying all of their
TAXES and that they are following all
relevant LAWS.
what are the bank’s interests as an external stakeholder?
Banks want to make sure that
businesses are BORROWING from
them (so that they can make money
from INTEREST). They will also want
to make sure that businesses can keep
up with REPAYMENTS so that they do
not lose money.
what are the interests of the customers as an external stakeholder ?
Customers want businesses to
continue to provide (new) goods and
services that will SATISFY THEIR
NEEDS AND WANTS.
what are the supplier’s interest’s as an external stakeholder?
Suppliers want to make sure that
businesses are BUYING from them.
They will also want to make sure that
businesses can keep up with
REPAYMENTS for things that they
have bought but not yet paid for.
what are the society’s intrests as an external stakeholder ?
Society is all of the people around a
business – they are not necessarily
customers. Society will want
businesses to minimise their costs by
PREVENTING EXTERNALITIES and be
SOCIALLY RESPONSIBLE.
what are the government influences as an external stakeholder ?
- Government influence the activities of a
business by MAKING LAWS which
change the way that they have to
operate. - Government influence the activities of a
business by EXECUTIVE AGENCIES which
change the way they have to operate. - Government influence the activities of a
business by changing TAX RATES which
will affect the amount of money that it
has. - Government has a HIGH level of
influence because businesses will end up
in court facing penalties if they do not do
as they are told in laws, etc.
what are the banks influnce’s as an external stakeholder ?
- Banks positively influence the activities
of a business by LENDING enough money
at reasonable RATES OF INTEREST to
allow them to do things that will
increase consumer satisfaction. - Banks negatively influence the activities
of a business by NOT LENDING enough
money or charging high RATES OF
INTEREST. - The level of influence of a bank VARIES
with the AMOUNT OF MONEY they are
lending because small loans will have
little impact.
what are customers influences as an external stakeholders ?
- Customers can positively influence the
ability of a business to achieve its’
objectives by USING MORE OF THEIR
GOODS AND SERVICES. - Customers can negatively influence the
ability of a business to achieve its’
objectives by NOT USING THEIR GOODS
AND SERVICES. - The level of influence that a customer
has VARIES with the amount that they
are SPENDING.
what are a suppliers influences as an external stakeholder ?
- Suppliers positively influence the
activities of a business by PROVIDING
the RESOURCES they need for
production. - Suppliers negatively influence the
activities of a business by NOT
PROVIDING the RESOURCES they need
for production. - The level of influence of a supplier
VARIES with the AMOUNT OF
PRODUCTS that they are supplying.
