discuss…..

1. Thought for the day: discuss…..

2. WIKI: http://ais-igcse-business.wikispaces.com/home

3. ReminderiGCSE Business expectationsComplete all work to the best of your ability.Bring your laptop (charged), the textbook, lined paper, calculator and writing equipment to all lessons.Complete all homework & tasks to the deadline.Keep all hard copy of work organised in a file that can be checked regularly by the teacher.Organise all online work in a e-file on your laptop.Ask for help when needed. UNIT 1.1 LESSON 1

4. File headings • Make a subfolder called: • Topic Two_ Business structure, organisation & controlMake a subfolder in ‘called: • 2.1 Ownership and internal organisation

5. How you will be assessed: This Term: The report due on 18th 30% (+5% homework) Half yearly (unit 1 & 2) 40% Homework 5%

6. How to get an A A Grade Evaluate, discuss, justify, advise, recommend. reasoned explanations, develop arguments, understand implications and draw inferences Examine, Analyse, Interpret, Formulate, Cause and Affect, advantages & disadvantages. A04 Evaluation Apply facts, terms, concepts, theories and techniques to business problems and issues. Link to a business. A03 Anayslis A02 Application facts, terms, concepts and conventions appropriate to the syllabus; theories and techniques A01 Knowledge & Understanding

7. 2.1 Ownership and internal organisation UNIT 1.1 LESSON 1

8. Aim of this section…… • To be able to identify the types of business organisation (sole trader, partnerships, limited companies, franchise, joint venture) and Limited and unlimited liability.

9. Activity One. • Pg 67

11. Entrepreneurs • The creation of any business relies heavily on the ability of the entrepreneur to calculate and manage risk. • The creation of a business involves considerable opportunity costs when combining human and financial resources.

12. Entrepreneurs Q & A Who or what is an entrepreneur? • People who establish or operate business, thereby taking financial risk • People who set up business are called entrepreneurs • They are innovators, organisers, decision makers and risk takers • Not everyone has what it takes Take this quiz: http://www.entrepreneur.com/personalityquiz HWK: Research a successful entrepreneurs and investigate their attitudes to risk taking.

13. Entrepreneurs • An entrepreneur is a person who has an idea for a business, develops the idea, and organises the necessary resources to see the idea through. Entrepreneurs create and build business enterprises.

15. Entrepreneurs Characteristics: • Hardworking • Ambitious • Independent • Highly motivated • Creative • Prepared to take risks

16. Plenary • 3 min: • Draw • What do you think when you think entrepreneur

17. Business Ownership

18. Profit-based private sector Businesses This means: • They are owned by private individuals • These individuals risk their own money • The owners’ reward is the profit they make. Most businesses in the UK are privately owned.

19. Private ownership options • Sole trader – 1 owner • Partnership – 2 people or more • Private limited companies (Ltd) – often a family-run business with the protection of limited liability • Public limited companies (plc) – large organisations whose shares are traded on the Stock Exchange • Franchises – small business trading with agreement of large firm • Cooperatives – collectively owned by workers/customers

20. Key difference • Sole traders and partnerships have unlimited liability. Owners are responsible for all debts and may have to sell personal possessions. • Companies have limited liability. Owners can only lose their investment even if the company has huge debts.

21. Liability • Make sure you understand liability and what it means for the owners. • Pg 68 Limited liability: the owners of a business have liability for the affairs of the business, restricted up to the amount they originally put into the business. Unlimited liability: the owners of a business have liability for the affairs of the business to the extent of their personal wealth.

22. Sole trader • A sole propietorshipis a business owned by a single person (also known as sole trader). • This person can employ as many people as needed, but remains the only owner of the business.

23. Easy to set up and give a personal service Owner independent – can make quick decisions Minimum of paperwork Knows customers – helps to avoid bad debts Unlimited liability Long hours, no cover for holidays/sickness Capital may come from savings Needs business skills Business ends on death Sole traders Benefits Drawbacks

24. Sole Trader – Key Points • Make Notes… Define Setting up as a sole trader Where does the money come from? What happens if things go wrong? Pg 69-70

25. Partnerships • A partnership is a business organization owned by more than one person. In an ordinary partnership, there are between 2 and 20 owners- the co- owners of the partnership. • At least one of these partners will have unlimited liability, although it is usual practice for all the partners to share responsibility for any losses made by the business. • The government does allow some businesses, such as law firms and health clinics, to operate with more than 20 partners.

26. Partnerships • To prevent potential misunderstandings and conflict, most partnerships draw up legal contract between the partners, known as deed of partnership. • The contents of the partnership deed include the names of all partners, the amount of capital invested bu each partner- and hence their stake in the partnership, their responsibilities, voting rights, arrangements for dismissing a partner or approving a new partner and how profits are to be shared between the owners. • If a deed of partnership is not prepared, then The Partnership Act of 1890 applies, stating that legally all partners have an equal share in the running of the business and the distribution of its profits

27. Easier to raise capital Problems/ideas can be discussed Greater range of skills/expertise Cover for holidays/sickness Unlimited liability Profits are shared May be disagreements Decisions/actions legally binding on all partners Death of a partner means share needs repaying Partnerships Benefits Drawbacks

28. Partnership – Key Points • Make Notes… • Make Notes… Define Setting up as a sole trader Where does the money come from? What happens if things go wrong? Pg70-72

29. p • A sole trader is run by one person. A partnership is owned and run by two or more people. • Sole traders and partnerships typically have limited liability. Capital is restricted to the owners own savings, borrowing & profits made. • A sole trader has control over their own business and takes all the profit. • Partners can share skills and spread the workload or running the business.

30. About companies • Each company has its own identity in law. • They are set up as legal entitites and exist quite separate to their owners. • The company employs staff, not the owner(s). • The company owns assets, not the owner(s). • The company operates until it is formally wound up or goes into liquidation. • The company pays corporation tax on its profits.

31. Limited liability Minimum of 1 director and 1 shareholder Easy to set up/affairs still private Easier to raise capital/borrow from bank Share transfers need agreement of all Cannot sell shares to the public More regulations to comply with Accounting procedures may be more costly Death of shareholder has no effect on company Private limited companies Benefits Drawbacks

32. Ltd – Key Points • Make Notes… • How do you set up a limited company? • Who owns and runs a limited company? • Where does the money come from? • What happens if it goes wrong? • Pg 76

33. Limited liability Increased capital as public can buy shares Minimum of 2 directors and 2 shareholders Shares increase in value if company successful Operating large scale can lower costs per unit Many regulations to comply with Accounts (and problems) are public knowledge Shareholders may sell shares if dividends poor Original owner may lose overall control Public limited companies Benefits Drawbacks

34. PLC – Key Points • Make Notes… • Why go public? • Pg 78

36. p • A company is owned by shareholders who are able to bring capital into a business. • Shareholders are protected by limited liability. The financial risk is limited to the value of the shares they hold.

37. Review of main types of private ownership • Sole traders – suitable for one person running small business with low risk/little investment required • Partnership – suitable for professional groups, husband/wife businesses, small business needing different skills • Private limited company – suitable for family business, essential if risk considerable, eg through expensive stock • Public limited company – suitable for large national/international operations

38. Private ownership review Most private businesses are owned by sole traders, partners or are companies. Other alternatives are: • Cooperatives – societies which operate for the benefit of their members (whether customers or workers). • Franchises – where a large company allows a small operator to trade on name in return for share of profits. • Joint Venture – an enterprise undertaken by two or more business organisations pooling resources.

39. Franchise • Some organizations, known as franchisors, sell the right to other businesses to use their company name, logo, slogans and trademarks. • Examples of franchises include McDonald’s, Starbucks and 7-Eleven. • The purchasing business is known as the franchisee. In return for the use of the franchise, the franchisee has to pay a certain percentage of its sales revenue (known as royalty payment) to the franchisor. • The major advantage of franchises is their low failure rate. According to a recent CNN report, the failure rate of Subway and Dunkin Donuts are only 7% and 8% respectively. This is largely because of the interrelated benefits to both franchisor and franchisee. Once established, a business development manager provides ongoing support and advice to the franchisee.

40. Franchise Advantages

41. Franchise disadvantages

42. Each owner has equal share/one vote Profits are shared equally Can have limited liability status Workers can decide whether to be owners Obtaining finance may be difficult Decisions by consensus take time ‘Hard’ decisions may be difficult to make ‘Equality’ can be hard for good leaders/workers Cooperatives Benefits Drawbacks

43. Provide access to new markets and distribution networks Increase capacity Share risk and costs between partner business Give access to greater resources (specialized staff, technology and finance). If objectives aren't clear Different objectives between the partners An imbalance in levels of experience, investment or assets bought to the venture Different culture and management style, resulting in poor cooperation. Joint Ventures Benefits Drawbacks

44. p • Another way to grow with less risk to its own capital is to sell franchises. • Another way of entering a foreign market is to create a joint venture with a local company.

45. Fly swatter Teacher will read out a definition… Find the Key word to the definition… andSwat it!!

46. Find the Key word to the definition… andSwat it!! Sole trader Partnership Private limited company Public limited company Franchise Co-operative Limited liability Unlimited liability Joint venture

47. Activity Activity 13.2 Pg 82 • Be creative • Use key words

48. Of this section…… • Understand the Relationship between objectives, growth and business organisation

49. pg 84Business in context UNIT 1.1 LESSON 1

50. Factors influencing the choice of type of business organisation People setting up a business will have to decide which legal form o business organization they wish to establish. This will depend on numerous factors, including: • Ownership- Does the owner want to be in complete control of the business? Can the owner/s afford to have the risk of having unlimited liability? • Control- How many people will own the business? Does it want complete privacy of its accounts? Do the owners prefer to work alone or with others, perhaps so to share the workload? • Sources of finance- How much money is needed to set up the business? Do the owners have the necessary money to start the business or are additional funds required?