To open a business is very easy; to keep it open is very difficult Chinese proverb

1. Thought for the day: To open a business is very easy; to keep it open is very difficultChinese proverb

2. Get an A A Grade To what extent, Evaluate, discuss, justify, advise, recommend. Level 4 Evaluation Apply, Examine, Analyse, Interpret, Formulate. Level 3 Application & Analysis Compare, Contrast, distinguish, prepare, construct, calculate, explain, comment Level 2 Understand Define, Identify, Complete, Outline, describe, Classify Level 1 Knowledge

3. Types of business organisations

4. 1.2 Nature and Organisation of Business: Types of Organisations

5. Activity • Level 4: Discuss As a group create two A3 posters Explaining Public and private sectors Using resources in the room.

6. Public Private

7. 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. • Holiday HWK: Research a successful entrepreneurs and investigate their attitudes to risk taking.

8. Entrepreneurs • Personal qualities and skills • (survey) • Pg 9 - 10

9. Starting a Business • Read: Pg 11 - 12 • What factors to consider when starting a business…

10. Pick a colour and speak about this point…. • Business idea • Finance • Human resources • Entrepreneur skills • Competition • Suppliers • Customers • Marketing • Legalities • Customer base • Working Capital

11. Identifying Market opportunities • ‘Market Opportunities’ – identification of new or unsatisfied customer needs. • Being able to identify and exploit market opportunities allows the entrepreneur to have a better chance of survival and success. • Market opportunities can come in several ways….

12. Identifying Market opportunities

13. Identifying Market opportunities • Identifying a gap in the market • Innovative ideas and creations • Developing the entrepreneurs’ personal qualities and skills Pg 24 Hoag Market Research is imperative!

14. Possible Problems with start ups… • Globally 40% of new business fail in their first year...

15. Possible Problems with start ups… Globally 40% of new business fail in their first year... • Lack of Finance • Cash flow problems • Marketing Problems • Unestablished customer base • People management problems • Legalities • Production problems • High cost of production • Poor location • External influences Pg 10 Activity 2.1

16. Starter Stars Plan the starter for next lesson… recapping this lesson

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. 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

22. Sole Trader – Key Points • Make Notes…

23. 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

24. Partnership – Key Points • Make Notes…

25. About companies • Each company has its own identity in law. • 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.

26. 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

27. Ltd – Key Points • Make Notes…

28. 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

29. PLC – Key Points • Make Notes…

30. Companies/Corporations – Key Points • Legal forms of Business organisation • Pg 15

31. Activity • Level 4: Discuss Pg 16: textbook Activity 2.3

32. 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

33. 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.

34. 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

35. Less risky than starting own business Selling a known name Advice and guidance available Owner keeps most of profit Share of profit goes to franchisor Franchisee must abide by legal agreement Only franchisor products can be sold Success very dependent on popularity of product Franchise Drawbacks Benefits

36. Public ownership • Term used for enterprises owned and controlled by the state. • Aim is to provide services needed by everyone, regardless of income or wealth, eg health and education. • Mainly financed through taxation. • Pg 16

37. Examples of public ownership • Central government departments, eg Department of Health • Local authorities and councils • Public corporations, eg BBC, Bank of England, British Nuclear Fuels

38. Owner liabilities All owners must: • Produce annual accounts • Pay tax on profits • Operate the business within the law • Abide by specific agreements (eg Partnership or Franchise agreement) or trade/professional regulations relating to their activity

39. Owner liabilities • Sole traders/partners are personally liable for debts • Shareholders in companies can lose investment if business fails • Company directors can be held personally liable in law in certain circumstances • Franchise operators may have to meet specific sales targets.

40. Factors which influence changes of ownership • More capital required to finance expansion or extend operations • More skills/abilities required • Greater security/less risk required • Change of business activity • Changes in legal regulations and requirements

41. Non-Profit organisations (NPOs) • Not-for-profit organisations • An establishment run in a professional and business-like manners but without profit being a major objective. • -aim to provide a service (e.g leisure and tourism) • Or to promote a special cause (Public libraries, state-schools, museums, government hospitals and social services) • Does not mean the business does not make a surplus. • ‘Profit’ surplus goes back into the business (e.g fee paying rpivate schools is reinvested into the school).

42. Non-Government organisations (NGOs) • Operates in the private sector. • But are not-for-profit. • Set up and run for the benefit of others in society (but independent of the government). • NGOs also known as – Private voluntary Organisations (PVOs)

43. Non-Government organisations (NGOs) Two types of NGOs • Operational NGOs – established from a given objective or purpose (Oxfam, Unicef) – tend to be infoved in reilf-based and community projects. • Advocay NGOs – (green peace and amnesty) – take a more aggressive approach to promote or defend a cause – they strive to raise awareness through direct action (lobbying, PR, mass demonstrations). The strength of NGOs is they are run and supported by highly committed people.

44. Non-Government organisations (NGOs) QUANGOs – Quasi-autonomous non-government organisations are semi-NGOs. They are funded by the government but run by people independent of the government (i.e semi independent organisations that support certain interests of the national government).

45. Charities • A type of registered non-profit organisation. - key function is collecting donations in order to support a cause that is beneficial to society. - As they don’t ‘sell’ they have to market a different way.

46. Activity • Level 4: Discuss How would you go about marketing a charity….. Since you have nothing to ‘sell’

47. Celebrity endorsements • Special charity events • Media Germany, Russia, Holland, Yugoslavia, Australia and Japan.  The event as a whole contributed 16 hours of music all of which was live, and over 1.5 million people tuned in to watch the events unfold.  The proceeds of which exceeded 110 million, which was more than was ever hoped for. 

48. Advantages and disadvantages of Charities • Pg. 36 Hoag

49. Non-Profit and Non-Government organisations (NGOs)

50. Pressure Groups • Non-Profit organisations established by their members to address a special interest of the group. • - campaigning against environmental neglect • Smoking in public areas • Testing on animals. • E.g Trade Unions, animal rights activist groups, environmental protection. • Examples