OCR GCSE Business (1-9)

Business 1 (01)

1.1 The role of business enterprise and entrepreneurship

From the OCR specification

• The purpose of business activity and enterprise

– Spotting an opportunity, developing an idea for a business, satisfying the needs of customers

• Characteristics of an entrepreneur

– Creativity, risk taking, determination and confidence

• The concept of risk and reward

Worksheet

Lesson objectives• To be able to describe the purpose of business

activity and enterprise

• To be able to identify the characteristics of an entrepreneur

• To be able to discuss the concept of risk and reward

Starter• Which of these best describes you?

1. Creative

2. Risk taker

3. Determined

4. Confident

TO BE ABLE TO DESCRIBE THE PURPOSE OF BUSINESS ACTIVITY AND ENTERPRISE

1) Spotting an opportunity

• Alexis Oladipo from Hackney, loves cooking and experimenting with food

• But desperate to make ends meet she worked for a year cleaning offices

• She then had a 'eureka' moment and set up a healthy food range

• LINK TO ARTICLE• LINK TO WEBSITE

2) Spotting an opportunity

• A successful business will be one that spots an opportunity to make a profit

• This could be an idea that no-one has thought of before – for example Trunki luggage (next slide)

• The opportunity could be where there are lots of businesses already making a healthy profit

• The entrepreneur may also spot an opportunity to trade and also make a difference to society –this is called a social enterprise

2) Developing an idea for a business

• Once an entrepreneur has spotted a business opportunity or had a good idea they will then need to turn this into a working business

• The next stage will be to get some market research to see if there is a real demand for the product or service

• Then the entrepreneur will need to write a business plan to attract funding so they have money to start the business

2) Developing an idea for a business• Rob Law was 21 when he had the idea to combine a toy

with luggage to create a “Trunki”• Came up with the idea when he looked round a

department store and had a college project to design some luggage

• 2006 Started “Magmatic” business on his own• Now employs 80 people in a Devon factory• Sold 2.8 million products in 100 countries• LINK TO ARTICLE• LINK TO WEBSITE

LINK TO VIDEO

3) Satisfying the needs of customers

• A successful business will identify the needs of customers – for example that pet owners want pet food specific to their breed

• The business will then decide what products or services they can provide or produce that will satisfy these needs – for example bespoke dog food that is made just for that particular pet

3) Satisfying the needs of customers• Vet Joe Inglis and 7 friends

realised that there were 8.5 million dogs in the UK and 4 out of 5 owners treat the pet as one of the family and want the best food possible

• They created a niche business which makes tailored food to the dog’s age, breed or medical condition and is delivered to their door

• Now TAILS.COM have 40,000 UK customers

• Business help lines have veterinary nurses on the phones to answer customer questions

• LINK TO VIDEO• LINK TO WEBSITE• LINK TO ARTICLE

TO BE ABLE TO IDENTIFY THE CHARACTERISTICS OF AN ENTREPRENEUR

Which characteristic best describes you?

patientgood listener

stylish

happy

driven

excitablejoker

dependable

optimistic

honest

sophisticated

trendy

posh

geek

strong

Characteristics of entrepreneurs

Two videos to introduce the

topic, just click on the images

to go to YouTube

Creativity• This is Kath Kidston• She started with a small

shop in London which she sold tea towels and restored furniture

• One day she had 1500 bed sets turn up at the store, an ordering mistake

• She turned these duvet covers into aprons, washbags, hats and swimsuits and so the brand was born

• Her first pattern idea she got from rose flowery wallpaper in a magazine

• She developed the ideas of “modern vintage” and “glamping”

Risk taking

• LINK TO VIDEO

• Jodie Prince and Liz Bush are risk takers and started Art Rookie as an online platform for up and coming artists

• “They have a vision to inspire, be inspired and share new and unknown British talent with the world.”

Determination • This is Jo Nicholls• She started in 1997 making

“Lily-Flame” candles in her kitchen

• She then bought a van and travelled round the country for 8 years selling her candles at craft markets

• She slept in the van, and once it broke down and took all her takings to fix it

• She made no profit for 3 years• Eventually she decided with

her partner Luc to sell wholesale to retailers instead and landed a big order with Lakeland

• He biggest customer is now John Lewis

Confidence

• This is Jamal Edwards• He started SBTV when he

was a teenager on a council estate in London, he is now worth £8million

• He started with a mobile phone, a camera and a passion for music

• He realised he could upload grime music direct to YouTube and cut out the music producers

• His channel has 730,000 subscribers

VIDEO LINK HERE

TO BE ABLE TO DISCUSS THE CONCEPT OF RISK AND REWARD

• A reward of setting up your own business is that you could be your own boss

• Being your own boss means you get to make the major decisions in the business

• You can also change the business if you want to

• Many people would like to have this degree of control in their working lives, which motivates them to start their own business

Keep all the profit

• Profit = Total revenue – Total costs

• A reward of setting up your own business is you get to keep all the profit that the business makes

• In time equipment may break or get old and you may need to invest some of your profit back into the business

• If you take on a business partner you may also need to share the profits with them

Take holidays when you want

• One advantage of running a business is that you could take holidays when you want

• This means you could have holidays out of peak times when prices are cheaper

• You could also take more holidays, and book them when it suits you

Great sense of satisfaction

• Opening a business can bring a great sense of satisfaction to the owner

• If your work is something you love, it will give clarity, drive, and happiness to all aspects of your life.

• If your work is meaningful, you’ll be more likely to stick with it in the long run, which means you’re more likely to be successful as a result

• Research has shown that finding meaning in your work increases motivation, empowerment, career development, job satisfaction, individual performance and personal fulfilment

Flexibility

• A good reward of running your own business is that your work pattern can be flexible

• This means you can start late, finish early, work the hours you want

• However running a business can mean you work more hours than a regular job, especially when it first starts up

• You also may need to hire plenty of trustworthy staff who can work when you are not there

Higher motivation and morale

The government says these are some of the benefits of starting your own business:• Better work autonomy (being

able to make your own decisions)

• Better work challenge• Financial benefits (capacity to

earn more money)• Family legacy – starting a

business you can leave to your kids

Do what you are interested in

• A reward for being your own boss is that you can turn your hobby into your job

• If you are passionate about something (football, horses, playing Xbox) wouldn’t it be great to turn this into a business

• See this example here

Job protection – can’t be fired

• Giving up the security of a full time job to start your own business can be risky

• The benefits and rewards of having your own business is that you are the boss and therefore you cannot be fired

• Your job will last as long as the business trades

• It is important to have regular money coming in to meet all your financial commitments like a mortgage or car payments

Cut the commute / work from home

• For some business owners they grow tired of a long commute to work

• For them starting their own business is so that they can either have a shorter commute or work from home

• Many business owners are looking to cut their carbon footprint too

• Article here

Owners can learn a lot about business• Owners of a business will find

that they learn a lot from the process of opening and running a company

• They may learn finances, accounting, how to manage staff, customer relations, dealing with suppliers, purchasing and production techniques

• Learning while doing is often easier than learning by reading

• This is why students should consider joining their school Young Enterprise program

Social enterrpise

• Owners may wish to open a social enterprise which is a business that is engaged in activities that aim to tackle social problems, improve communities, people’s life chances, and meet the social needs of people within the community VIDEO

Better work / life balance

• Video HERE

• Being able to have a better work life balance means being able to work but still have time to see your family, watch the TV, or do a hobby you enjoy

• Working for yourself means you can change the balance and work less and make time for your hobbies

Open ended career progression

• Some business owners may start-up their own company so that they can develop their career

• As soon as you start a business you become a managing director even if you were a sales assistant before

Risk

Article with short animation on business risk

Click the image to go to Investopedia to play the clip

IP issues

• IP stands for Intellectual property see video here• IP can be protected by patents, trade marks,

design and copyright and gives ideas their value. IP rights protect your work. Whether you design, invent, write, perform or research, IP matters.

Click on Graphic to go to IP website

Cyber attacks

• A new report (2016) from the Federation of Small Businesses has found that small firms are collectively attacked seven million times per year, costing the UK economy an estimated £5.26 billion.

• Despite the vast majority of small firms (93%) taking steps to protect their business from digital threats, two thirds (66%) have been a victim of cyber crime in the last two years. Over that period, those affected have been victims on four occasions on average, costing each business almost £3000 in total.

MalwareVirus

HackingSpywarePhishing

Recession /economic / political problems and instability

• In a recession or times of economic or political instability customers tend to save rather than spend on non-essential items.

Poor reputation

• If a business provides poor customer service, or suffers a problem, then it may have a poor reputation

• This can lead to loss of sales, loss of revenue and loss of profitability

• This can lead to job losses

Employment laws and regulations

• All businesses in the UK must obey the employment laws

• For example they must pay the minimum wage or above, if they don’t they are breaking the law

Financial risks

• Starting a business can be a financial risk for the owner

• The owner may put their own cash and other assets (e.g. a van) into a business

• If the business does not do well then the owner could lose their money, which is why many businesses become ltd to protect the owner

• If the owner borrows money from a bank to finance the business, they still have to pay this back (with interest), even if the business does not do well

Change in tastes and trends

Consumer tastes change over time which means that a business is at risk if they don’t keep up with current trends.

Risk of not managing cash flow

• Cash flow is the flow of money in and out of a business

• A business needs more money coming in than going out to survive, and that money also needs to come in on time or they cannot pay their overheads (bills)

• Being prepared for a cash shortage using an overdraft is a sensible idea for a start-up

• Most businesses now prepare a cash flow forecast so they can see when they might have a cash shortage, and to arrange finance with a bank

Weather and other unforeseen factors, natural disasters

• A disaster can strike any organisation, large or small. It can arrive in the shape of storm, flood, fire, earthquake and even a tsunami

• It may take some time for the business to return to normal operation after an incident

• Climate change means UK businesses must plan for extremes of weather

Agriculture and farming are often

the worst hit industries in natural

disastersVideo here from

BBC

Failure to plan for the future / lack of strategy

• If a business fails to plan for the future it may risk losing out to competitors

• A business must have a clear strategy and plan if it is to survive in a today’s dynamic business world

• For example Blockbuster failed to take up the Netflix offer as they had no digital strategy

Watch this video

Staff training and safety

• A business needs to train its staff so that they can; operate machinery safely, work a till, deal with customers or sell products and services

• Well trained staff can give the business a good reputation

• A business also needs to look after the safety of staff an obey a number of UK laws on Health and safety at work

Operational risks – break down of equipment

• Many businesses have a variety of machines or equipment, including computers

• Many businesses run their machines 24/7 and cannot afford machines to stop in the event of a break-down e.g. bread factories

• When machines break down there is the cost to fix the machine plus the cost of lost production time

Staff – reliability

• A business will need reliable staff who turn up on time, every day, ready to work

• Without reliable staff a business will not be able to offer the right level of customer service

• This can have an impact on reputation, revenue and profit

Commercial risks, failure of suppliers to supply and customers to pay

• If a supplier fails to supply goods or services to a business, this could be critical

• If customers cannot get the product or service they need, they may go elsewhere, especially if there are lots of substitute businesses selling the same good or services

• If customers do not pay on time, then this may cause cash flow problems for the business who will need to pay their suppliers

Sample questions

Sample question 1

[1]

Answer question 1

(a) Enterprise involves hard work but it is not the reward.

(b) Correct answer: Profit is the reward for enterprise.

(c) Enterprise involves taking risks, but the risk is not the reward.

(d) Self-discipline is a characteristic likely to be needed for an entrepreneur to be successful, but it is not the reward.

Sample question 2

[1]

Answer question 2

(a)Many people start their own business in order tobe their own boss.

(b)Correct answer: Owning your own business increases, rather than reduces financial risk.

(c)Pursuing personal interests is a good way tocombine hobbies/beliefs with earning a living e.g.musician, fashion.

(d)Satisfying customer needs is a reason to set up abusiness e.g. to provide designer clothing or aconvenience store.

Sample question 3

[1]

Answer question 3

(a)Correct answer: Determination and creativity

are key characteristics of successful entrepreneurs.

(b)Being disorganised and inflexible are not

characteristics of successful entrepreneurs.

(c)Determination is important, but inflexibility is likely

to hinder the potential success of an entrepreneur.

(d)Entrepreneurs are usually risk taking rather than

risk averse. Being disorganised is only likely to

hinder the potential success of an entrepreneur.

Sample question 4

State two characteristics of an entrepreneur. [2]

Answer question 4

• willing to take risks• determination• confidence• creativity• passionate• hard working• motivated• disciplined• adaptable• flexible• knowledgeable• people person

Any two from this list, accept similar words e.g. resilient, risk taker

1) What does the word entrepreneur mean?

2) True or false – an entrepreneur needs to be a risk taker?

3) Which popular TV program is a platform for entrepreneurs to pitch their ideas and attract finance?

4) If there are lots of risks in starting up a business there are also lots of….?

5) Why does a business need to satisfy the needs of customers?

1. An entrepreneur is a person who spots an opportunity to provide goods or services to customers in order to make a profit

2. True an entrepreneur needs to be a risk taker

3. Dragons’ Den

4. Rewards

5. Need to satisfy the needs of customers so they will buy the products or use the services that the business has to offer

Glossary

• Entrepreneur; A person who decides to set up a business hoping to make a profit

• Risk; this is the possibility that the business will have a lower than expected profit or a loss

• Reward; this is the benefit of having a business which may be keeping the profit, working for yourself or being able to take holidays when you want

Resources written by Sarah Hilton for revisionstation.co.uk