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1. Understanding Business Activity

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Brian Cleary

on 29 November 2016

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Transcript of 1. Understanding Business Activity

Welcome
1. Understanding Business Activity
Introduction
Mr. Cleary

bcleary@disdubai.ae or VLE

IGGSE Business

IB Business & Management and Economics
Starter Activity
Each group has to create a realistic product tor service for the Dubai market.

Requirements:

Step 1:
Brand Name
Target market (who the product/service is aimed at)
Location
USP (Unique Selling Point)
Price
Cost

Step2: Design Advertisement

Step 3: Presen
t
The Economic Problem
What are needs?
A need is a good or service that is essential for living
How can we define a want?
A want is a good or a service which people would like to have , but which is not essential for living
The Economic Problem
Considering the concepts of needs and want, what do you believe is the economic problem?
The economic problem - there exist unlimited wants but limited resources to produce the goods and services to satisfy those wants. This creates scarcity.
Factors of production are those resources needed to produce goods and services

What factors did DIS need to start up?
Factors of Production
Land - all natural resources provided by nature such as, oil gas, metals and forest.

Labour - people capable to produce products

Capital - finance, machinery and buildings


Enterprise - a risk taker with skills to bring all the other factors of production together.
Scarcity
Reflecting on the factors of production, why do we have poverty in the world?
Opportunity Cost
You only 30AED to spend, choose your preference from 1 to 3
.
Opportunity cost is the next best alternative given up by choosing another item
Recap
Deria International School operates a division of labour method which promotes specialization of teachers

Explain the meaning of division of labour and specialization in the context of DIS.

What are the advantages and disadvantages of specialization to DIS
The purpose of business activity is to combine factors of production to make goods and services that satisfy peoples needs
A major business challenge is to add value to its products: Added value is the difference between the selling price and the cost of materials and components.
Is added value the same as profit, why?
How can apple increase the added value of its iPhone?
Independent Learning

Prezi: Brian Cleary 1. Understanding business activity
LO:
To what extent is enterprise the most important factor of production.


Success Criteria:

Define needs & wants
Explain the economic problem
Apply factors of production to DIS
2. Classification of businesses
Opportunity cost is the next best alternative given up by choosing another item.
Join at kahoot.it with Game PIN: 835504
LO:
To what extent is the primary sector still the most important sector of the economy?
Learning objectives:
Outline the key sectors of the economy.
Explain how products pass through the different sectors of the economy.
Design a timeline to display changes in the UK economy.
Choose one of these products and explain the steps in its production?

Resources:

Book & internet, library website

Success Criteria:
Link the steps to the primary - secondary - tertiary sector
Stages of Economic Activity
All production can be classified into three broad types of business activity or sectors of industry. These sectors are:

Primary
- extracts raw materials
Secondary
- manufactures goods
Tertiary
- provides a service
Group Activity
Mixed Economy
Mixed economy

has both private sector and a public sector
In recent years in countries such as the UK and other european countries the balance has changed between the public and private sectors of the economies.

Can you explain the change and reasons behind the change
Private sector
-
business not owned by the government

Public sector
-
government or state - owned and controlled businesses and organizations. Areas such as health, education, defense, public transport, electricity and water.
Discuss and write an explanation of
how & why
the importance of the different sectors are changing over time.
Reason for changes in Economic Structure
De - industrialisation
(secondary sector) due to being unable to compete with India and China led to decrease in secondary sector

Depletion
of primary products such as oil, gas and timber leading to less employment in primary sector. (decrease in primary sector)

Higher income
leads to a higher proportion of peoples incomes being spent on services such as travel and restaurants. (increase in tertiary sector)


Privatization
Privatization
is the selling of government controlled and owned businesses to private individuals.
1. Business activity
3. Enterprise, business growth and size
Entrepreneur is a person who organises, operates and takes the risk in starting up a new business venture
Entrepreneurship and Enterprise
List 5 of your favorite entrepreneurs
What characteristics do they have in common?

Would you like to be an entrepreneur, if so why? are there any negatives?
Entrepreneur
Risk of failure
Loss of capital (personal savings)
Lack of knowledge and support
Opportunity cost
Independence and own boss
Put ideas into practice
Become famous
Possible high returns
Working at something you enjoy and have an interest in
Hardworking, risk taker, creative, optimistic, self confident, innovative, independent & effective communicator.

explain why each of these are important characteristics?
Advantages:

More efficient as profit focused
More investment
More innovation
Government focus elsewhere
Disadvantages:
Job losses
No social objectives
Prices may rise
6 mark - Do you think.....
Look at both sides of the arguments
Positive and negative.
Conclusion justifying your opinion
.

1.3 Enterprise, business growth and size
LQ: To what extent can anyone be a successful entrepreneur

Learning Objective:

Define entrepreneur
Explain the characteristics of entrepreneurs
Analyse the benefits of being an entrepreneur

Explain the support government provide to business start ups
Why does government support business start ups?
Government Benefits of Start - Ups
Reduce unemployment
- new business create new jobs

Increase competition
- more choice for consumers

Increase output
- more goods and services available

Benefit society
- create social enterprise that benefit people

Can grow further

Sample Response

Overall for Country X, the secondary sector is more important as it will provide the main employment as agriculture and coal industry decline.


The secondary sector could be considered more import for Country X than the tertiary as the secondary sector provides essential good to consumer such as clothes and housing. As it is a LEDC it will rely heavily on the secondary sector in the near future
However, the tertiary sector could be considered more important as without the service industry the secondary sector would struggle to exist. The tertiary also provides education and is very important for society.

Review yesterdays learning objectives and rate them out of three .


In groups come up with at least three questions you would like answered.
5 Minutes
Learning objective: I will be able to produce a business plan for a new business start up?

Success criteria :

Define a business plan. All
Explain the different components of a business plan . Most
Construct a business plan for a business. Some





Business Plan
Business Plan
Basic Information
Name, aim & location
Marketing;
Product, price, promotion, place.
Finance
: costs , revenue
Human resources
Workers, skills and experience
In groups complete a business plan for a business of your choice. You can also be creative and create a new business where you are the entrepreneur.

Groups will present their business plan.
Success Criteria;

Good presentation.
Key departments of marketing, finance, HR included.
Group Roles

Time keeper
Writer
Group leader
Speaker
25 Minutes
HW: VLE Tuesday

From question 1 & 2 complete any two of the four (2mark) questions.

Complete one of the two (4mark) questions.
A business plan
is a document that contains the business objectives and important details about the operations of a business.
Comparing the size of businesses
Vs
Vs
Size is measured by:
number of employees
value of output
value of sales
value of
capital employed
Vs
Why do entrepreneurs want to grow their business?
Profits
Status & prestige
Lower average cost
Higher market share
Define the terms in
orange
Growth
Internal growth is paid for by
profits
and is usually slow.

External growth involves
takeovers
or
mergers
with other businesses.
Use your MED or laptops to find example of companies that have grown through:

1. Internal growth
2. Takeovers
3. Mergers
Takeovers:
Nestlé's takeover of Rowntree Mackintosh
Tata takeover of Jaguar Land Rover
France Télécom takeover of Orange
Mergers:
Disney-Pixar
Exxon-Mobil
Daimler Benz/Chrysler
Sears / Kmart
Integration (Mergers/ Takeover)
Chain of production
Forestry
Wood Mill
Paper Mill
Priniting Factory
Book Shop
Based on the chain of production shown answer the following questions.

What is vertical integration/ merger?

What is horizontal integration/ merger?

What is conglomerate merger/integration?

Give examples of real companies
Integration
Forward Vertical
Horizontal
Conglomerate (diversification)
Backward vertical
Explain the types of integration from the diagram
Integration
Section 1 : Chapter 3
LO: To be able to explain and apply the types of integration to different companies
Success Criteria:
Define merger and takeover
Apply mergers and takeover to companies
Benefits of Integration
Horizontal:
Reduces competition
Economies of scale
Bigger market share
Forward Vertical:
Assured outlet for their products
Profit margin made by retailers absorbed
Retailer can stop selling rival firms products
More information received from customers (market research)
Backward vertical integration:
Assured of supply
Profit margins of supplier absorbed
Costs of supplies controlled
Can prevent competitors supplies
Conglomerate:
Spreads risks as revenues from different industries
Transfer of skills between firms
Growth Problems
Difficult to control - diseconomies of scale



Poor communication



Expansion leave cash shortages



Integrating two business can be very difficult.
Problem
Decentralisation - operate the business in small units.


IT and telecommunications upgrade



Organic expansion, ensure sufficient sources of finance.


Good communication and styles of management
Solutions
Why some businesses stay small?
Types of industry:
Require personalized service
Easy to set up therefore high competition
Market Size:
Small number of customers
Owners Objectives:
Avoid risk
Keep control
Why some business fail
Poor management

Failure to plan for change

Poor financial management

Over expansion

Risk of new business start up
Discuss and bullet point the benefits of each type of integration
Enterprise, business growth and size
LO: To be able to explain the benefits of integration
Success criteria:
Define integration
Explain benefits of integration
Outline the problems of growth
Michelle owns a successful restaurant and is a successful entrepreneur.She is considering her options for expansion. Option one is expanding her existing restaurant. Option two is to take over a restaurant in the next town. She may seek some government assistance for her expansion.
Define an entrepreneur. (2 marks)

Identify and explain two reasons why Michelle might want to grow her business. (4 marks)

Identify and explain two ways in which government may support Michelle. (6 marks)

Do you think Michelle should pursue the expansion of her existing restaurant or take over the rival restaurant. (6 marks)


Reflection activity 1.3
I worked collaboratively with my group.

I contributed to group work?

I helped other in my group.

I respected other in my class.


Complete Revision Checklist Page 34
4. Types of Business Organisation
Chapter 4
LO:
To be able to analyse a sole trader

Success Criteria:
Define sole trader
Explain the advantages of sole traders
Apply sole traders to real business examples
Sole trader is a business that is owned and controlled by one person.

It is the most common form of business organisation.
Sole Trader
Advantages:

Few legal regulations
Own boss
Full control
Quicker decisions
Freedom of working hours, holidays.
Close relationship with customers
High motivation
Keep all the profits
Privacy of accounts
Disadvantages:

No one to consult on decisions
Unlimited liability
Higher personal risk
Lack of finance
No economies of scale
No continuity after death


Partnership
Partnership is a form of business in which two or more people agree to jointly own a business.
Partnership agreement is the written and legal agreement between business partners.
Advantages:

More finance
More ideas
Shared workload , risk and stress
Specialisation
High motivation
Easy and less legal requirements compared to companies
Disadvantages:

Unlimited liability
Unincorporated business
Conflict between partners
Risk for each partner
Limit on partners , limits growth


Limited Liability Partnership offers partners limited liability and offers a separate legal identity
Objective:
Prepare a presentation on comparing and contrasting sole traders and partnerships
Success criteria:
All members must contribute to production and presentation.
Definitions
Key terms
Advantages
Disadvantages
Examples
Similarities & differences
Prezi or PPT


Presentation Activity
Success Criteria:
All members must present some part of the presentation.

Other groups must take notes of any points which is new to them

Please challenge the presenting group with question
Ahmed, currently works at a multinational hotel as head chef. He is considering leaving his job to start his restaurant. Ahmed is debating weather he should set up a sole trader or a partnership. Ahmed does not have enough saved at the moment. Ahmed likes making all decision himself.
Exam Case Study
Define sole trader.

Define partnership.

Identify and explain two advantages of a sole trader.

Identify and explain two disadvantages of a partnership.

Do you think Ahmed should start the business as a sole trader or a partnership.
bcleary@disdubai.ae
Learning Objective:
Compare and contrast contrasting private limited companies and public limited companies
Private Limited Companies
Is an incorporated business that only sells shares to private individuals
Characteristics:
Separate legal identity
Owned by shareholders
Directors run the business
Usually finish with Ltd
Advantages:
Selling shares can raise large amounts of finance
Shareholders have limited liability
Less risk for shareholders
Can keep control if you do not sell shares
Continuity of existence

Disadvantages:
Legal documents are time consuming and expensive: The articles of association & memorandum of association to be lodged with the registrar of companies
Shares only sold with the agreement of other shareholders
Less privacy than unincorporated businesses
Shares not sold on stock exchange
Public Limited Companies
PLCs are incorporated businesses that sells shares on the stock exchange.

THEY ARE NOT IN THE PUBLIC SECTOR
Advantages:

Limited liability
Incorporated business
Raise large amount of capital
No restriction on selling shares
High brand awareness
Disadvantages:

Legal documents are costly and time consuming
More regulations and controls
Difficult to manage as large firms
Owners lose control
Key Terms
Incorporated business
- companies that have separate legal identity
Shareholders
- people who invest money in the business in return for ownership
The Articles of Association
- explains the internal rules of the business
The Memorandum of Association
-
explains the company for external groups.
Registrar of Companies
- government department you must register your legal documents with
AGM
-
annual general meeting must be held each year. shareholders vote a board of directors
Dividends
- profits payed to shareholders.
LO:
To be able analyse private and public companies
Success Criteria:

Define key business terms
Explain the difference between Public and Private companies
Analyse Private Vs Public Companies


Objective:
Through asking yes or no questions identify the term placed on your forehead.
Yes / No Game
Rules:
All terms must be placed face down in the middle of the table
Only yes or no questions.
Maximum 10 questions per round.
Can only guess after min three questions.
Maximum three guesses.
Steps:
Look at the words and discuss any terms you do not fully understand.
Cut out words
Ready to start
Mark each persons score - based on number or questions needed and guesses used
Joint Ventures
A
joint venture
is when two or more businesses agree to start a new project together sharing capital, risk and profit.
Disadvantages:

Profits are shared
disagreements over decisions
Cultural clashes
Communication
Franchising
A
franchise
is a business that allows other people (franchisee) to purchase the right to sell their products or service under their brand. e.g McDonalds or Subway
Advantages:
To franchisor: To franchisee:
Selling of license gains revenue
Quick expansion
No management responsibility
High sales of supplies
Less risk with established brand
Franchisor does advertising
Supplies all available from franchisor
Training provided
Easier to get loans
Disadvanatages:
Poor management can harm image of brand
Franchisee keeps profit
Less independence and freedom
Expensive and share profits
Advantages:

Share costs
Local knowledge when expanding to new countries
Risks are shared
Research task: Find out how successful the joint venture between Sony & Ericsson has been.
LO:
To be able to analyse franchises and Joint Ventures.
Success Criteria:

Define franchising
Analyse franchising
Explain public corporation


Objective:
Research franchises to find; examples , advantages and disadvantages
Success criteria:
List four different businesses that use franchising
Definition of franchise
Advantages to franchisor / franchisee
Disadvantages to franchisor / franchisee


Objective:
Research and explain public corporation in Dubai
Success criteria:
Identify public corporations in Dubai
What are the advantages and disadvantages of these corporation for us as residents and for the government


Public Corporations
The
public sectors
is all businesses owned by the state such as hospital, schools and public services
Public corporations
are businesses owned by the state or government e.g RTA
Advantages:
Provide essential services e.g water, TV & electricity
If monopolies it is best it is run by the public sector
Government can nationalise failing businesses

Disadvantage:
No profit motive so inefficient
Subsidies can cost government money
No competition decreases efficiency
Government use public corporation for own agendas
5. Business Objectives & Stakeholder Objectives
LO:
To be able to understand the purpose of business objectives
Success Criteria:

Define business objectives
Apply objectives to businesses
Explain why business objectives change


Business Objectives
An
objective
is an aim or a target to work towards
Purpose:

Gives workers & managers clear targets
Focuses decision making
Helps measure performance
Helps unite the stakeholders
Examples of objectives:

Business survival
Profit
Returns to shareholders
Business growth
Increased market share
Provide a service to the community

Match the examples of business objective to specific companies and type of legal structure

E.g Business survival - La Femme Beauty Salon JLT - Sole trader
Business Objectives
Survival
- newly set up, increased competition or during a recession
Profit
- private sector business aim, used for growth, satisfactory level of profit rather than maximising profit.
Returns to shareholders
- aim of limited companies, through increased profits and increased share price
Growth
- increase salaries and status, spreads risk, economies of scale, higher market share.
Market share
- a businesses sales as a % of total sales in the market. Formula = Company sales / Total market sales x 100
Providing a service to society
- aim of social enterprises, provides jobs, protect environment, reinvest to grow the social enterprise, public corporation.
Apple sales - $234bn

Samsung Sales $287bn

Others $176bn

Calculate the market share for Apple & Samsung
Apple sales 34%

Samsung Sales 41%
Changing Business Objectives
Survival ----------> Profit

Higher market share -----------> higher shareholder returns

Profit ----------> survival

Increased market share -----------> market leader
Give two more examples
Stakeholders
A
stakeholder
is anyone with an interest in the business
Objective:
Create a stakeholder map for DIS
Success criteria:
Include all relevant stakeholders
Briefly describe their interest in the school
For each of the different
stakeholders
briefly identify their interest / objective in the business

Owners
Workers
Managers
Customers
Government
Suppliers
Community
Banks

E.g

Workers - payment, job security, new contracts and working conditions
Objectives of Public Sector
Financial
- profit/ surplus used to reinvest or for government expenditure
Service
- provide essential services such as education and health
Explain the different possible conflicts between stakeholders
Social
- create employment in low employment areas
LO
: To be able to explain added value
Success Criteria:

Define opportunity cost
Explain specialization
Outline strategies in increase added value
How to structure exam response questions:
2 Marks - Define, what is meant by
Definition and example
2 marks - Identify
State only
4 Marks - Identify and explain two.....
State. Explain
6 Marks - Identify and explain two.....
State. Explain. Development point.
Finance
Premises
Business ideas and support
Training grants
Activity:

On MS Word and using the structure on page 24
Complete a business plan for DIS.
Pair work

Post to VLE
Limitations to Measuring Criteria
Number of employees
- business maybe capital intensive
Value of output
- some output may not be sold
Value of sales
- some companies sell cheap product in comparison to expensive items
Value of capital employed
- some firms are labour intensive
LO
: To be able to understand the problem of growth
Success Criteria:

Identify problems of growth
Explain firms stay small
Peer mark exam style questions
Would you recommended setting up a sole trader or a partnership, justify your answer. (6 marks)
Success criteria:
Research both
Have one advantages one disadvantage of each
Conclusion with recommendation (justify)
Dell is a private limited company but Apple is a public limited company
What is the difference between a private limited company and public limited company

Which do you believe is better.

Why have they chosen this business structure?
LO
: To review exam
Success Criteria:
Identify strengths and weaknesses
Reflect on exam response technique
LO
: To be able to analyse both public limited and private limited corporations
Success criteria private limited companies:

Define
Example
Advantages
Disadvantages
Success criteria public limited companies:

Define
Example
Advantages
Disadvantages
Explain how ownership and control are separated
Reflection
Purpose:
To identify areas of improvement
Common Areas:
Missing work / HW
Lack of development of points
Lack of application to the text
Presentation of work not clear or neat
Conclusion not justified
Opinion giving at the start of 6 mark questions
No example with definitions
No reflecting on answers to correct / improve
Full transcript