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neurologyYou need to know

• A business is an organisation that combines resources to produce goods or services for customers.
• The purpose of business activity is to add value by turning inputs into outputs that customers are willing to buy.
• Most businesses aim to satisfy customer needs or wants while generating enough revenue to cover costs and, in most cases, make profit.
• Goods are tangible products that customers can physically possess.
• Services are intangible products that provide an action, experience or benefit rather than a physical item.
• Customer needs are essential goods or services required for everyday life, such as food, shelter, healthcare and education.
• Customer wants are non-essential goods or services that people would like to have but do not need for survival.
• Added value is the difference between the cost of inputs and the value or selling price of the output.
• Businesses can add value through quality, design, branding, convenience or customer service.
• Profit is the difference between revenue and total costs, so profit is not the same as added value.
• Reasons for starting a business include producing goods, supplying services, distributing products, exploiting a market opportunity and benefiting other people.
• Distribution businesses add value by moving products from producers to customers at the right place and time.
• Meeting customer needs and wants effectively improves the chance that a business will attract sales and repeat customers.
• Businesses can operate by supplying goods, supplying services or supplying both.
• Durable goods are goods designed to last and be used repeatedly over time.
• Non-durable goods are goods that are used up quickly or consumed soon after purchase.
• Consumer services are services sold mainly to individuals for personal use.
• Commercial services are services supplied mainly to other businesses.
• Most businesses perform four basic functions: operations, marketing, finance and human resources.
• The operations function is responsible for producing goods or delivering services efficiently and at the required quality.
• The marketing function identifies customer needs and promotes products in order to increase sales.
• The finance function manages money, budgets and sources of finance so that the business can operate and grow.
• The human resources function recruits, trains, supports and manages employees.
• Opportunity cost is the loss of the next best alternative when a choice is made.
• Opportunity cost exists because consumers and businesses have limited income, time and other resources.
• Businesses are more likely to succeed when they match their products closely to customer needs and wants.
• The four factors of production are land, labour, capital and enterprise.
• Land means the natural resources and physical sites used in production.
• Labour means the human effort, skills and knowledge used in production.
• Capital means the man-made resources used to produce goods or services, such as machinery, tools, buildings and technology.
• Enterprise means the willingness and ability to organise resources and take risks in order to start or run a business.
• An entrepreneur combines land, labour and capital to produce goods or services.
• The quality of labour can affect productivity because better-trained workers often produce more output or better-quality output.
• Businesses can be classified by the main sector of industry in which they operate.
• The three main sectors of industry are the primary sector, the secondary sector and the tertiary sector.
• The primary sector extracts raw materials from nature.
• Farming, fishing, forestry and mining are examples of primary sector activities.
• The secondary sector processes raw materials and manufactures goods.
• Manufacturing, construction and oil refining are examples of secondary sector activities.
• The tertiary sector provides services to consumers and other businesses.
• Retailing, transport, banking, hospitality and healthcare are examples of tertiary sector activities.
• Some businesses operate across more than one sector, so sector classification depends on the main activity of the business.
• As countries develop economically, employment usually shifts away from primary industry towards secondary and tertiary activities.
• Enterprise is the ability and willingness to identify opportunities and take action to turn ideas into successful business activity.
• An entrepreneur is a person who identifies a business opportunity and takes the risk of starting a business.
• A business opportunity exists when an entrepreneur identifies a product or service that customers are willing to buy.
• Entrepreneurs organise resources, make decisions and accept risk in the hope of a reward.
• Entrepreneurs make key decisions about products, prices, markets, finance and staffing.
• Entrepreneurial risk can include losing invested money, losing time and giving up secure employment.
• Taking calculated risks means judging the possible rewards of a decision against the possible losses.
• Successful entrepreneurs are typically hard working, organised, innovative and willing to take calculated risks.
• Resilience helps entrepreneurs continue after setbacks and uncertainty.
• Creativity helps entrepreneurs develop original ideas or improve existing products, services or processes.
• Initiative helps entrepreneurs act on opportunities without waiting for instructions from others.
• Entrepreneurs often start businesses because they want to be their own boss.
• Entrepreneurs may start businesses because they want to earn more money than they could as employees.
• Entrepreneurs may start businesses to pursue a personal interest or turn a hobby into a source of income.
• Entrepreneurs may start businesses because they have identified a gap in the market.
• Entrepreneurs may start businesses to achieve more flexible working hours or a different lifestyle.
• Entrepreneurs may start businesses because they are dissatisfied with their current job or career prospects.
• Entrepreneurs may start businesses to provide a good or service that benefits other people or the local community.
• Entrepreneurship can create value by introducing new products, improving existing offers or meeting customer needs better than rivals.
• The business environment is dynamic because external conditions affecting businesses change over time.
• Changes in technology can create new products, new production methods and new ways of reaching customers.
• Changes in the economic situation, such as inflation, interest rates, unemployment and economic growth, can change business costs and customer demand.
• Changes in legislation can force businesses to alter products, employment practices or operating methods.
• Changes in environmental expectations can increase demand for sustainable products and pressure businesses to reduce environmental harm.
• Changes in consumer tastes and behaviour can increase demand for some products and reduce demand for others.
• External change creates threats as well as opportunities for businesses.
• Businesses that monitor external change can identify opportunities earlier and reduce risk.
• Failure to respond to change can lead to falling sales, loss of market share and business failure.
• Obsolescence occurs when a product becomes outdated and less desirable because technology or customer preferences have changed.
• The legal structure of a business affects control, liability, access to finance, continuity and how profits are shared.
• A sole trader business is owned by one person.
• A sole trader keeps all profit made by the business after costs have been paid.
• A sole trader has full control over business decisions.
• Sole trader status is simple and inexpensive to set up, so it is common for start-up businesses.
• A sole trader can employ staff, but the business is still legally owned by one person.
• Sole traders often have limited access to finance because only one owner provides capital and lenders may see the business as risky.
• A sole trader has unlimited liability, so the owner is personally responsible for the debts of the business.
• Unlimited liability means a sole trader may have to use personal assets to repay business debts.
• A sole trader business has limited continuity because the business may cease if the owner dies, retires or stops trading.
• A partnership is a business owned by two or more people who share responsibility for running it.
• Ordinary partnerships are usually easy to set up because they involve relatively few legal formalities.
• A deed of partnership can define capital contributions, decision-making powers, profit sharing and procedures for partners joining or leaving the business.
• In an ordinary partnership, each partner usually has unlimited liability for the debts of the business.
• In an ordinary partnership, one partner can legally bind the other partners through decisions made on behalf of the business.
• A partnership can benefit from a wider range of skills, shared workload and more capital than a sole trader business.
• A partnership may find it easier than a sole trader to raise finance because several partners can invest funds and share risk.
• Partnerships are common in professional services such as law, accountancy and medicine.
• Partnerships can suffer from disagreements over decisions, workload and the sharing of profit.
• Partnership profits do not have to be shared equally, because the deed of partnership can set a different arrangement.
• A limited company is a separate legal entity from its owners.
• Shareholders own a limited company, while directors are responsible for managing it.
• Limited liability means shareholders can lose only the value of their investment if the company fails.
• A private limited company is owned by shareholders and cannot sell shares to the general public on a stock exchange.
• A private limited company in the UK uses the suffix Ltd or Limited in its business name.
• Shares in a private limited company are usually held by a small group such as founders, relatives or private investors.
• A private limited company must be incorporated and registered with Companies House.
• A private limited company must file annual accounts and other required information, so it has less privacy than a sole trader or ordinary partnership.
• A private limited company is often more suitable than a sole trader or partnership when a business involves greater risk or needs more finance.
• A private limited company can usually raise more finance than a sole trader or partnership because it can issue shares privately and borrow in the company name.
• Ownership of a private limited company can be transferred by selling shares, which gives the business greater continuity.
• A private limited company is more expensive and complex to set up and run than a sole trader or partnership.
• Some large businesses remain private limited companies so existing owners can retain control and avoid the scrutiny of a stock market listing.
• A public limited company can sell shares to the general public and can have its shares traded on a stock exchange.
• A public limited company in the UK uses the suffix PLC or Plc in its business name.
• Flotation is the process by which a company first offers shares for sale to the public.
• A public limited company can raise very large amounts of capital because shares can be sold to a wide range of investors.
• Shares in a public limited company are usually easier to buy and sell than shares in a private limited company.
• A public limited company must meet strict legal, reporting and governance requirements.
• Flotation and stock market listing are expensive and time-consuming.
• Existing owners may lose some control when a company becomes a public limited company because ownership is spread across more shareholders.
• A public limited company faces pressure from shareholders and financial markets to deliver strong financial performance.
• A public limited company may be vulnerable to takeover if another business buys a controlling shareholding.
• A not-for-profit organisation exists mainly to achieve social, environmental or public-service aims rather than to maximise profit for private owners.
• A not-for-profit organisation can make a surplus, but that surplus is usually reinvested in the organisation or its aims rather than distributed to private owners.
• A charity is a not-for-profit organisation that supports a recognised charitable purpose such as relieving poverty, advancing education or improving health.
• Charities are regulated and must use their resources to support their stated charitable purpose.
• Charities often rely on donations, fundraising and grants, so their income can be uncertain.
• Charities may attract volunteers and public support because donors value their social purpose.
• Charities often use campaigning as well as service delivery to raise awareness and influence policy related to their cause.
• Charities can face criticism over administrative costs or senior pay if stakeholders believe too little income reaches beneficiaries.
• A social enterprise trades to earn revenue while also pursuing social or environmental objectives.
• A social enterprise usually reinvests most of its profit to support its mission.
• A cooperative is a business owned and controlled by its members, who may be workers, producers or customers.
• Cooperatives share decision-making among members, which can improve accountability but can also slow decisions.
• Social enterprises can build a strong reputation by trading ethically and supporting disadvantaged groups or environmental goals.
• Social enterprises may find growth difficult because they balance financial performance with social aims and may reinvest profits rather than maximise returns to investors.
• A public sector organisation is owned and controlled by the government and is usually funded mainly through taxation.
• Public sector organisations usually provide essential services such as education, healthcare and emergency services.
• Public sector organisations are often kept under government control when services are strategically important or would be underprovided by private businesses.
• Public sector organisations are not usually run to maximise profit, and any surplus is normally reinvested in services or returned to the government.
• Public sector organisations may be less efficient than private businesses if weak competition reduces pressure to cut costs or improve quality.
• Political priorities and government budgets can change the funding and objectives of public sector organisations.
• Choosing a legal structure requires balancing control, liability, access to finance, continuity, profit sharing and administrative complexity.
• Owners who want full control are more likely to choose a sole trader structure than a partnership or company.
• Owners who want to share workload, skills and decision-making may prefer a partnership or a company with several owners.
• Owners who want to protect personal assets are more likely to choose a limited company than a sole trader or ordinary partnership.
• Sole traders and ordinary partnerships usually offer more privacy because they do not normally publish the same level of financial information as limited companies.
• A business with low start-up costs and limited risk is often suited to sole trader status.
• A business started by several people with complementary skills and moderate finance needs is often suited to a partnership.
• A private limited company is often suitable when a business needs more finance, wants limited liability and does not want to sell shares to the general public.
• A public limited company is usually suitable only for a large established business that needs very large amounts of capital.
• The amount of capital needed for start-up or expansion can determine whether a business must move from sole trader or partnership status to a limited company.
• The most appropriate legal structure can change over time as the size, risk and finance needs of the business change.
• Changing from a sole trader or partnership to a private limited company can improve access to finance and continuity.
• Changing from a private limited company to a public limited company can raise the profile of the business and provide access to capital through flotation.
• Selling shares to new investors can dilute existing owners' control over the business.
• Borrowing allows owners to raise finance without giving up ownership, but it increases interest costs and financial risk.
• When evaluating legal structure, owners must consider how the choice will affect stakeholders such as employees, customers and investors.
• Some family-owned businesses remain private limited companies to retain control while still benefiting from limited liability.
• Some public limited companies choose to return to private ownership to reduce stock market pressure and gain more strategic freedom.
• A business aim is a broad long-term goal that sets the overall direction of a business.
• A business objective is a specific target that helps a business achieve its broader aims within a stated period of time.
• Business objectives are most useful when they are SMART: specific, measurable, achievable, realistic and time specific.
• A specific objective states exactly what the business wants to achieve.
• A measurable objective includes a quantity or indicator that can be tracked.
• An achievable objective can be met with the resources and capabilities available to the business.
• A realistic objective is possible in the business's actual trading conditions.
• A time-specific objective includes a clear deadline.
• Clear objectives help managers make decisions, allocate resources and coordinate the work of employees.
• Clear objectives can motivate employees when staff understand the targets they are expected to meet.
• Clear objectives help communicate the direction of the business to investors and other stakeholders.
• Clear objectives allow a business to judge later whether its plans have been successful.
• Survival is a common objective for start-up businesses and firms facing serious financial pressure.
• A survival objective usually requires a business to maintain positive cash flow, control costs and generate enough sales to continue trading.
• Profit maximisation is the objective of increasing the difference between total revenue and total costs as much as possible.
• Growth is the objective of increasing the size of the business, usually through higher sales, larger output or expansion into new markets.
• Domestic growth means expanding sales or operations within the home market.
• International growth means expanding sales or operations into overseas markets.
• An objective to increase market share means winning a larger proportion of total market sales than competitors.
• Customer satisfaction is an objective that focuses on meeting or exceeding customer expectations so that customers are more likely to return and recommend the business.
• Social and ethical objectives require a business to consider the effects of its decisions on workers, communities and the environment as well as profit.
• Shareholder value means the overall return shareholders receive from dividends and increases in share price.
• Increasing shareholder value is a major objective for many public limited companies.
• Not-for-profit organisations usually set objectives linked to their social mission rather than to profit maximisation.
• Business objectives differ because businesses vary in size, ownership, competitive pressure and purpose.
• Small businesses are more likely to focus on survival, owner income and manageable growth than large established businesses.
• Larger established businesses are more likely to focus on market leadership, international expansion and increasing shareholder value.
• Businesses in highly competitive markets are more likely to prioritise low costs, strong customer retention and protecting market share.
• Businesses in less competitive or more specialised markets may place greater emphasis on profit margin, quality or niche reputation.
• Family-owned businesses may prioritise long-term stability and control over rapid expansion.
• Businesses with charitable or social purposes are more likely to prioritise service users or beneficiaries than shareholder returns.
• Business objectives often change as the business moves from start-up to growth and then to a more established stage.
• A start-up business may first focus on survival and breaking even before shifting towards profit, growth or market share objectives.
• A business may change its objectives after internal changes such as new owners, new managers or a change in business strategy.
• A business may change its objectives after external changes such as new technology, stronger competition, changing consumer demand or new legislation.
• Ethical and environmental objectives often become more important when larger businesses face greater public scrutiny and stakeholder pressure.
• Poor performance may force a business to replace growth objectives with objectives based on cost reduction, efficiency or survival.
• A business judges success by comparing actual performance with its objectives.
• Financial objectives measure success using outcomes such as revenue, profit, profit margin, market share and share price.
• Revenue is the income a business receives from selling goods or services.
• Revenue is calculated as selling price multiplied by quantity sold.
• Profit is the amount left after total costs are subtracted from total revenue.
• Profit is calculated as revenue minus total costs.
• Rising revenue does not necessarily mean rising success if costs rise faster than sales.
• Profit margin measures profit as a percentage of revenue and shows how efficiently revenue is being turned into profit.
• Market share measures the percentage of total market sales made by a business.
• Market share is calculated by dividing the business's sales by total market sales and multiplying by 100.
• A rising share price is an important measure of success for a public limited company because it suggests investors expect stronger future performance.
• Financial success does not always mean a business has met all of its objectives.
• Customer satisfaction can be used to judge success because satisfied customers are more likely to buy again and build positive word of mouth.
• Social and ethical success can be judged using measures such as reduced pollution, fair treatment of workers or positive community impact.
• Annual reports often present non-financial measures to show performance against ethical and environmental objectives.
• A social enterprise may judge success mainly by the extent to which it achieves its social mission.
• Not-for-profit organisations often judge success by the extent to which they meet user or community needs.
• Some owner-managed businesses judge success partly through non-financial outcomes such as independence, personal satisfaction and work-life balance.
• Using both financial and non-financial measures gives a more complete picture of business success than using profit alone.
• A stakeholder is any individual or group with an interest in a business because the business can affect them or they can affect the business.
• Internal stakeholders are people within the business, such as owners, managers and employees.
• External stakeholders are people or groups outside a business, such as customers, suppliers, the local community, government and pressure groups.
• The objectives of a business are often shaped by the needs of its most powerful stakeholders.
• Business owners usually want profit, business growth and, in many small businesses, independence or personal satisfaction.
• Shareholders in a limited company usually want high dividends and a rising share price.
• Employees usually want higher pay, job security, safe working conditions and opportunities for promotion.
• Managers usually want the business to meet its targets because this can improve job security, pay and status.
• Customers usually want good-quality, reliable products at prices they consider good value.
• Suppliers usually want regular orders, prompt payment and a long-term trading relationship with the business.
• The local community usually wants businesses to create jobs and local investment while minimising noise, traffic and pollution.
• Government usually wants businesses to follow the law, pay taxes and support employment and economic growth.
• Pressure groups try to change business behaviour when they believe a business is harming people, animals or the environment.
• Stakeholder objectives often conflict because a decision that benefits one group can disadvantage another group.
• A decision to raise wages may benefit employees but reduce profit for owners or shareholders.
• A decision to cut prices may benefit customers but reduce profit margins for owners or shareholders.
• A profitable and growing business can benefit owners, employees and suppliers, whereas falling sales or business failure can reduce returns, jobs and orders.
• Business activity can benefit the local community through employment, spending and regeneration.
• Business activity can harm the local community through pollution, congestion, litter or pressure on local services.
• Employees can influence a business through trade union action, negotiations, absenteeism, staff turnover and strikes.
• Shareholders can influence a company by voting on major decisions at company meetings and by selling shares if they lose confidence in the business.
• Customers can influence a business because falling demand, complaints and negative reviews can damage sales and reputation.
• Suppliers can influence a business strongly when the business depends on them for key materials, components or trade credit.
• The influence of a stakeholder depends on how much power that stakeholder has to affect the business and how difficult the stakeholder is to ignore.
• A poor business location can reduce sales, raise costs, make recruitment harder and contribute to business failure.
• The most suitable location depends on the nature of the business because different businesses need different amounts of space, infrastructure and customer access.
• Manufacturing businesses often need large sites with storage and loading facilities, whereas many service businesses prioritise premises that are easy for customers to reach.
• Proximity to the market is especially important for businesses whose customers expect convenience or regular face-to-face contact.
• Service businesses such as restaurants, grocers and hairdressers usually locate close to customers because convenient access affects demand.
• Businesses that provide delivery services can reduce transport time and distribution costs by locating close to the areas they serve.
• Businesses that rely on passing trade benefit from locations with high footfall because many potential customers pass the site regularly.
• Businesses selling specialist or unique products can sometimes succeed in remote locations because customers may be willing to travel further.
• Businesses may locate close to suppliers when raw materials are perishable, time-critical or need to arrive in a particular condition.
• Businesses often locate near the source of bulky, heavy or expensive raw materials in order to reduce transport costs.
• A business may locate near a natural resource when that resource is essential to the quality or characteristics of the product.
• Businesses often choose locations with a suitable labour supply so that they can recruit workers with the right skills more easily.
• Some businesses move production to countries with lower wage costs in order to reduce labour expenses.
• Good road and public transport links help businesses recruit from a wider labour market and support reliable commuting.
• Some businesses locate near competitors because a cluster of similar firms can attract more customers to the area.
• Other businesses choose locations with little direct competition so that they can gain market share more easily and face less pressure on price.
• Rent and property prices can strongly influence location decisions because they affect operating costs.
• Some small businesses reduce location costs by operating from home, using shared workspaces or allowing remote working.
• A business must weigh location costs against benefits such as access to customers, passing trade and labour supply.
• A business plan is a document that sets out a business idea, its aims, and how the owners intend the business to operate and develop.
• Producing a business plan before trading begins can reduce start-up risk because it forces the owner to research the market, estimate costs and consider likely problems before launch.
• Business planning helps owners set clear aims and objectives and decide how functions such as finance, marketing, operations and staffing will be organised.
• Business plans are used to raise finance because lenders and investors use them to judge the credibility, risk and likely profitability of a business.
• A business plan is not only for start-up businesses, because established businesses can use it as a working document to guide decisions and review progress.
• A business plan should be updated as market conditions, opportunities and threats change, or its forecasts and actions quickly become outdated.
• There is no single standard format for a business plan, but most business plans include a similar set of core sections.
• An executive summary gives a concise overview of the business idea, target market, unique selling proposition and key financial forecasts.
• A company description explains the purpose of the business, its legal structure, its location and any strengths that give it an advantage.
• A market analysis section examines the size of the market, customer needs, market trends and the strengths and weaknesses of competitors.
• A products or services section explains what the business will sell and why customers are likely to value it.
• A marketing and sales strategy explains how the business will price, promote and sell its products and how it plans to attract and retain customers.
• An organisation, operations and management section explains how the business will run day to day and identifies key staff, suppliers, production methods or stock control systems.
• A financial projections section forecasts revenue, costs, profit, cash flow and the amount of finance the business needs.
• A risk analysis section identifies possible threats to the business and explains how the business plans to reduce or respond to them.
• Business planning can increase the chance of success because it helps owners identify opportunities and potential problems before they become serious.
• Business planning helps owners judge whether a business idea is likely to be viable before they commit too much time or money.
• Comparing actual performance with the targets and forecasts in a business plan helps a business judge success and decide whether changes are needed.
• A business plan is only as useful as the quality of the research, assumptions and judgement used to produce it.
• Forecasts of sales, costs and cash flow can be inaccurate because future demand and external conditions are uncertain.
• Preparing a detailed business plan takes time and effort, which can be difficult for a small business with limited resources.
• A business that follows its original plan too rigidly may respond too slowly to unexpected opportunities or threats.
• Fixed costs are costs that do not change with the level of output and must usually be paid even when the business makes no sales.
• Rent, insurance and salaried staff are typical fixed costs.
• Variable costs are costs that change with the level of output.
• Raw materials, components and packaging are typical variable costs.
• Total variable costs are calculated by multiplying variable cost per unit by the number of units produced.
• Total costs are calculated by adding fixed costs to total variable costs.
• Revenue is the money a business receives from selling goods or services and is also called turnover or sales revenue.
• Revenue is calculated by multiplying selling price by quantity sold.
• Profit is the amount left when total costs are subtracted from revenue.
• A business makes a loss when total costs are greater than revenue.
• Gross profit is calculated by subtracting variable costs from revenue.
• Net profit is calculated by subtracting fixed costs from gross profit.
• A negative net profit figure shows that the business has made a loss.
• Business expansion is the process of increasing the size, scale or market reach of a business.
• Business growth can involve a change in legal structure, such as a sole trader taking on a partner or a private limited company becoming a public limited company.
• Shareholders often support expansion because growth can increase market share, profit and shareholder returns.
• Business expansion can increase market power over customers and suppliers.
• Business expansion can create opportunities for product diversification and additional revenue streams.
• Larger businesses often find it easier to raise finance for future growth.
• Organic growth is expansion achieved through internal development, usually funded by retained profit or borrowing.
• Organic growth methods include opening new stores or outlets, product diversification, franchising, outsourcing, investing in new technology and expanding through e-commerce.
• Opening new stores or outlets is an organic growth method that increases selling capacity and can bring a business closer to more customers.
• Product diversification is an organic growth strategy in which a business adds new products to create extra sources of revenue.
• Franchising is an organic growth method in which a franchisor sells another business owner the right to use its brand and business model.
• Franchising can accelerate expansion because franchisees provide capital and take much of the financial risk of opening new outlets.
• A franchisor usually receives an initial fee and ongoing royalty payments from each franchisee.
• Franchisees usually receive training, marketing support and established operating systems from the franchisor.
• Franchising can damage a brand if franchisees fail to meet expected standards of quality or customer service.
• E-commerce can support organic growth by increasing sales without the need to open more physical shops.
• E-commerce can widen a business's market to national or international customers, but weak distribution systems can damage customer satisfaction.
• Outsourcing is an organic growth method in which a business pays another firm to carry out part of its production or services.
• Outsourcing can help a business expand more quickly by increasing capacity and lowering costs without investing in all production resources itself.
• Outsourcing reduces direct control over quality, reliability and delivery times.
• Organic growth is usually less risky than external growth because managers expand within a business and industry they already understand.
• Organic growth is often slower than external growth and may be limited by the finance available.
• External growth, also called inorganic growth, happens when a business expands by merging with or taking over another business.
• A merger occurs when two or more companies combine to form a new company.
• A takeover occurs when one company gains control of another company by buying a controlling shareholding, usually more than 50 per cent of the shares.
• Businesses use mergers and takeovers to enter new markets, broaden product ranges or gain access to new technology.
• Mergers and takeovers can create synergies, which are benefits such as higher revenue, lower costs or improved products created by combining businesses.
• Mergers and takeovers can increase market share and reduce competition.
• Mergers and takeovers can increase shareholder value through higher profits, larger dividends and higher share prices.
• External growth is usually faster than organic growth, but it can be expensive and risky because combining businesses can create integration problems.
• Vertical integration occurs when a business merges with or acquires another business at a different stage of the supply chain.
• Forward vertical integration occurs when a business combines with another business that is closer to the final customer in the supply chain.
• Backward vertical integration occurs when a business combines with another business that is closer to raw materials or components in the supply chain.
• Vertical integration can reduce production costs, improve security of supply and allow a business to earn profit from another stage of production.
• Vertical integration can create inefficiency through duplicated roles, culture clashes or a lack of expertise in the new activity.
• Horizontal integration occurs when a business merges with or acquires another business at the same stage of production.
• Horizontal integration can quickly increase market share, reduce competition and lower unit costs through bulk buying.
• Horizontal integration can create inefficiency through duplicated resources, overlapping management and organisational culture clashes.
• Conglomerate integration occurs when a business merges with or acquires an unrelated business.
• Conglomerate integration spreads risk because the business is no longer dependent on a single market.
• Expansion can strengthen a business's profile and make it easier to attract skilled employees.
• Expansion can dilute founder control because raising finance for growth often requires ownership to be shared with other investors.
• Rapid expansion can make communication, coordination and decision-making more difficult because larger businesses are more complex.
• Rapid expansion can cause overtrading if a business does not have enough cash to support its day-to-day operations.
• Economies of scale occur when a business lowers its average cost per unit by increasing its scale of output.
• Economies of scale reduce average costs rather than total costs, because total costs usually continue to rise as output increases.
• Average costs are often high at low levels of output because fixed costs are spread over relatively few units.
• As output rises, a business can move towards the level of output at which average costs are minimised.
• The output level at which average costs are lowest is called productive efficiency.
• Diseconomies of scale occur when average costs begin to rise because a business has expanded beyond its most efficient scale.
• The long-run average cost curve is typically U-shaped because economies of scale reduce average costs up to a point and diseconomies of scale increase them beyond that point.
• Internal economies of scale are reductions in average cost that arise from the growth of the business itself.
• Purchasing economies of scale arise when a large business buys raw materials or components in bulk and receives discounts from suppliers.
• Technical economies of scale arise when a business can afford more advanced machinery or technology that increases efficiency and lowers unit costs.
• Managerial economies of scale arise when a large business employs specialist managers whose expertise improves efficiency and reduces average costs.
• External economies of scale are reductions in average cost that occur when the whole industry or market grows.
• A growing industry can create a pool of workers with relevant skills, which reduces recruitment and training costs for individual businesses.
• Local education providers may offer courses matched to a growing industry, which improves the supply of appropriately trained labour.
• A large industry can persuade local authorities to improve transport and communications infrastructure, which can make distribution and operations more efficient.
• Diseconomies of scale show that a business can become so large that it starts to operate less efficiently.
• Poor communication and coordination can create diseconomies of scale because longer chains of command slow information flow and increase errors.
• Increased bureaucracy can create diseconomies of scale because larger businesses need more administration to organise people and resources.
• Reduced employee motivation can create diseconomies of scale because workers in very large businesses may feel less valued and become less productive.
• Some very large businesses respond to diseconomies of scale by splitting operations into smaller autonomous units that can communicate and coordinate more effectively.
• Average unit cost is the cost of producing one unit of output after both fixed costs and variable costs have been included.
• Average unit cost is calculated by dividing total costs by the number of units of output.
• A business is experiencing economies of scale when average unit cost falls as output increases.
• A business is experiencing diseconomies of scale when average unit cost rises as output increases.
• If selling prices remain unchanged, falling average unit costs tend to increase profit and rising average unit costs tend to reduce profit.

• Classify a product as a good or a service by using whether the customer receives a tangible item.
• Distinguish between customer needs and customer wants in a given purchasing scenario.
• Calculate added value by subtracting the cost of inputs from the selling price of the output.
• Differentiate profit from added value by using revenue, total costs and input costs correctly.
• Identify ways a business could add value through quality, design, branding, convenience or customer service.
• Categorise business activities as operations, marketing, finance or human resources.
• Explain the opportunity cost of a business or consumer choice by stating the next best alternative forgone.
• Classify resources used by a business as land, labour, capital or enterprise.
• Categorise a business into the primary, secondary or tertiary sector from its main activity.
• Assess how changes in technology, the economy, legislation, environmental expectations or consumer tastes could create opportunities or threats for a business.
• Compare sole traders, partnerships, private limited companies and public limited companies in terms of control, liability, access to finance, continuity and administrative requirements.
• Recommend an appropriate legal structure for a business by using its size, risk, finance needs and ownership aims.
• Differentiate between charities, social enterprises, cooperatives and public sector organisations by using their aims, ownership and use of surplus.
• Write a SMART business objective with a clear measure and deadline.
• Select suitable objectives for a business by using its stage of growth, ownership and market conditions.
• Calculate revenue, profit and market share from given business data.
• Judge business success against stated objectives by using both financial and non-financial measures.
• Identify the likely objectives of owners, shareholders, employees, customers, suppliers, government and local communities in a business scenario.
• Explain how a business decision could create conflict between two stakeholder groups.
• Recommend a suitable location for a business by weighing market access, suppliers, labour, transport, competition and property costs.