SAVAGE Teaches - BUSINESS STUDIES 101: Blog!

1.9 Why New businesses fail

9/9/2019

Lack of record keeping

New businesses may take record keeping for granted - i.e. keeping record of their sales, invoices, receipts. These are necessary to help with convincing bankers on their performance and track record. Without these - new businesses struggle to obtain additional financing if needed to sustain their business.

Lack of Working Capital

Working capital refers to the cash in hand that the businesses should have to ensure day-to-day operational expenses are properly managed. Insufficient working capital may lead to loss of sales - for example not having enough cash to pay wages to workers would lead to loss of productivity among workers and eventually loss of sales in the long run.

Poor Management Skills

New entrepreneurs may not possess all the skills needed to be a successful leader - and the lack of some management skills may potentially lead to business failure, for example not able to lead a team or motivate them to work towards the company's goal.

Changes in Business Environment

New businesses who do not adapt to changes in the business environment may stand to lose out. For example if there a change and growth in producing safe and environmentally products as consumers prefer them - this is something worth considering as this has an impact to sales.

1.8 Challenges of an entrepreneur

2/9/2019

What are the challenges of an Entrepreneur?

An entrepreneur face many challenges in setting up a business, as can be found below:

Deciding on a business idea - this is quite difficult to do if one have no idea where to begin. To help, those interested in starting a business can look at their hobbies as a guide. For example, if you love baking, then you can consider starting a home bakery.
Determining a location - where to place your business is key. If it is very near to potential customers then it may likely be expensive. But if it is too far, then it may be a cheaper rental but can you reach your customers?
Lack of capital - not having enough money is another challenge. Banks may be unwilling to loan money to businesses who have no track record - so what do you do?
Competition - how do you compete with businesses that have long existed before yours have begun?
Building a customer base - this is a challenge because gaining new customers is also a challenge. Therefore to maintain them and to grow new ones will take time.

1.7 CHARACTERISTICS OF AN ENTREPRENEUR

26/8/2019

So, you want to start a business, but you don't know if you can, or are able to. Well, let's check these boxes below and see if you're it:

Are you an innovative person? Do you have an idea that is outside of the box? Are you able to solve a problem with the creation of your product/service?

Do you usually follow through with a new plan or idea? To ensure that you almost always finish what you start? Do you follow through?

Are you able to push yourself back up after every failure? Are you confident to take on new challenges?

Do you like learning new things? Are you able to pick up a new skill by spending time to learn it so that you could master it?

Are you willing to use your own savings to start something that could potentially fail?

Have you led a team before? Guide them to get something done? Gain their trust to do what you needed them to do?

1.6 ROLE OF AN ENTREPRENEUR

24/8/2019

Who is an Entrepreneur?

An entrepreneur is someone who is innovative - possess the ability to think outside the box to create something new in the business world

An entrepreneur is someone who is willing to use their own money/ savings or take a bank loan in order to start a business - not knowing whether or not the business would bear fruits.

An entrepreneur is someone who is willing to be responsible to manage the business from scratch, spending many hours in a day to ensure that success comes.

An entrepreneur is someone who is willing to undertake the risk of failure - not knowing the future yet putting in all they have - time, money & commitment to undertake this venture.

1.5 ECONOMIC PROBLEM & THE OPPORTUNITY COST

1/8/2019

What is an 'economic problem'?

Problems that arise due to:

scarcity in natural resources - basically the diminishing of clean waters, healthier lands, clean air , the chopping down of trees without taking into account of re-planting them to maintain nature's balance.
scarcity in skills/human resources - the lack of skill or expertise knowledge that prevents people from creating new, innovative products

These scarcity in resources causes wants and needs not to be met - hence businesses only produce what they can with the resources they have.

This means they would have to choose what they can produce, letting go of the idea of not producing something else that could also be very important to be produced = this is called Opportunity Cost.

ADDED VALUE

31/7/2019

What is the difference between these two pictures?

Can you tell the difference between these two pictures? The 'under construction' sign tells us that something is being constructed (perhaps a house) and to your right you see an actual house! These pictures show an unfinished and a finished/final product.

But, what if the construction never completed? Would the house be completed? Should the house be completed? Why is it important for it to be completed?

The above questions brings us to today's topic of 'added value'. The definition of added value states that it is the difference between the raw materials that are used to make the house, against the price of the house that it is sold for. In other words, an uncompleted house holds no value = or to be put simply, raw materials alone holds no value to a business, unless it is being converted into a final product, where the business would be able to set a selling price to the product. Hence if you look at the picture on your right - the final, completed house gives value that customers would be willing to pay for, because they are able to see the effort that the construction company has put into making it as attractive as it looks. This also means, if businesses put more value or effort into creating value for their products, they may possibly have higher chances to set competitive prices that will eventually lead to higher sales volume!

However, this also brings the question to whether added value is the same as profit, since added value talks about the difference between raw materials and selling price. To explain on this, I urge you to watch my video in the 'Videos' Section of this website for you to determine if added value is the same as profit.

Thanks for reading this today. Please 'follow' me for more reading materials to help you ace business studies!

1.3 Factors of production

30/7/2019

Now that you are able to differentiate between employed and self-employed, let's talk about what the word 'business' means . Businesses are important to an employed person because with a sustaining business, an employed person will continue to be employed.
Broken apart, business is is a combination of the following:

A person/group of people with an idea;
using resources (land, labour, capital)
to produce a product or service
that would help satisfy a want or a need

As can be seen from above, the creation of a business or a company or an organization would allow for the creation of a business activity to take place. Without business activity - there is no use of resources and therefore there would not be a final product or service. In other words - a business without the essentials would not be able to transform the idea into an actual product or service that a customer would want or need.

The resources or also known as the 'Factors of Production' are explained below:

Enterprise/enterpreneurial skill = a person or a group of people who has the idea to create a product or service that could fulfill the need or wants of society
Land = a place for the business to activity to take place; or raw materials needed for the production of goods/services
Labour = the manpower or help needed to ensure that the objective of the business is fulfilled, for example a salesperson, a clerk or a receptionist to pick up calls from potential consumers or investors
Capital = money for the business to commence and purchase land or equipment, or pay salary to workers.

The factors of production are essential to help businesses produce the following:

Consumer good - tangible, physical items such as bags, shoes, watches or consumables produced by businesses for consumers needs
consumer services - intangible in nature - such as doctor's consultation or a complaint made to the customer service department for a badly manufactured shoe you have just purchased.
Capital good - mostly items (physical or tangible in nature) that are focused to business-to-business customers to aid them in the production of their product/output. For example a business purchases circuit boards from another business and these circuit boards are then used in the business itself to produce their very own computers/electronic devices.

Shoes are examples of consumer good

A circuit board is an example of a capital good

A hair stylist provides a service

1.2 APPLICATION OF EMPLOYED AND SELF EMPLOYED

29/7/2019

In the last blog, we spoke of two terms - employed and self-employed.
Now, let's put that understanding to test by reading this article about Dulip who is about to start his business.

From this article, we have seen that in order to start a business, it takes a lot of work and effort.
For example - Dulip would have to:

get a bank loan, leaving him open to the possible risks of non-payment (in event business is a failure)
use up his savings, leaving nothing left for his own use
research and plan
speak to people ie. suppliers/vendors/potential customers
employ people to work for him and with him
consider the environment

The list goes on - so why do you think Dulip would want to start his own business rather than working for another firm/employer? Wouldn't it be easier to just work for an employer?

If you were Dulip, what would you do?

1.1 EMPLOYED VS SELF-EMPLOYED

28/7/2019

What are the differences between an employed and a self employed person?

an employed person has a stable income, where as a self employed person may not be earning a stable income;
an employed person has set of responsibilities and tasks to undertake as determined by the employer, whereas a self-employed person has the power to decide on the types of task he/she intends to undertake;
an employed person would not need to worry about the next paycheck, as long as the company that employs him/her is able to sustain and grow its business;
a self employed person would need to put in more effort than he/she would if he/she were employed as the success of his/her business would depend greatly on it.

What should you do next?

In this very brief blog, you are being introduced to the business studies subject by first comparing and contrasting the differences between and employed person, and a self-employed person.

To go a little deeper, I'd like to being your attention to the topic introduction mentioned in the CIE textbook, of Chapter 1 - Enterprise.

I am sure many of you would have read about Dulip, and his plan to start his business. Please do read that short case study again, and I will cover that in the next blog.

WELCOME!

27/7/2019

If you are taking this subject for the first time, read ON..

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b) follow the class with the most students - that means the lecturer is fun! OR
c) follow the subject which they think is the easiest - 'This subject is the easiest of all the rest, no calculations!!'.

So, which category would you fall in?? Oh, let me include these options which may just be your answer:

d) pick the subject they found to have a chemistry with, OR
e) pick the subject they have always liked.

Now, whatever your answer may be, one thing is certain - in the end, there must be some form of attraction to the subject you intend to pursue. And sometimes attraction does not happen at first sight - you need to know a little bit about that someone before you decide that you like that someone.

The same goes with Business Studies, to like the subject is to know what it is about. To help you understand more, this site is created to help you learn Business Studies in a simpler and easier manner - as if this is an online library tool that you can take with you wherever you go!

Follow this blog for more tips and updates on Business Studies!

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