WEBVTT 00:00:00.500 --> 00:00:03.955 Welcome to GCSE Edexcel Business revision. 00:00:04.105 --> 00:00:07.331 Unit B U S 4: Making the business effective. 00:00:10.000 --> 00:00:14.949 Unlimited liability means owners are personally responsible for business debts. 00:00:15.099 --> 00:00:18.575 Their personal assets may be at risk if the business cannot pay. 00:00:21.233 --> 00:00:25.546 Limited liability normally limits shareholders' loss to their investment. 00:00:25.696 --> 00:00:32.809 A company is a separate legal entity; personal guarantees or wrongdoing can still create personal consequences. 00:00:35.467 --> 00:00:39.192 A sole trader is one owner, not necessarily one worker. 00:00:39.342 --> 00:00:46.519 The owner controls decisions and keeps the profit but has unlimited liability and may struggle to raise enough finance. 00:00:49.200 --> 00:00:53.947 A partnership has two or more owners who can share investment, skills and workload. 00:00:54.097 --> 00:01:00.591 An ordinary partnership has unlimited liability; disagreements and shared profit can be disadvantages. 00:01:03.267 --> 00:01:08.079 A private limited company (Ltd) has shareholders and limited liability. 00:01:08.229 --> 00:01:12.355 Shares are sold privately rather than offered to the public on a stock exchange. 00:01:15.033 --> 00:01:18.596 An Ltd can raise share capital and protect shareholders, 00:01:18.746 --> 00:01:22.586 but establishing and administering the company involves requirements, 00:01:22.736 --> 00:01:26.104 and selling shares can reduce the original owner's control. 00:01:28.767 --> 00:01:34.350 Choose ownership by liability, control, finance and the owners' skills and circumstances. 00:01:34.500 --> 00:01:40.215 Limited liability does not guarantee a successful business or remove the company's debts. 00:01:42.867 --> 00:01:47.152 A franchisee pays to operate using a franchisor's brand and business system. 00:01:47.302 --> 00:01:52.709 The franchisor grants the rights and may provide training, advertising and approved suppliers. 00:01:55.367 --> 00:02:03.642 Franchising can reduce some start-up uncertainty through an established name, but fees, royalties and rules reduce independence and profit. 00:02:03.792 --> 00:02:05.819 A franchise can still fail. 00:02:08.500 --> 00:02:14.738 Fictional case: an owner who wants complete freedom over recipes may prefer an independent café; 00:02:14.888 --> 00:02:21.276 a franchise's recognised brand may attract customers but restrict the menu and require royalty payments. 00:02:23.933 --> 00:02:30.363 Being close to the market can improve access and sales, especially for businesses relying on passing customers. 00:02:30.513 --> 00:02:33.627 High footfall may come with higher rent and competition. 00:02:36.300 --> 00:02:42.069 Proximity to suitable labour matters when specialist skills or sufficient employees are needed. 00:02:42.219 --> 00:02:47.435 A cheap site is less useful if recruitment is difficult or workers face long journeys. 00:02:50.100 --> 00:02:57.959 Proximity to materials can reduce transport costs and delivery time, especially for bulky, perishable or frequently used inputs. 00:03:00.633 --> 00:03:06.007 Nearby competitors can take sales but may also attract customers to a shopping area. 00:03:06.157 --> 00:03:11.341 The effect depends on differentiation and whether customers compare alternatives there. 00:03:14.000 --> 00:03:24.121 The nature of the activity changes priorities: a retailer may need visibility, a factory space and transport links, and a home-based consultant reliable internet. 00:03:26.800 --> 00:03:29.211 An e-commerce business trades online. 00:03:29.361 --> 00:03:37.434 It may need fewer high-street premises but still needs suitable storage, delivery arrangements, reliable technology and customer trust. 00:03:40.100 --> 00:03:46.434 A fixed-premises business may offer personal service, immediate collection or an experience customers value. 00:03:46.584 --> 00:03:51.725 Rent and limited opening hours can be disadvantages compared with an online offer. 00:03:54.400 --> 00:03:58.945 Compare total location costs and expected benefits, not rent alone. 00:03:59.095 --> 00:04:05.111 Delivery costs, access, labour, planning constraints and the effect on sales can change the best choice. 00:04:07.767 --> 00:04:12.981 The marketing mix combines product, price, promotion and place to serve a target market. 00:04:13.131 --> 00:04:17.867 Place means how the product reaches customers, not simply the factory's address. 00:04:18.017 --> 00:04:20.427 The four elements of the marketing mix 00:04:25.100 --> 00:04:29.369 Product includes features, quality, design, packaging and service. 00:04:29.519 --> 00:04:33.711 It should solve the target customer's problem and give a reason to choose it. 00:04:36.367 --> 00:04:41.173 Price must fit customer expectations, competition, costs and objectives. 00:04:41.323 --> 00:04:47.007 A very low price may attract attention but fail to cover costs or undermine a premium image. 00:04:49.667 --> 00:04:53.035 Promotion communicates benefits and encourages sales. 00:04:53.185 --> 00:04:59.349 Messages and channels should reach the target customers rather than just the largest possible audience. 00:05:02.000 --> 00:05:06.613 Place includes a shop, direct website, delivery or another route to market. 00:05:06.763 --> 00:05:11.290 The route affects convenience, costs, availability and customer experience. 00:05:13.967 --> 00:05:22.296 The four elements work together: a premium handmade product needs credible quality and suitable service to support its price and promotion. 00:05:24.967 --> 00:05:29.989 Changing customer needs or competition may require several elements to change. 00:05:30.139 --> 00:05:37.381 A delivery service may need new packaging, revised prices and online promotion as well as a new distribution method. 00:05:40.033 --> 00:05:47.626 Technology enables online sales and digital communication, but it introduces costs for websites, fulfilment and support. 00:05:47.776 --> 00:05:51.665 More online reach does not automatically mean profitable sales. 00:05:54.333 --> 00:05:59.047 A business plan explains what the business intends to do and how it will operate. 00:05:59.197 --> 00:06:04.486 It organises decisions and provides evidence for potential lenders or investors. 00:06:07.167 --> 00:06:11.793 Describe the idea, aims and objectives, target market and research. 00:06:11.943 --> 00:06:16.185 Explain why customers will buy rather than simply claiming there is demand. 00:06:18.867 --> 00:06:24.925 Include forecast revenue, costs and profit, with clear assumptions about sales volumes and prices. 00:06:25.075 --> 00:06:28.667 Unrealistic sales forecasts can make the whole plan misleading. 00:06:31.333 --> 00:06:36.847 A cash-flow forecast identifies likely receipts, payments and periods of cash shortage. 00:06:36.997 --> 00:06:40.823 Profit forecasts alone do not show whether bills can be paid on time. 00:06:43.500 --> 00:06:47.333 Explain sources of finance, location and the marketing mix. 00:06:47.483 --> 00:06:54.746 These decisions must fit together: high rent needs a credible sales forecast and enough finance to cover early cash gaps. 00:06:57.400 --> 00:07:02.185 Planning can reduce risk by exposing missing information and testing assumptions. 00:07:02.335 --> 00:07:06.208 It does not remove risk, and lenders may still reject a plan. 00:07:08.867 --> 00:07:11.299 Update the plan as evidence changes. 00:07:11.449 --> 00:07:19.053 Compare actual results with forecasts so the owner can revise prices, spending or finance before problems become severe. 00:07:21.733 --> 00:07:26.234 Fictional case: a mobile bike-repair plan forecasts 20 jobs daily. 00:07:26.384 --> 00:07:33.935 Before borrowing for equipment, check travel time and repair capacity: sales forecasts that exceed capacity are not credible. 00:07:36.600 --> 00:07:39.116 That completes Making the business effective. 00:07:39.266 --> 00:07:42.611 Revisit the notes and test yourself on the revision website.