1 Flashcards
Why do new business ideas come about?
🟡products become obsolete
🟡changes in technology
🟡change in customer wants
Hat are the two types of business ideas
💡 adapting an existing product
💡original ideas
What are some risks of starting a new business?
🔹Failure
🔹Financial loss
🔹Lack of security
What may be some rewards for entrepreneurs?
🔵purse an interest
🔵dissatisfaction with current job
🔵financial rewards
🔵be their own boss
What purpose do businesses serve?
🟣goods
🟣services
🟣goods & services eg:Restaurants
🟣 delivery
What do businesses do serve..
🟤peoples wants
🟤peoples needs
What is enterprise?
🔴a business
🔴qualities
🔴factor of production
(Entrepreneurial activity)
How can value be added to a product ?
🔸quality
🔸USP
🔸convenience
🔸branding
🔸design
What are some ways to minimise risks?
Market research
Revenue forecasts
Branding
🔺defines it’s values
🔺creates customer loyalty , which can increase market share
🔺🔺🔺🔺
E-commerce/M commerce
🟡low start up costs
🟡ideas straight to the marketplace
🟡do not need their own payment platform
What quality does an entrepreneur hold?
🔷taking risks
🔷identifying business opportunities
What are some roles of an entrepreneur ?
🟣innovation
🟣organised
🟣willingness to take risks
🟣hardworking
What are the 4 factors of production?
◾️enterprising
◾️capital
◾️land
◾️labour
What are some customer needs?
🟢convenience
🟢quality
🟢price
🟢choice
What is the importance of satisfying customer needs?
🔹they will buy
🔹increase in sales and customer satisfaction
What are some advantages of being market driven?
🟡avoid costly mistakes
🟡find the correct marketing mix
🟡allows them to be competitive
What is found in market research?
🔴demand
🔴competition
🔴target market
What is qualitative research?
Opinions and written stuff
What is quantitative research?
Factual quantified information
What is market segmentation?
Dividing potential customers into different groups
Why do business use market segmentation?
⚫️choosing a marketing mix
⚫️choosing promotion
⚫️market mapping
What are variables in segmentation?
🟦age
🟦location
🟦income
🟦gender
Why is market mapping used
To identify a gap in the market by looking at what competitors have to offer
What can businesses compete on?
🟣location
🟣product range
🟣customer service
🟣price
Why is the impact of high competition?
Price
Quality
What is primary research?
Market research that is done by it’s own firm for its own use. The research can tailor the business’s exact needs
What are examples of primary research?
🔹the likert scale
🔹questionnaires, surveys , interviews
What is secondary market research ?
A firm collecting information on research that has been performed by other people.
It is used for an entire market and is cheap
What is the difference between an aim & an objective
Aim = ultimate purpose
Objective =goals in order to achieve the aim
An objective is normally more specific
Name some aims
Survival
Profit maximisation
Maximise shareholder value (business worth)
Name some objectives
Increase market share
Growth
Customer satisfaction
Social and ethical objectives
What influences a firm’s objectives
🟨type of business
🟨size
🟨competition
What is revenue?
Source of income earned by the sales
Number of sales✖️sale price
What are fixed costs?
Costs that do not vary as the company changes it’s output
Eg: rent, insurance, salaries
What are variables costs?
Costs that change directly with output
Eg: wages for factory labour, raw material, transport costs
What is profit?
The amount of money a business makes taking costs into account
Profit= revenue➖total costs
Total costs
= fixed costs➕variable costs
What is average unit cost?
Total cost ➗number of units produced
What is interest?
Extra amount you pay in the loan
Interest =interest rate✖️size of the loan
What is the break even point?
The revenue = total cost’s
What is the margin of safety?
The gap between the actual output and the break even point
What are limitations to the break even analysis?
🟤assumes the amount of sales 🟤assumes the firm will not change the price when output changes
What is cash inflow and outflow
The the cash coming into the business. The cash going out of the business
What is net cash flow?
Cash inflow ➖cash outflow
What is opening balance?
The amount of cash that the business starts to trade with
What is closing balance?
The amount of cash that the bush finished trading with
Closing balance = opening balance ➕net cash flow
What is a liquidity problem?
Business runs out of cash in the short term
What are the consequences of cash flow problems?
Won’t be able to pay:
🔹creditors (people who give loan) will charge a higher invest in the future
🔹suppliers relationship
🔹employees might leave
How can you solve cash flow problems?
🟤increase cash inflows, more sales, sell assets
🟤reduce outflows, delay
🟤reschedule payments
What are some short term methods of finance?
🟪trade credit, delaying payment
🟪hire purchases, pay in Installment
🟪overdraft
🟪🟪
What are some long term methods of finance?
🟢share capital (sell shares for money
🟢retained profit
🟢loans/mortgages
🟢crowdfunding
🟢venture capital,
🟢personal savings
What are some advantages for sole traders?
✔️easy to set up
✔️be your own boss
✔️gets all profit
✔️control
What are some disadvantages of being a sole trader?
❌have to make decisions alone
❌hard to raise finance
❌hard to retain employees
What are some advantages of partnerships?
✔️more experience /ideas
✔️easier to raise money
✔️good employees can be retained
What are some disadvantages of partnerships?
❌shared profit
❌disagreements
❌taking responsibility for other’s faults
What are limited companies?
Businesses owned by shareholders.
Only legally responsible for the amount they have invested
What is a private limited company?
Ownership of shares is restricted , owners have a lot of control.
There is an upfront fee however
What are public limited companies?
They sell their shares on the stock exchange, very fast growth. However owners do it have a large say
What is unlimited liability?
You can lose more than you invested including personal assets.
Eg: sole traders and partnerships
What are some advantages and disadvantages of limited liability?
✅Easier access to finance
❌need to incorporate which can be expensive/time consuming
What is an unincorporated association?
A non profit organisation but with unlimited liability
What is franchising?
When a company gives someone the right to sell its products and use it’s trademark for a fee
What are some advantages and disadvantages of franchising?
❌do not have full control
❌have to pay a fee
✅increases brand awareness ✅marketing and brand name already established
✅do not need large amounts of investment
What factors affect the business location?
🟣available of raw material
🟣labour nationally
🟣labour internationally
🟣competition
🟣rent
🟣location of the market
What are the marketing mix ?
🅿️rice
🅿️roduct
🅿️romotion
🅿️lace
Why do businesses create plans?
🔴important for new business 🔴raising finance
🔴setting objectives
🔴business organisation
What are the main features of a business plan?
🔹mission statement 🔹products/services
🔹market analysis
🔹organisation and management team
🔹production details
🔹finance
🔹summary
How do you calculate break even?
Fixed costs ➗(selling price ➖fixed costs)
How do changes in technology provide new business opportunities?
🔺they make expensive technology affordable
🔺social media
🔺e commerce /m commerce
How is expensive technology becoming affordable beneficial for entrepreneurs?
The new technologies can be used in the company’s products and services. Reducing the costs for manufacturing
How is E and M commerce beneficial to entrepreneurs?
The barriers/risks for starting a business have decreased , as rent for a physical place is not required. Instead new business ideas can be brought straight to the market place.
How is social media beneficial to entrepreneurs?
Inexpensive way to promote a business, interacting with existing and potential customers. Reduce the work involved in marketing.
How do businesses keep up to date with the changes in consumer wants?
Surveys , feedback questionnaires, data, demographic data
Why might a business adapt one of it’s existing products?
Cultural reasons(vegan burgers) , new trends (changing colour of clothes),
What is meant by the dynamic nature of a business?
