1. Business In The Real World Flashcards
1.1 Key terms : Business
Business is the practice of making one’s living or making money by producing or buying and selling products. It is also “any activity or enterprise entered into for profit.”
1.1 Key terms : Product
In marketing, a product is an object, or system, or service made available for consumer use as of the consumer demand; it is anything that can be offered to a market to satisfy the desire or need of a customer.
1.1 Key terms : Service
A service is an act or use for which a consumer, firm, or government is willing to pay. Examples include work done by barbers, doctors, lawyers, mechanics, banks, insurance companies, and so on. Public services are those that society as a whole pays for.
1.1 Key terms : Factors of production
Land - physical space to carry out work
Labour - work done, physical, online
Capital - money to produce and manufacter
Entrepeneurship - spark and motivation
1.1 Sectors : Primary sector
The primary sector of the economy includes any industry involved in the extraction and production of raw materials, such as farming, logging, fishing, forestry and mining.
1.1 Sectors : Secondary sector
The secondary sector consists of processing, manufacturing, and construction companies. The secondary sector produces goods from the natural products within the primary sector. The secondary sector includes the following business activities: Automobile production. Textile.
1.1 Sectors : Tertiary sector
The tertiary sector of the economy, generally known as the service sector, is the third of the three economic sectors in the three-sector model. The others are the primary sector and the secondary sector. The tertiary sector consists of the provision of services instead of end products.
1.1 Sectors: Quaternary sector
The quaternary sector is said to the intellectual aspect of the economy, including education, training, the development of technology, and research and development.
1.2 Business types : Sole Trader
A sole trader is a self-employed person who owns and runs their own business as an individual. A sole trader business doesn’t have any legal identity separate to its owner.
1.2 Business types : Partnership
A partnership is a legal arrangement that allows two or more people to share responsibility for a business. Those partners share the ownership and profits, but they also share the work, responsibility, and potential losses.
1.2 Business types : LTD
(Limited Company) A limited company (LTD) is a general form of incorporation that limits the amount of liability undertaken by the company’s shareholders. It refers to a legal structure that ensures that the liability of company members or subscribers is limited to their stake in the company by way of investments or commitments.
1.2 Business types : PLC
(Public limited company) A public limited company, or ‘PLC’ for short, is a company that is legally allowed to offer its shares for sale to the public. They don’t have to offer shares to the public if they choose not to, but the option is there if and when needed.
1.2 Business types : not for profit
An organisation without any motive for profit, eg. charity, church
1.2 Key words : Companies House
Any limited company or partnership business has to register with Companies House. These records are public and there is usually a fee to register.
1.2 Key words : deed of partnership
A document that is signed by all of the owners of a business setting out the terms they must abide by and their obligations as owners.
1.2 Key words : dividends
A sum of money paid regularly by a company to its shareholders out of its profits.
1.2 Key words : economies of scale
Where the average costs (of production, distribution and sales) fall as the business increases the amount of product that it produces, distributes and sells.
1.2 Key words : grant
A grant is money given to a business, usually by the government or lottery fund, that does not need to be paid back.
1.2 Key words : hostile takeover
A takeover of one company (called the ‘target company’) by another (called the ‘acquirer’) that is accomplished without the agreement of the target company’s management. Instead, the acquirer approaches the company’s shareholders directly or fights to replace the management to get the takeover approved.
1.2 Key words : income tax
Tax that someone pays based on their personal income (the money that they earn).
1.2 Key words : Limited liability
When the business owner or owners are only responsible for business debts up to the value of their financial investment in the business.
1.2 Key words : Unlimited liability
When the business owner or owners are personally responsible for all the debt of the business, no matter what the value.
1.2 Key words : profits
The amount of money made after all costs are deducted.
1.2 Key words : Loss
The opposite of profit, loosing money
1.2 Key words : share capital
The money raised when a business becomes a public limited company by offering shares in the business in return for capital.
1.2 Key words : shareholders
A part owner of a private or public limited company.
1.2 Key words : shares
A percentage or portion of a company.
1.2 Key words : stock market
A centralised market where business shares are traded.
1.2 Key words : Opportunity cost
The cost of loosing knowledge or potential income over making a financial or related decision
1.3 Business Aims : Survival
An initial business aim upon starting up is to survive and get out of debt
1.3 Business Aims : Make profit
Making profit to pay off debt, rent or mortgage, then repurpose money towards business development and maintenence
1.3 Business Aims : Maximise profit
Increasing price, investing in advertisement, convince people they need something
1.3 Business Aims : Maintain sales
Maintaining sales to always be making profit, not become bankrupt
1.3 Business Aims : Market share
Holding a large market share for a particular category or product is good as it makes your company reputable and a go to for customers
1.3 Business Aims : Value of shares
A higher share value means a company worth more money, worthy of investing
1.3 Business Aims : Growth Domestically & Internationally
Growth nationally and abroad is good to reach a larger client base and be reputable worldwide.
1.3 Business Aims : Customer satisfaction
Customer satisfaction is important to stay reputable and be recommended to more, leading to more profit
1.3 Business Aims : Ethical
Staying ethical is morally right and most customers also care, so they are not supporting a bad cause
1.3 Key words : Business aims
A business aim is a short term achievement set out by a business to track progress
1.3 Key words : Business objectives
A business objective is a long term measurable achievement set out by a business to track progress
1.4 Key words: Stakeholder
Any person who has a direct connection, an interest or concern in the company or organisation, eg. government, shareholders, managers etc.
1.4 Stakeholders : Employees
Employees have direct involvement with the company as they carry out all the work for the company.
1.4 Stakeholders : Managers
Managers control the companies operations and are responsible for employees
1.4 Stakeholders: Owners
Owners are responsible for managers and employees, and have the final say in all business decisions
1.4 Stakeholders : Customers
Customers are the people who buy the product or service for money, they are involved as they are buying a product made by the company
1.4 Stakeholders : Consumers
Consumers are the users of the product which can often also be the customers, they are the ones to be compensated if anything where to go wrong with the product
1.4 Stakeholders : Suppliers
Suppliers are directly linked in as stakeholders as if anything goes wrong with the product they are liable for giving compensation, assuming they are also the manufacturer of the product, if the product has been branded or altered further by the company then liability is shared
1.4 Stakeholders : Manufacturer
Manufacturers are the producers of the product, they can also be the suppliers of the final product assuming how the product is supplied to the business is how it was manufactured
1.4 Stakeholders : Government
The government has a direct involvement as they are in charge of making sure the business is being run ethically and by law, they are also in charge of making sure taxed are paid and other business fees
1.4 Stakeholders: Local community
The local community is directly involved as large amounts of business traffic might raise environmental or congestion issues, impacting those in the area
1.5 Key words : Business location
The physical location the business is run from, eg. an online store on a computer from home, shop on highstreet etc.
1.5 Location Factors : Raw materials
If in primary sector, being geographically closer to the raw materials will save transport and storage costs rather than shipping to business location
1.5 Location Factors : Employment
A reputable area is more prone to having well educated people, in the area to employ, more ideas leads to higher profit
1.5 Location Factors : Competitors
Being close to competitors can be good so people aren’t faced with a choice of should i go to my only option or where do i go (2 options)
1.5 Location Factors : Infrastructure
If transport is accessible, this will attract employees and customers thanks to an easy commute
1.5 Location Factors : Proximity 2 target market
Selling a product near attractions to do with that product will attract more customers, eg. a skiing supply store near a mountain range
1.5 Location Factors : Finance
Well equipped and densely populated areas will be more expensive than less congested areas, but paying more for location might be compensated with customers
1.6 Key words : Business planning
Business planning is the plan associated with the start up of the business and near future goals and objectives, can also be updated after start up
1.6 Key words : Uncertainty
Uncertainty is the lack of knowledge to do with the business, eg. a poor business plan has been made
1.6 Key words : Risk
A risk is the cost of doing or not doing something, often associated with making poor business decision
1.6 Key words : Revenue
Revenue is the income received from sales before removing fees related to paying employees and other fees/taxes
1.6 Key words : Total costs
Total costs are the sum of variable costs and fixed costs
1.6 Key words : Variable costs
Variable costs are costs that vary directly with the business output, more sales, more stock required, higher cost
1.6 Key words : Fixed costs
Fixed costs are costs that don’t change when a business makes changes to sales or output, like workers pay or mortgage on and within a fixed term contract
1.6 Key term : Gross profit
Gross profit = sales revenue - variable cost
1.6 Key term : Net profit
Net profit = sales revenue - (variable costs + fixed costs)
1.7 Key term : Organic growth
Organic growth refers to the growth of a business through internal processes, relying on its own resources.
1.7 Key term : Inorganic growth
Inorganic growth refers to business expansion that is achieved through mergers, acquisitions, or takeovers, rather than by increasing sales or customer base. This includes forms of franchising.
1.7 Key term : Internal growth
The same as organic growth.
1.7 Key term : External growth
The same as inorganic growth.
1.7 Key term : Market capitalisation
Market capitalization refers to how much a company is worth as determined by the stock market. It is defined as the total market value of all outstanding shares.
1.7 Key term : Franchise, Franchisee, Franchisor
Franchise - action of franchising
Franchisee - buyer (pays to use branding etc)
Franchisor - seller (original company who sells trademark rights)
1.7 Key term : E - commerce
Act of buying products or services through the internet/online
1.7 Key term : Outsourcing
Outsourcing is the business practice of hiring a party outside a company to perform services or create goods that were traditionally performed in-house by the company’s own employees and staff.
1.7 Key term : Merger
A merger is a process where two or more companies join into one new legal entity by entering into an agreement. It is a corporate strategy to expand, diversify, or strengthen the business. A merger may involve purchasing the assets, shares, or stock of the other companies. Mergers can be classified by the type of product, market, or relationship of the companies involved.
1.7 Key term : Takeover
A takeover is a business transaction in which one company assumes control of or acquires another company. A takeover can be done by purchasing a majority stake or voting rights in the target company, or by merging with or acquiring the target company. The company that initiates the takeover is called the acquirer or the bidder, and the company that is taken over is called the target.
1.7 Key term : Economies of scale
Economies of scale meaning is cost reductions that occur when companies increase production and become more efficient. The fixed costs and sometimes the variable costs are lower per unit of production. This can create a competitive advantage for the business. Eg. Efficient supply & demand, 20g of flour but 19g needed
1.7 Key term : Diseconomies of scale
In microeconomics, diseconomies of scale are the cost disadvantages that economic actors accrue due to an increase in organizational size or in output, resulting in production of goods and services at increased per-unit costs. Eg. Inefficient supply & demand, 20g of flour but 21g needed
1.7 Key term : Communication
Process of sharing information between or to people within or outside of the company
1.7 Key term : Coordination
In basic terms, coordination means the integration and synchronization of the activities, resources and efforts of the people working in the organization, which leads to unity of action, in the pursuit of the organization’s objectives.
1.7 Key term : Motivation
Motivation in business refers to mental drive and how driven and happy an employee is to carry out their role
1.7 Key term : Economies of scale calculations
Calculating at different output levels
1.7 Key term : Diseconomies of scale calculations
Determining if in decline or not
1.7 Key term : Unit cost
Cost per unit to buy/manufacter, store, ship, and sell.
1.7 Key term : SIC
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