1. What is a business? Flashcards
what do businesses supply?
Businesses supply goods and services to consumers and other businesses.
What is the difference between goods and services?
goods are tangible products that can be physically held, while services are intangible products.
how do businesses impact employment?
Businesses provide jobs, allowing individuals to earn an income and purchase goods and services
give an example of a business that provides significant employment
in 2019, tesco employed around 300,00 staff.
how do businesses enhance the life of consumers?
by creating new goods and services, such as medicines developed by pharmaceutical companies like Pfizer
how can businesses improve a countries reputation?
by providing products and services globally, such as the UKs financial services enhancing the UKs standing
what is the transformation process in business?
The conversion of inputs (e.g., raw materials) into outputs (finished goods) to satisfy consumer needs.
What does adding value mean in the context of business?
Businesses enhance the worth of their goods and services throughout the transformation process.
What is a B2C organisation? give an example
businesses that sell goods and services directly to consumers e.g Spotify provides music streaming services to consumers.
What is a B2B organisation?
Businesses that sell goods and services to other businesses e.g Hootsuite sells social media management services to companies like Virgin.
How can businesses be categorised by product type?
Primary Sector: Extracts or grows raw materials (e.g., fishing, mining).
Secondary Sector: Manufactures goods using raw materials (e.g., clothing, mobile phones).
Tertiary Sector: Provides services (e.g., hotels, cinemas).
what is the purpose of a mission statement in a business?
To create corporate aims, which are the long-term goals of the entire business.
what are corporate aims?
stated long term goals of a business that guide its overall mission
how are corporate objectives related to corporate aims?
Corporate objectives specify the tasks and activities needed to achieve corporate aims.
what levels can corporate objectives be broken down into?
functional(departmental), team and individual objectives
what does the SMART acronym stand for in setting objectives?
specific, measurable, attainable, realisitic, timely
why must objectives be specific?
So that employees know exactly what they are working towards.
Why must objectives be Measurable?
To allow employees to determine whether they have met their objectives.
what does it mean for objectives to be attainable?
Objectives should be achievable to foster employee commitment.
why should objectives be realistic?
To prevent employee demotivation and feelings of being overwhelmed.
Why must objectives be timely?
employees need to know deadlines for achieving their objectives
what is profit maximisation?
An objective to achieve the highest amount of profit for shareholders.
What is the survival objective in business?
The need for a business to continue trading despite external challenges.
What does growth as a business objective entail?
Expanding stores, sales value, sales volume, or product range.
What does satisficing mean?
Making enough profit to meet a minimum required level.
What are social objectives?
Goals that focus on supporting society, including sustainability and fair trade initiatives.
What are the benefits of setting objectives?
They provide direction, support planning, coordinate resources, and align employee efforts towards common goals.
what is revenue?
revenue is the income earned by a business from the sale of its goods and services
how is revenue calculated?
revenue= number of sales x sales prices
give an example of revenue calculation
if a stationary store sells 500 pens for £2 each, then the revenue is £1000 (500 x £2)
what are costs in a business context?
costs are all of the expenses that a business incurs, including wages and utility bills.
how are total costs calculated?
total costs are the sum of fixed costs and variable cots
what are fixed costs?
fixed costs do not vary with the level of output; they remain constant regardless of production levels
give an example of fixed costs
example include office rent, insurance, and fixed employee salaries
can fixed costs change?
yes, fixed costs can increase as the business grows
what are variable costs?
variable costs change directly with output; they vary as production levels change
give examples of variable costs
examples include wages for factory labor, raw materials, and transport costs
(AO3/4) how does Ryanair achieve cost leadership?
by implementing various strategies that lower operational costs
(AO3/4) what advantage does buying new planes give Ryanair?
new planes are more fuel-efficient, resulting in lower fuel costs per flight compared to competitors with older planes
(AO3/4) why does Ryanair fly to cheaper airports?
Ryanair often flies to secondary airports, which typically have lower landing fees and airport costs
(AO3/4) how does Ryanair maximise aircraft usage?
Ryanair ensures its planes take off as quickly as possible after landing, allowing for more flights per day with the same aircraft
what is Ryanairs pricing strategy?
Ryanair backloads its prices, advertising the lowest airfares on price comparison websites but charging extra for services like seat selection and carry on bags.
how does backloading prices affect customers perception of Ryanair’s fares?
it makes Ryanair appear cheaper at first, but additional fees may result in higher overall costs
what is profit?
profit is the amount of money a business makes after accounting for costs; it represents a surplus
how is profit calculated?
proft= total revenue - total costs
what happens if revenue is greater than costs?
the business will make a profit
what happens if costs are greater than revenue?
the business will incur a loss
what is average unit cost?
average unit cost= total cost ÷ output (total number of units produced)
why is average unit costs important for a business?
it helps a business determine the price they need to charge to make a profit on each item
what is interest?
interest is the extra amount paid when borrowing money, typically expressed as a percentage of the loan
how is interest calculated?
interest= interest rate x the size of the loan
give an example of interest calculation
if a business borrows £200 at an interest rate of 5%, the interest paid each year is £200 x 0.05 = £10
