1.1 Business Organization Flashcards
What is the economic problem?
That there are infinite wants and needs, but finite resources
What is opportunity cost?
When making a choice, the next best alternative we had to give up is called the ‘opportunity cost’
What is the primary sector?
Extracts and uses the natural resources
What is the secondary sector?
Manufactures goods using the raw materials from the primary sector
What is the tertiary sector?
Provides services to consumers and other sectors of industry
What is the quaternary sector?
Knowledge based part of the economy
What are the 4 factors of production?
Land, labour, capital and enterprise
What is “specialisation”?
Specialisation is when each worker specialises in some part of the production process. This dividing of the production process into different tasks is called division of labour. Specialisation and the division of labour increase efficiency and output.
What does ‘‘Land’’ refer to?
Natural resources
What does “Labour” refer to?
Workforce/ employees
What does “Capital” refer to?
Machinery
What does “Enterprise” refer to?
The skill and risk-taking ability of the person who brings together the resources
What is “Added value”?
Added value is the difference between the selling price and the cost price of a good or service
What are the 4 functional areas of an organisation?
Operations, Marketing, Finance, Human Resources
What do “Operations” do in an organisation?
Decides how the good will be manufactured, stock control, quality control, research and development
What does “Marketing” do in an organisation?
Product, price, place, promotion
What does “Finance” do in an organisation?
Recording financial transactions, cash flow, budgeting
What does “Human resources” do in organisation?
Recruitment, training, pay and benefits, health and safety
What’s an entrepreneur?
An individual who demonstrates enterprise and initiative to make a profit
What’s an intrapreneur?
An individual employed by a large organisation who demonstrates entrepreneurial thinking in the development of new products or services
What are some reasons for starting your own business?
Freedom, passion for the product, profit, enjoyment, new experience
What are the 6 stages to setting up your own business?
- Organising the basics
- Researching the market
- Planning the business
- Establishing legal requirements
- Raising the finance
- Testing the market
What is a business plan?
“A written document that describes a business, its objectives and its strategies, the market it is in and its financial forecasts”
Why is a business plan important?
The plan allows potential investors (including the bank) to check the validity of the idea
