1.1 Dynamic nature of business Flashcards
What is a service?
An act a business carries out for you in exchange for money e.g hairdresser
What is a product?
A physical item capable of satisfying customer needs.
What makes a good business idea?
*Solving a problem
*Cheaper, better version of existing idea
*Simpler, easier version of existing idea
*Developed, tested and sold quickly
*Focus on needs of cutomer
How do new business ideas come about?
*Improvements
*Original ideas
*New technology
*Gap in the market
*Business experiences
*Change in environment
*Products become obsolete
*Changes in consumer wants
What is creative destruction?
When one product makes another product obsolete
What is obselete?
When a product is no longer used or out of date
What are the benefits of new business ideas
*Needs to be creative
*New ideas can help businesses improve their products
*Allow staff to be motivated and creative
What are the drawbacks of new business ideas?
*Products failing can damage reputation
*Need highly motivated staff
*Need money and a good reputation to develop ideas
How can value be added to a product or service?
- branding
- design
- usp
- quality
- convience
benefits of adding value
- charge higher price
- create point of difference with competitors
- protectect against competitors offering lower prices
- focuses businesson its traget market segment
How does technology change?
- make products and services faster
- make products more compact
- make products and services cheaper
- make products and services easier to use
Why do customer needs change?
- Changes in fashions
- changes in economy
- changes in technology
What are the reward associated with starting a business?
- Business success - personal satisfaction, awars and recognition
- Profit - revenue exceeds costs over a period of time
- independence - value freedom over working for someone else
What are the risks associated with starting a business?
- Business failure through poor cash flow, fall in sales revenue or action of competitors
- financial loss - owner may lose capital they invest in the business if it fails which could include personal belongings if unlimited liability
- Lack of security - not working for someone means no guaranteed income, holidays or sick pay
How can risk be reduced?
- detailed market research
- produce a business plan
- ensure business is competitive
- raise sufficient start-up finance
