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Business > 3.1 Business In The Real World > Flashcards

3.1 Business In The Real World Flashcards

1
Q

What is a business?

A

An organisation that produces a good or provides a service on a commercial basis.

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2
Q

What is a good?

A

Something that is tangible (touch) e.g. a mobile phone

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3
Q

What is a service?

A

Something that is intangible (not touch) e.g. a hair cut

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4
Q

What is a customer?

A

Someone who purchases a product.

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5
Q

What is a consumer?

A

Someone who uses the product.

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6
Q

Why do businesses exist?

A

• Produce goods
• Supply a service
• Distribute products
• Fulfil a business opportunity

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7
Q

Why do people want to start a business?

A

• To follow an interest or hobby
• To escape from a boring job

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8
Q

What is an entrepreneur?

A

A person who is willing to take a risk in starting a new business.

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9
Q

What is a social enterprise?

A

A business that has a positive impact on society e.g. the lighthouse (money they make goes to the community)

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10
Q

What does the primary industry do?

A

Extracting raw materials from the land or sea.
• Farming and agriculture
• Mining
• Fishing
• Energy
• Forestry

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11
Q

What does the secondary industry do?

A

Processing or converting raw material into finished goods.
• Construction
• Car production
• Shipbuilding
• Producer goods (what the business would buy)
• Consumer goods

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12
Q

What does the tertiary industry do?

A

Selling finished goods to the customer (provide a service).
• Banking
• Restaurants
• Healthcare
• Internet and mobile phone companies
• Hairdressing
• Delivery companies

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13
Q

What is the chain of production?

A

The stages that a product goes through to be ready to be sold to customers.
Chocolate:
Cocoa, sugar + milk —> Machines mix ingredients and shape chocolate bar —> The bar gets transported to the retailers (shops)

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14
Q

What does interdependency mean?

A

Businesses in a chain of production rely on one another.

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15
Q

What is deindustrialisation?

A

When there is a decline in manufacturing in a country and an increase in tertiary businesses.

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16
Q

Why has deindustrialisation happened in the UK?

A

• Increased demand in tertiary services
• Cheaper to manufacture abroad, Uk can’t compete (rent and wages cheaper)
• Better education leads to an increase in staff for higher thinking/paying job (tertiary)

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17
Q

What are factors of production?

A

The resources (inputs) that businesses use to provide their goods and services.

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18
Q

What are the 4 factors of production?

A

• Capital
• Enterprise
• Land
• Labour

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19
Q

What is capital?

A

Investment in equipment required to produce/run a business such as factories and machinery.

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20
Q

What is enterprise?

A

The skills of the people involved in a business to identify business opportunities and bring resources together.

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21
Q

What is land?

A

The physical site on which a business is based and the natural resources required.

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22
Q

What is labour?

A

The skills available and number of workers employed by a business.

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23
Q

What is opportunity cost?

A

The cost of having to make one choice at the expense of another.

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24
Q

What is the business environment?

A

All the various factors outside of a business that can affect it.

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25
Q

What is a dynamic market?

A

The business environment is constantly changing.

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26
Q

What are the 4 factors in a business environment?

A

• Technological change
• Legal change
• Economic change
• Environmental change

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27
Q

What is the technological change?

A

• Businesses have adapted to new technologies and use them to influence their future
• Technology has made buying and selling products much easier
• Rapidly changing everyday
• New markets and products being created

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28
Q

What is the legal change?

A

• This can be when there are new laws/regulations imposed
• This specific legal change could impact business costs
• Demand for a businesses product could be affected

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29
Q

What is the economic change?

A

• Businesses will almost always witness changes in our economy and some may be affected more than others by them
• Price can rise and fall over time (inflation)
• Costs for borrowing money, or gains from saving, are effected (interest rates)
• Our country grows at different rates

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30
Q

What is interest rate?

A

A rate charged for borrowing money.

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31
Q

What is environmental expectations?

A

• Customers and consumers are more concerned about how businesses behave.
• They will both ultimately want to know:
What resources and materials have been used
How the products are being made
How are the products being transported

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32
Q

What are characteristics of a successful entrepreneur?

A

• Passion
• Self-confidence
• Motivation
• Risk taking
• Decision making

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33
Q

What are the types of business ownership?

A

• Sole trader
• Partnership
• Company
• Not-for-profit

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34
Q

What is a sole trader?

A

A business that is owned and ran by a single individual.
• Hair dresser
• Plumber
• Electrician

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35
Q

What are characteristics of sole traders?

A

1) Self employed
2) May employ others
3) Often small businesses and services
4) Aims to survive

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36
Q

What are issues of being a sole trader?

A

1) Financial
2) Time available
3) Difficult to take time off
4) Difficult to get customer/brand awareness

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37
Q

What is unlimited liability?

A

The business owner is responsible for all the debts of a business. May have to sell own possessions to pay business they owe money too.

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38
Q

What is economies of scale?

A

Factors they cause average cost per unit to fall as output increases.

Purchasing economies of scale = Buying in bulk to get each unit cheaper.
Technical = Use of specialist equipment or processes to boost productivity.

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39
Q

What are positives of sole traders?

A

• Able to make all the decisions
• Do not have to share profits

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40
Q

What are negatives of sole traders?

A

• Unlimited liability
• Difficult to raise finance, or high interest rates
• Prices are often higher than larger firms

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41
Q

What is a partnership?

A

Partners are the joint owners of a business. The law says a partnership can have between 2 and 20 partners.

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42
Q

What is equal share?

A

All partners get an equal share of profits and debts regardless of initial investment or hours worked.

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43
Q

What is a deed of partnership?

A

Rules to follow (not compulsory)

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44
Q

What is involved in a deed of partnership?

A

1) How profits should be shared
2) % capital each person puts in
3) Votes each partners has based on money put in
4) Rules on taking on new partners
5) Leaving the partnership

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45
Q

What are positives of partnerships?

A

• Flexibility over when you work/ sickness covered
• Teamwork

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46
Q

What are negatives of partnerships?

A

• Conflicts may arise
• Profits are shared amongst partners
• Unlimited liability

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47
Q

What are limited companies?

A

A business that has limited liability and is incorporated under the companies act.
1) Separate legal identity from its owner
2) Owners are shareholders
3) Shareholders have limited liability
4) Shareholders have a say
5) Have to produce accounts annually by law

48
Q

What does incorporated mean?

A

Process of becoming a company.

49
Q

What is limited liability?

A

Only responsible to pay back/loose what you have invested into a business e.g. share.

50
Q

What are private limited companies?

A

A company whose shares are sold privately often to friends and family.

51
Q

What are positives of private limited companies?

A

• Shareholders are known to the business
• Limited liability
• Less likely to have disagreements with shareholders (friends + family)

52
Q

What are negatives of private limited companies?

A

• Restricted share capital (smaller target market)
• More paperwork
• Publish financial accounts publicly

53
Q

What are public limited companies?

A

A company whose shares are traded publicly on the stock exchange.

54
Q

What is the stock exchange?

A

The place where shares are brought and sold.

55
Q

What is hostile takeover?

A

When a business try’s to takeover another business without mutual consent.

56
Q

Why change from an LTD to PLC?

A

• Greater access to finance from selling shares to the public share capital (amount of money invested into a business through shares)
• Shareholders can bring skills and expertise to a business
• Increase value and status

57
Q

Why do people buy shares?

A

1) They earn a ‘dividend’ which is part of the profit of the business
2) They can sell the share for more than they brought it for and make a ‘return’ on their investment

58
Q

What is a dividend?

A

When a company pays a percentage of their profits to share-holders based in the number of shares they own.

59
Q

What is a not for profit business?

A

A business that is set up to achieve other objectives rather than make a profit e.g. charities, social enterprises.

60
Q

What are features of a not for profit organisation?

A

• Have to raise funds to invest like other business
• Doesn’t exist to make profit, reinvested
• Have social objectives
• Positive impact on society
• Aim to make a difference

61
Q

What are positives of a not for profit business?

A

• Give back to the community
• Benefit from positive PR (publicity)

62
Q

What are negatives of not for profit businesses?

A

• May be costly to implement
• Hard to gain trust from others
• May not lead to a benefit for the business e.g. no financial gain

63
Q

What are charities?

A

Aim to raise money for good causes, or to help people, animals and the environment. They’re funded mainly by donations, get tax relief and are eligible for certain types of grant.

64
Q

What are social enterprises?

A

Businesses who aim to help society. They make money by selling products or services like a traditional for-profit business, but use their profits to benefit society.

65
Q

What is an aim?

A

An overall goal or target a business hopes to reach.
• We want to create a new product.

66
Q

What is an objective?

A

A specific measurable target that outlines how a business will achieve the aim.
• We want to increase sales by 50% by 2025

67
Q

What are purposes of objectives?

A

• Helps motivate employees
• Helps investors understand direction of the business
• Make specific plans to achieve these targets (prioritise important ones)

68
Q

Why will objectives differ between businesses?

A

1) Size
2) Level of competition
3) Type of business
4) Type of market

69
Q

As a business gets larger what may it start to focus on?

A

• Becoming dominant in the market
• Expanding internationally
• Increasing shareholder value
• Consider the environment and ethics

70
Q

What is a stakeholder?

A

An individual, group or organisation that affects or is affected by a businesses actions.
• Employees
• Government
• Community
• Management
• Owners
• Suppliers
• Customers
• Competition

71
Q

What is business location?

A

Where a business is geographically situated.

72
Q

What are the factors influencing location?

A

1) Competition - How much competition there is and how close they are.
2) Raw materials - Need to be accessible and it depends how heavy they are.
3) Cost - Is it a big cost a small business faces paying rent or mortgage. Different places cost different amounts
4) Technology - Can effect where a business is based and who they sell to. Not for all products though.
5) Market - Where your customers are is vital. Some businesses do not have to be close to customers
6) Infrastructure - Road systems of transport networks are important, it can affect how quickly customers can access products
7) Employees - you need them and they must have the right skills.

73
Q

What is globalisation?

A

The increasing trend for goods to be traded internationally and for companies to locate abroad.

74
Q

What is offshoring?

A

Making products or parts of products in other countries.

75
Q

What are multinationals?

A

A business that operates in more than one country.

76
Q

What are positives of globalisation?

A

• Cheaper labour
• Increase in brand awareness
• Cheaper resources

77
Q

What are negatives of globalisation?

A

• Language barrier
• Cultural differences
• Different regulations

78
Q

What is a business plan?

A

A written document showing what the business plans to do in the future and what it needs to do to achieve its aims and objectives.

79
Q

Why write a business plan?

A

• To see if an idea is feasible (set objectives)
• To give the best possible chance of success (coordinate resources)
• To get finance
• To help budget
• To attract investors

80
Q

What are benefits of objectives?

A

• Helps raise finance
• Helps with decision making. This allows businesses to decide what their main focus should be.

81
Q

What are drawbacks of a business plan?

A

• Takes time to carry out research and write the plan
• Can cost money to construct
• It’s based on forecasts and is therefore likely to be inaccurate

82
Q

What is cost?

A

Amount a business pays for a good or service.

83
Q

What is a fixed cost?

A

Costs that do not change with the amount a business produces or sells (output)
Rent, salaries, business rates

84
Q

What is a variable cost?

A

Costs that change depending on what the business produces or sells (output)
Raw materials, wages, utility bills, marketing.

85
Q

Equation for total variable cost

A

Variable cost per unit X Total number of units

86
Q

Equation for total costs

A

Fixed cost + total variable cost

87
Q

What is total costs?

A

All the costs a business faces.

88
Q

What is price?

A

The amount charged by a business to a customer for a good or a service.

89
Q

What is revenue?

A

The income earned from sales.

90
Q

Equation for revenue?

A

Selling price per unit X output (quantity produced or sold)

91
Q

What is profit?

A

The amount of capital left after all costs have been accounted for.

92
Q

Equation for profit?

A

Total revenue - total costs

93
Q

What is the importance of revenue?

A

• Main source of income for a business
• Helps a business to break even and they earn a profit

94
Q

What is the importance of profits?

A

• Main aim of most businesses
• Considers how well they are performing
• Can be used to reward shareholders and staff

95
Q

Why do businesses want to grow?

A

• Make increased profit
• Increase brand awareness
• Increase target market/consumers

96
Q

What is organic growth?

A

When a business increases in size from within the business, using its own resources.
Open more shops, offices, branches
Offer franchises to other businesses
E-commerce sales
Outsourcing

97
Q

What is inorganic growth?

A

When a business increases in size by joining with, or buying, another business.
Merger
Takeover
Acquisition

98
Q

What is a franchise?

A

A franchise is where a business sells the rights to another business to use their name, product or process.

99
Q

What is a Franchisor ?

A

An individual who sells the rights to use the name.

100
Q

What is the Franchisee?

A

Decides to pay a franchise to use their name and sell their products.

101
Q

What are royalties?

A

% of their sales.
The franchisee must pay the Franchisor royalties.

102
Q

What are benefits of a franchisee?

A

• High incentive to expand quickly
• Support by Franchisor
• Easier to make a profit as most profit kept by franchisee

103
Q

What are drawbacks of being a franchisee?

A

Franchisor can end franchise whenever.

104
Q

What are benefits of being a Franchisor?

A

• Growth paid for by finance
• Fewer staff and problems to manage
• Franchisee fee is a good source of income

105
Q

What are drawbacks of being a Franchisor?

A

• Franchisee might damage brand
• One poor publicity = total damage

106
Q

What are the methods of organic growth?

A

1) Opening up new stores
2) E-commerce - the acts of buying and selling a product/service using and electronic system
3) Outsourcing - When a business subcontracts to another business to produce a product for them

107
Q

What is merge?

A

2 or more businesses join to form a new larger.

108
Q

What is takeover?

A

1 business buys control of another.

109
Q

Methods of inorganic growth?

A

1) Merge
2) Takeover

110
Q

Why merge/takeover?

A

• Reduces competition by removing key rivals
• Power within the market
• Increased growth
• Combine expertise/skills
• Higher profit levels

111
Q

What are economies of scale?

A

Factors that cause average cost per until to fall as output increases.

112
Q

What is technical?

A

Use of specialist equipment or processes to boost productivity.

113
Q

Equation for average cost per unit?

A

Total cost / output

114
Q

What is diseconomies of scale?

A

Factors that cause average cost per unit to increase as output increases.

115
Q

What are types of diseconomies of scale?

A

1) Co-ordination/control - problems monitoring productivity and work quality, increasing wastage of resources.
2) Motivation - workers in large firms may develop a sense of alienation and loss of morals.
3) Communication - workers in large businesses may have less opportunity to communicate.

116
Q

What is alienation?

A

The feeling that you have no connection with the people around you or that you are not part of a group.

Business (8 decks)

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