Assessment 1

Question 1

Factors of production

Land …

Answer 1

The natural resources such as oil, water, and the land itself.

Question 2

Factors of production

Labour…

Answer 2

the people employed by the business to make the product

Question 3

Factors of production

Capital…

Answer 3

man-made resources that are needed to make products such as machines, tools and factories

Question 4

Factors of production

Enterprise…

Answer 4

combining all the factors of production by the entrepreneur

Question 5

Define an entrepreneur and name the skill and qualities of them

Answer 5

The entrepreneur is the person who brings together the workers, the natural and the man-made resources to produce goods and services

identifying a gap in the market – being able to spot where their product or services will fit and make a profit

risk-taking – all business start-ups come with an element of risk. Many people do not wish to take that gamble

leadership – entrepreneurs are not followers. They are the innovators who can take an idea and develop it. They also have to inspire other people to work and stay with them

Question 6

Profit maximisation

Answer 6

The aim is to make as much money as possible out of the business.
This is the most obvious, but it is not always possible to achieve along with other objectives

Question 7

Growth

Answer 7

To grow and increase market share, the business may have to accept lower profits as its costs will be higher and it may be selling at reduced prices.

Question 8

Social Responsibility

Answer 8

Some businesses may wish to improve their public image by showing they are socially responsible.
They may give money to good causes or spend money to avoid damaging the environment

Question 9

Stakeholders/Owners

Answer 9

Shareholders have invested money in the business and will want to see the price of their shares rise, and their share of the profit increased.

Owners such as sole traders or partners are stakeholders in their own business. They will want see the business achieving its objectives because their livelihoods depends on their business being successful

Question 10

Managers

Answer 10

Will want job security, better pay and working conditions and good promotion prospects.

Question 11

Customers

Answer 11

Will want low prices, high quality and good after-sales service

Question 12

Government

Answer 12

Will want he business to keep within the law, pay their taxes, and provide employment

Question 13

Internal factors that affect a business

Financial

Answer 13

This is the money the business has available. If there are funds within the company it can use these to help it develop. However if they don’t have money, they can miss out.

Not being to pay staff and employ more employees.
A machine cannot be bought
Loans have to be obtained from a bank

Question 14

Internal factors that affect a business

Human Resource

Answer 14

Employees can affect how a business works by making decisions, carrying out their work to a poor standard and also by taking industrial action. Staff who are poorly trained might not have the skills to perform their jobs well.

Managers are promoted employees who are paid extra in return for extra responsibilities. The have more decision making powers than employees but in turn a higher risk of making the wrong decision and something going wrong

Question 15

Internal factors that affect a business

Current technology

Answer 15

The technology that a business has can influence how the business operates. If the technology is out of date, this might mean the orders cant be processed as quickly as possible or things can go wrong eg machines can break down.

Question 16

External factors that affect a business

POLITICAL

Answer 16

Changes made in local, national and European Union affect a business. For example, the minimum wage legislation brought many changes to firms in terms of who they employed and how much they had to pay. The EU has brought in a number of pieces of legislation which affect the rights of workers. For a business this mean increased costs and changes in their operations to comply with the laws.

Question 17

External factors that affect a business

ECONOMIC

Answer 17

The government will change the levels of taxation and the exemption for tax each year, which will increase or decrease the costs of a business. For example if they increase the rate of VAT then prices will rise, meaning people will probably buy less. Changes in corporation tax will increase or decrease the business profits

Question 18

External Factors that affect a business

Social

Answer 18

The UK now has a much older population than ever before
The average age for a first time mother is 29
The average family now has less than two children

All these factors means that firms’ customers have changed and they have to provide different goods and services. For example growth markets are now providing holidays for over 60s

Question 19

External factors that affect a business

Technology

Answer 19

The growth of the internet and ownership of home PCs, coupled with a reduction in costs means that consumers can shop worldwide. For business this means they have to compete worldwide in what we call the global market. New inventions or improvements in processes in some industries mean that one firm will have an advantage over all the others. They have to work hard and fast to catch up or they wont survive .

Question 20

External factors that affect a business

ENVIROMENTAL

Answer 20

It is important to realise that environmental changes will have many far-reaching effects on business activity for example the existence of out-of-town hypermarkets and one-stop shopping was made possible by the spread of car ownership[ and would be threatened if the use of cars was to be limited because of the pollution they cause. This gives an impetus to oil firms to try to find an environmentally friendly fuel, and to governments to finance alternative methods of transportation rather than build more motorways which destroy the environment

Question 21

External factors that affect a business

COMPETITIVE

Answer 21

Every business want to stay ahead of their competitors and want better quality and new products, to produce more cheaply, to have a better reputation, and to sell more. Their long time survival depends on achieving at least one of these aims. The problem is competitors are always trying to take their customers away. The actions of competitors are the biggest single threat to any business. A business that achieves all of these aims will effectively push other out of the market. To survive the business must always be seeking ways to be better than competition.

Question 22

Sources of finance for a business

GRANTS

Answer 22

Money available from governments, to help businesses set up
A source of finance from central or local government, the EU etc. It is often an incentive for a new business to set up in a particular area of high unemployment.
They are one-off payments that once received are not usually repeated.
Sometimes difficult to receive.

Question 23

Sources of finance for a business

Hire purchase

Answer 23

Often used to obtain equipment and vehicles. The cost-plus interest is paid in equal instalments over a set period of time.
Item is easier to afford as the cost is spread
Fixed monthly repayment helps budgeting
The hire purchase company still owns the item until the final instalment is payed.

Question 24

Sources of finance for a business

Overdraft

Answer 24

A short term facility at the bank to overdraw on your account.
Can be agreed in advanced, and for many firms a permanent facility can be available.
Interest rates can be quite high.

Question 25

Sources of finance for a business

Retained profits

Answer 25

Keeping profits from that year to be used the next year to expand
Profits kept back from previous years can be used to purchase assets
Companies that self finance using retained profits may not be able to grow the speed they will like to grow at.

Question 26

What is desk research

Answer 26

Looking at existing information eg in newspaper, books and internet websites. This gathers secondary information

Question 27

Advantages and disadvantages of field research

Answer 27

The researcher has gathered new information and therefore more up to date than existing information.

The information has been gathered for a specific purpose and is therefore more relevant to the businesses needs.

It can take a long time to carry out field research, which could stop decisions being made quickly

It can be expensive to carry out field research, which means the money cannot be spent on something else.

Question 28

Advantages and disadvantages of desk research

Answer 28

It is usually cheaper to gather than field research, which saves the organisation money.

Decisions can be quickly because the information already exists

The information might be biased, which could lead to wrong or incomplete decisions being made

The research may have been carried out ages ago and therefore the information is not relevant to todays business environment

Question 29

Methods of field research

Survey/questionnaire

Answer 29

Involves specific questions being asked to respondents.
Response for phone survey is immediate
A large number of people can be surveyed

Question 30

Methods of field research

Market Testing

Answer 30

Is when a product is launched in a region. The product will be launched nationally if the results from the test region is positive.
People from the test area can point out the things they dislike
If the product is not successful then the money that was meant to be used for a national launch can be saved.
Customers of the test area may have tastes that are only specific to that area and does not represent the whole country.

Question 31

Methods of field research

Personal interviews

Answer 31

Face-to-face interviews that are held in the streets or at the respondents home.
Allows for a two way conversation.
Any misunderstandings can be quickly cleared up.
Home interviews are unpopular for respondents.
Researchers have to be selected and trained which can be quite costly.

Question 32

Methods of field research

Answer 32

Customers are invited to see/try out products and give their opinions.
Qualitive information can be gained
Inexpensive method of market research.
Qualitive information can be hard to analyse
Results may be inaccurate as respondents feel to obliged be positive about the products

Question 33

Benefits of Market Segmentation

Answer 33

Tailoring of products to meet the needs of particular groups of consumers
Sales of products in the most appropriate place to reach the chosen target audiences. This maximises sales
Pricing will reflect what a target market will be willing to pay for the product or service. This can increase profits.
Tailoring product and market research techniques to entice a company’s target market. This will prevent money wasted on ineffective marketing

Question 34

The marketing mix

Product

Answer 34

This is the actual item that is produced by the business and then sold in a market.
The product must be what the customer wants or they will not buy it. Market research helps a business to identify what the customer wants.

Question 35

The marketing mix

Price

Answer 35

This how much money the business charges the customer to buy the product. Different pricing strategies are used to determine the price of a product
The product must be a price that the customer will buy at.

The price must not be too high compared to competition because customers will buy from them if it is. The price must reflect the quality of the item but at the same time cover the costs of the business and make a profit.

Question 36

The marketing mix

Place

Answer 36

This is the way the business makes the product available to the customer and where the product is sold (the market)
The product must be accessible to the customer (ie be able to obtain it)
The product might be sold via shop, online, tv and through smartphone apps.

Question 37

The marketing mix

Promotion

Answer 37

This is how customers are told about the product and encouraged in different ways to buy the product. Promotion is more than just advertising.
The product must be promoted and advertised to customers so that they know it exists.
Different promotion methods are used to encourage customers to buy a product.

Question 38

The product life cycle

Development

Answer 38

Costs in developing the product may be very high. There is no sales.

Question 39

The product life cycle

Introduction

Answer 39

The product is launched onto the market
Customers become aware of the product.
Stockholding costs, marketing and promotion costs may be significant.
Innovative products will have little competition and can therefore charge a high price

Question 40

The product life cycle

Growth

Answer 40

Sales rise quickly
More customers are aware of the product.
Competitors may launch their own versions of the product.

Question 41

The product life cycle

Maturity

Answer 41

Product is fully established

Sales may fall as competitors enter the market

Question 42

The Product life cycle

Decline

Answer 42

Consumers are interested in other products - tastes, fashions and technologies have changed.
At this point the product may be withdrawn from the market

Question 43

Importance of packaging

Answer 43

Packaging provides protection during transport, customer appeal, Easy access to the product.

In addition packaging will also have legally required information printed on it such as ingredients and weight. This is a requirement under laws such as the trade descriptions act and the European rules on food additives

Question 44

special offers

Answer 44

Special offers can be defined as a short term incentive which encourage customers to purchase products/service.
Sometimes a business may give new customers special offers to encourage them to try a product for the first time in hope they will continue to buy it.

Question 45

Bonus packs

Answer 45

Allows the customer to try more of the product for the same prices as the original.

Question 46

Free offers

Answer 46

Free toys may be included in boxes of breakfast cereal or free CDs may be offered in newspapers or magazines

Question 47

Free samples

Answer 47

perfume or beauty counters will often give free samples of new products to encourage customers to try the product and make a purchase possibly at a later date.

Question 48

Credit Facilities

Answer 48

These allow customers to purchase products on credit (paying for the product at a later date) which they would not have been able to afford. An example of this is the Topshop store card. Purchases would be made in store and a bill would be sent to the customer requesting

Question 49

Competitions

Answer 49

Customers will purchase a product which will then allow them to be entered into a competition. For example, newspapers may have ‘Lucky Wallets’ in which the customer can win money if they purchase the newspaper