B1 - Business In The Real World Flashcards
What is the first objective of a new business
To survive beyond their launch
What is the next objective of a new business after survival
To make profit
What is the definition of Factors of Production?
The Inputs used in the production process to create Output
What are the 4 Business Areas
- Finance
- Human Resources
- Marketing
- Operations
What are the 4 factors of production
- Land ( where business is based and land of natural resources )
- Labour ( people working in the business including managers )
- Capital ( buildings and machinery needed in the business )
- Enterprise ( entrepreneurs who set up the business )
What is a sole trader?
A business that’s owned by one individual that retain all profits genernated by the business
- unlimited liability ( responsibly )
- cheap and quick to do
What is a partnership?
Formed where a business is started and owned by more than one person
The Partners own the business and have unlimited liability ( responsibility )
What is a private limited company (ltd)
Formed when a business sets up to have a separate legal identity from its owners
( Iceland, Virgin and John Lewis ) .
They have limited liability ( responsibility )
What are the owners of a private limited company known as?
Shareholders - they receive a share of the profits ( dividends ) as a reward for being a shareholder.
Who run a private limited company
A board of directors appointed by the shareholders.
What factors influence the type of structure chosen by a business
- Size of business
- Type of business
- Lender Requirements
- Investment Protection
- Control
- Growth
What is a stakeholder
A stakeholder is someone who has an interest in the activities and decision making of a business.
What are examples of stakeholders
- Shareholders or business owners
- Managers and employees
- Suppliers
- Banks
- Customers
What factors influence Business Location
( RECIPE )
- Raw materials (primary or secondary sector )
- Employment ( high skilled or cheap labour )
- Competitors ( near or far from them )
- Infrastructure ( transport - road rail sea - technology - wifi speeds )
- Proximity To Market ( Offline & Online )
- Finance ( new or established business )
What do the influences of Business location affect?
- Sales
- Image
- Costs
Why business plan?
- Raising Finance to present to financers
- Setting Objectives that are measurable targets
- Business Organisation , the need to plan how functions will be organised
What are advantages of Business plans
- allow for setting targets
- can be used to measure performance
What are disadvantages of Business Plans
- change means plans must be flexible
- can be costly and time consuming
What are the main parts of a Business Plan
- Executive Summary
- Mission Statement
- Products or Services
- Market Analysis
- Organisation and management team
- Production Details
- Finance
What are the 2 methods of Business Expansion
- Internal Growth ( Organic )
- External Growth ( Integration )
For expanding a business what are examples of Internal Growth?
- Franchising
- Opening New Stores
- E - Commerce
- Out sourcing
For expanding a business what are examples of External Growth?
- Mergers
- Acquisition/takeover
What are the advantages of Organic Growth
- Less risky than taking over other businesses
- Builds on strengths of the business , e,g. brands, customers
- Outsourcing means growth can be achieved without costly new investment
What are the disadvantages of Organic Growth
- Growth achieved may be dependant on growth of market
- Harder to build market share if the business is already a leader
- Slow growth , shareholders may prefer more rapid growth
What is the tertiary sector?
Provision of services
What is the primary sector?
Extracting raw materials
What is the secondary sector?
Converting raw materials into goods
What is an Entrepreneur ?
An individual who takes on RISK to hopefully gain a REWARD
What is opportunity cost?
The sacrifice when an alternative is chosen
What is unlimited liability?
Owner and business is the same legal entity
Owner is responible for all debts the business incurrs
What is limited liability?
Owner and business are different legal
Shareholders personal assests ARE NOT at risk if businesses had debts
What is an example of a businees that have Unlimited liability?
- Sole trader
- Partnerships
What is an example of a businees that have Limited liability?
- Private limited companies
- Public limited comapanies
What is Floatation?
Process of a private limited company offering shares for sale on the stock market to therefore become a public linited company
What is Not-for-profit organisation?
Business set up to pursue objectives that benefit society
- Profits are generated but not the main aim
How do you calculate Total Costs?
Total costs = Fixed costs. + Variable Costs
How do you calculate Average unit cost?
Total costs / Output
What external factors affcet businesses?
- Technology
- Economy
- Legislation
- Environment
What is Economies Of Scale?
Average cost FALLS as output GROWS
What is Diseconomies Of Scale ?
Once Economies of Scale have been reached if the output grows, the average cost per unit INCREASING
