Buisness Flashcards
Define Specialisation
Specialization occurs when a person or organisation concentrates on a task at which they are best at
Advantages of Specialisation
Workers are trained to do a particular task and specialise in this, thus increasing efficiency
Saves time and energy: production is faster by specialising
Quicker to train labourers: workers only concentrate on a task, they do not have to be trained in all aspects of the production process
Skill development: workers can develop their skills as they do the same tasks repeatedly, mastering it.
Disadvantages of Specialisation
It can get monotonous/boring for workers, doing the same tasks repeatedly
Higher labour turnover as the workers may demand for higher salaries and company is unable to keep up with their demands
Over-dependency: if worker(s) responsible for a particular task is absent, the entire production process may halt since nobody else may be able to do the task.
Define Added Value
Added value is the difference between the cost of materials bought in and the selling price of the product.
How to increase Added Value?
Reducing the cost of production. Added value of a product is its price less the cost of production. Reducing cost of production will increase the added value.
Raising prices. By increasing prices they can raise added value,
Define Primary Sector?
this involves the use/extraction of natural resources.
Define Secondary Sector
this involves the manufacture of goods using the resources from the primary sector.
Define Teritary Sector
this consist of all the services provided in an economy
What is Private Sector
where private individuals own and run business ventures. Their aim is to make a profit, and all costs and risks of the business is undertaken by the individual.
Public Sector
where the government owns and runs business ventures. Their aim is to provide essential public goods and services (schools, hospitals, police etc.) in order to increase the welfare of their citizens, they don’t work to earn a profit. It is funded by the taxpaying citizens’ money, so they work in the interest of these citizens to provide them with services.
Why do governments want to help new start-ups?
They provide employment to a lot of people
They contribute to the growth of the economy
They can also, if they grow to be successful, contribute to the exports of the country
Start-ups often introduce fresh ideas and technologies into business and industry
How do governments support businesses?
Organise advice: provide business advice to potential entrepreneurs, giving them information useful in staring a venture, including legal and bureaucratic ones
Provide low cost premises: provide land at low cost or low rent for new firms
Provide loans at low interest rates
Give grants for capital: provide financial aid to new firms for investment
Give grants for training: provide financial aid for workforce training
Give tax breaks/ holidays: high taxes are a disincentive for new firms to set up. Governments can thus withdraw or lower taxation for new firms for a certain period of time
How to measure Buisness size
Number of employees: larger firms have larger workforce employed
Value of output: larger firms are likely to produce more than smaller ones
Value of capital employed: larger businesses are likely to employ much more capital than smaller ones
Why businesses stay small
Type of industry: some firms remain small due to the industry they operate in. Examples of these are hairdressers, car repairs, catering, etc, which give personal services and therefore cannot grow.
Market size: if the firm operates in areas where the total number of customers is small, such as in rural areas, there is no need for the firm to grow and thus stays small.
Owners’ objectives: not all owners want to increase the size of their firms and profits. Some of them prefer keeping their businesses small and having a personal contact with all of their employees and customers, having flexibility in controlling and running the business, having more control over decision-making, and to keep it less stressful.
Why businesses fail
Poor management: this is a common cause of business failure for new firms. The main reason is lack of experience and planning which could lead to bad decision making.
Over-expansion: this could lead to diseconomies of scale and greatly increase costs, if a firms expands too quickly or over their optimum level
Failure to plan for change: the demands of customers keep changing with change in tastes and fashion. Due to this, firms must always be ready to change their products to meet the demand of their customers
Poor financial management: if the owner of the firm does not manage his finances properly, it could result in cash shortages. This will mean that the employees cannot be paid and enough goods cannot be produced. Poor cash flow can therefore also cause businesses to fail
