Business - 1.3 Flashcards
1
Q
reasons for business growth
A
- higher profits
- more status for owners and managers
- larger share of its market
- lower average costs
2
Q
economies of scale - examples
A
- purchasing : when businesses buy in ‘bulk’ so they get lower prices
- marketing : targeting large audience
- financial : bigger businesses get better interest rates
- managerial : afford specialists managers
- technical : more efficiency
3
Q
economies of scale
A
- reduction in average costs as a business grows
4
Q
ways for business growth
A
- internal growth
- external growth
5
Q
internal growth
A
- business expands its existing operations
- independent
6
Q
external growth
A
- business takes over / merges with another business
- growth that is dependent on another firm
7
Q
3 types of external growth
A
- horizontal integration
- vertical integration
- conglomerate merger
8
Q
horizontal integration
A
- same industry, different firm
eg. furniture company taking over another furniture company
9
Q
vertical integration
A
- same industry and firm, different production sector
10
Q
conglomerate merger
A
- firm merging another firm in a different industry
11
Q
problems linked to business growth
A
- diseconomies of scale
- poor communication
- low morale
- slow decision making
12
Q
diseconomies of scale
A
- factors that lead to an increase in average costs as a business grows beyond the optimum point
solution : expand slowly
13
Q
poor communication
A
- bigger business makes it difficult to send and receive messages
solution : technology
14
Q
low morale
A
- too many people can make others feel unimportant
solution : staff motivation techniques
15
Q
slow decision making
A
- bigger businesses take longer to make decisions to satisfy all of the stakeholders
16
Q
reasons for business remain small
A
- market is small : specialized goods
- owners objectives : full control
- lack of capital to expand
- nature of industry
17
Q
why business fails
A
- poor management : lack of experience
- failure to plan for change : unable to adapt
- poor money management
- over-expansion
- competition with other business
18
Q
why new businesses are at greater risk of failing
A
- failure to understand the market = lack of market research
- expanding too fast
- remaining rigid
- lack of sufficient finance = underestimate cost
- incompetence = lack of skills
19
Q
4 way to measure business size
A
- no of employees
- value of output
- value of sales
- value of capital employed
20
Q
number of employees
A
- total number of full time employees in an organization
- indicates company’s capacity and scale of operations
limitations : doesn’t accurately reflect business success, capital-intensive may be better than labor-intensive
21
Q
value of output
A
- total value of goods or services produced by the business
- comparing businesses in the same industry
limitations : doesn’t account for efficiency or profitability. a company with high output might not be as profitable if production costs are high
22
Q
value of sales
A
- revenue
- total sales generated by the business
- indicates market demand for a company’s products/services and financial success
limitations : high sales but low profit margins
23
Q
value of capital employeed
A
- total value of assets used in the business (machinery, equipment and other investments)
- indicates level of investment in business infrastructure
limitations : doesn’t show efficiency, possible misuse of assets
24
Q
stakeholders
A
- individuals or groups who have an interest or concern in a business
25
is profit a measure of size?
no, bec it only shows monetary value
monetary = how much money all the goods or services produced by a business are worth
26
business size
- how small or large a business is
27
entrepreneur
- an individual who has an idea for a business, who takes the financial risk of starting and managing a new business
28
successful entrepreneurs
- innovative & creative
- risk taking
- determined, focused, perseverant
- organized, team player, committed
- problem solver
- hardworking and intelligent
29
benefits of starting your own business
- independence and flexibility
- control
- to make a difference
- personal fulfillment
30
disadvantages of starting your own business
- risk of failure = especially for a new businesses
- capital = entrepreneurs own money at risk
- lack of knowledge
- opportunity cost = loss of income
31
business plan - definitions
- written document that outlines the business aims and visions
32
reasons for a business plan
- attract finance
- give owner ideas
- useful for stakeholders
33
contents of a business plan
- description of the business
- products and services
- the market
a. total market
b. predict market growth
c. target market
d. analysis
e. predicted changed in the market in the future
f. forecast sales revenue
g. marketing strategy
h. market research data
4. location and how products will reach customers
5. organization structure and management
6. financial information
7. business strategy
34
for - business plan
- test your idea
- the best possibility of success for new business
- secure funding
- business planning more manageable and effective
- guide business decisions
34
against - business plan
- time consuming
- another business could introduce the idea
- market is always changing (business plan has to too)
35
government support for start-ups
- reduce unemployment
- increase competition
- increase output
- grow further
