Business Activity

Question 1

Aims

Answer 1

Aims: Long term objective of the business. E.g. become the biggest business in its sector
Aims should be SMART:
Specific
Measurable
Attainable
Realistic
Time Manageable

Aims for profit organistations: Increase sales revenue, ethical aims and increase brand awareness
Aims for not-for-profit organisations: Provide services, help people in need and serve the community

Question 2

Objectives

Answer 2

Short or medium term target of a business needed to reach its aim. E.g. increase sales by 20% in the next 5 years

Question 3

Why do some business remain small?

Answer 3

Are content to operate as a small business, adapt quicker than large businesses and serve niche markets

Question 4

Stakeholders

Answer 4

Individuals and organisations who are affected by the decisions and actions of a particular business.
Internal: Employees, manager and owners
External: Suppliers, shareholders and customers

Question 5

Why do some people want to set up their own business?

Answer 5

Personal ambition, be own boss, use qualifications and no work available

Question 6

Business enterprise

Answer 6

The formation of a new business or development of a new good or service to be introduced to the market

Question 7

Entrepreneur

Answer 7

A person who sets up a business by taking on the financial risks in hope of making a profit.
Motives-
Financial: Generate a profit
Non-financial: Create employment for others
Social: Surplus revenue used to support a specific cause
Rewards-
Flexibile working hours, be own boss and pursue an interest
Risks-
Financial loss of income and money invested, low sales and long hours and stress

Question 8

Types of integration

Answer 8

Occurs when a business takes over another business to control the direct distrubtion of a business’ products
Conglomerate- A business joins another in a different type of production process
Horizontal- Buying or merger of other businesses producing the same or similiar products
Vertical backwards- Occurs when the suppliers of a business are taken over by that business

Question 9

Benefits from owning businesses at different stages of production

Answer 9

Control over production and control over sales

Question 10

Internal economies of scale

Answer 10

The benefits a business gains as a result of being large. All costs can be spread between the large numbers of goods produced so the cost per good is lower than for small businesses
Risk bearing- Selling the product to more markets
Financial- Can borrow large sums of money
Managerial- As a business increases its output theres a need for large specialist departments so can spread cost over all goods sold/produced
Technical- Can use machinery 24/7
Marketing- Business increases its output it can afford more expesive advertising campaigns
Purchasing/bulk buying- More goods bought the lower the average cost per unit

Question 11

Franchise

Answer 11

Right given by one business to another to sell goods or services using its name

Question 12

Franchisor

Answer 12

Business which allows a franchisee to sell using their processes, experience and name in return for royalties
Pros-
Enables growth and franchisor receieves money
Cons-
Less control over franchised outlet and franchisor pays some costs

Question 13

Franchisee

Answer 13

Business which pays royalities for the right to sell goods or services using established processes and under the name of another business
Pros-
Training recieved, business model (well known name) and goods to sell bought by franchisor
Cons-
Little freedom to operate and set up cost paid to franchisor

Question 14

Expanding via franchising or opening own stores

Answer 14

Franchising-
No need to find site and able to expand the market and sales quickly
Own shops-
Will keep all profits and avoids training associated with franchises

Question 15

How can the success of a business be measured?

Answer 15

Profit and loss acount, Increase of sales and ask customers opinions

Question 16

Location and site

Answer 16

Location: Geographical area where businesses may be found
Site: Specific place within a geographical area
Factors to consider:
Size of premises, ease of access for customers and deliveries

Question 17

Footfall

Answer 17

Number of people passing close to the business. Potentional customers of the business

Question 18

Why locating near a competitor is not always a good thing

Answer 18

Similar businesses may be well known so likely to have loyal customers and may have wider range of goods

Question 19

Locating a business

Answer 19

Pros-
Cost of rent, car parks and access for delivery
Cons-
Competition, congestion and distance for customers to travel

Question 20

Possible effects that a retail shopping centre might have on nearby traditional local shopping area

Answer 20

Positive-
Lower rents in traditional area and more customers attracted to area by the retail park shopping centre
Negative-
Increased competition and more congestion on local roads

Question 21

Public sector

Answer 21

Organisations owned and controlled by the government
E.g. NHS, police and education
Aims & objectives: Provide a service, improve accessibility to others and avoid wasteful duplication of resources
Provides public goods, not affected by recession, government jobs to protect environment and helps reduce inequality in society

Question 22

Private sector

Answer 22

Business run by private individuals
E.g. Sole traders, partnerships, Ltd’s and PLC’s
Profit incentive to be efficient, entrepreneurs create jobs where needed, less bureaucracy and scope for corruption and doesn’t require taxes to fund

Question 23

Unlimited liability

Answer 23

Owners of a business are responsible for all of the debts of a business. Personal belongings may need to be given up to pay the debts of the business

Question 24

Sole trader

Answer 24

Businesses owned by 1 person who has unlimited liability. Other people can be employed but there is only 1 owner.
Pros-
Keep all profit, make decisions without consulting others and be own boss
Cons-
Unlimited liability, more responsibility and limited sources of resources

Question 25

Partnerships

Answer 25

Business owned by between 2-20 people. Has unlimited liability Pros- Extra skills in business, more people to make decisions and easy to set up as no legal requirements Cons- Partners may disagree, profits shared and some partners may not work as hard as others

Question 26

Deed of partnership

Answer 26

Legal document which is an agreement between partners that set out the rules of the partnership Contains: Names of partners, how profits are shared and shows duties and responsibilities of partners

Question 27

Sole trader ---> Partnership

Answer 27

Pro of partnership- More capital, partner brings new skills and share workload Cons of partnership- Original sole trader loses independence and will need to share profits

Question 28

Limited liability

Answer 28

Owners of a business are not responsible for the debts of a business. Personal belongings dont need to be given up to pay debts of the business. Owners will lose money they invested in the business if they falls

Question 29

LTD (Private limited companies)

Answer 29

Businesses that are owned by shareholders who have limited liability. Pros- Invited shareholders so able to maintain control and continuity so business will not end if one of the shareholders/owners leave Cons- Disclose accounts (financial information can be looked at by the public/ competitiors) and profits have to be shared with the other shareholders

Question 30

PLC (Public limited companies)

Answer 30

Businesses that are owned by shareholders who have limited liabilty. Their shares are available to be sold to the general public Pros- Continuity, more capital and invited shareholders Cons- Restriciton on share ownership (shareholders have to agree on sale of shares) and limited capital available

Question 31

Social enterprises and co-operatives

Answer 31

Social enterprise: Businesses which operate for the benefit of the community or its workers or as a charity Co-operative: Business organisation that is owned by its customers, workers, producers and members E.g. Big issue and the co-operative Pros- Benfits society and posititive public relations

Question 32

Charities

Answer 32

Organisations set up to provide help and raise money for those disadvantaged in scoiety. Not established to make profits but they can earn surpluses

Question 33

Sectors of industry

Answer 33

Primary- Where raw materials are produced e.g. farming and mining Secondary: Where raw materials are manufactured into goods e.g. factory Tertiary: Businesses in this sector provide a service e.g. retailer and hotel Chain of production: This process links the primary, secondary, teritiary sectors together in the production process

Question 34

Factors of production

Answer 34

Land: Natural resources that are needed to produce goods Labour: Physical and mental element that is needed to produce goods and services Capital: The money and fixed capital that is needed to produce goods and services Enterprise: People who have the ideas to start a business and organise the other 3 factors of production

Question 35

Consumers

Answer 35

Final users of goods and services. End of the distribution channel

Question 36

Needs

Answer 36

Items that you have to have in order to survive e.g. food and water

Question 37

Wants

Answer 37

Items that you would like to have but aren't neccessary to your survival e.g. TV and holidays

Question 38

Goods

Answer 38

Tangible items that you can physically touch Consumer goods: Goods which are produced for the final consumer e.g. cars, food and clothes Producer goods: Goods which are produced for other businesses to be able to produce other goods and services e.g. Vehicles, computers and robots Durable: Consumer goods that are not used once and don't have to be bought frequently because they last for a long time e.g. Washing machine Non-durable: Goods which are immediatly consumed or have a lifespan of less than 3 years

Question 39

Services

Answer 39

Things you cannot touch, they are non-physical tangible items e.g. hairdressers and taxi service Personal services: Services provided for individuals and can include services for house maintenance and personal grooming Commercial services: Services that provide mainly to businesses such as transport and warehousing but may be available to indivduals such as insurance and banking

Question 40

Markets

Answer 40

Where buyers and sellers meet in order to exchange goods and services, often for money

Question 41

Retailers

Answer 41

Sells goods to consumers. Small retailers buy their stock from wholesalers but large-scale retailers buy directly from manufacturers Functions: Display and promote goods, sell to consumers and goods and services