Business Activity Flashcards
Enterprise
Spotting an opportunity to provide a product or service that people are willing to buy.
Profit satisfying
The minimum amount of capital for a business to survive and owner to have profit , aim of small businesses.
Advantages and disadvantages of partnerships
Advantages:
- More skills / ideas
- Dual investors
Disadvantages:
- split profit
- unlimited liability
Advantages and disadvantages of a private limited company (Ltd)
Advantages:
- limited liability
- original owners likely to stay in control
Disadvantages:
- finance limited to ‘friends and family’
- costs more to set up than ‘sole trader or partnership’
Advantages and disadvantages of a public limited company (Plc)
Advantages:
- Can raise large sums through the stock exchange
- limited liability
Disadvantages:
- Risk of takeover
-company info and accounts public
Why is a business plan important
- Banks more likely to loan
- minimises risk (all elements considered)
- identifying markets
Aims of a business
P rofit
I ncreased market share
G rowth
S urvival
S ervice
Organic growth of a business (internal)
- opening new stores
- introduce new products
- employ more people
- raise awareness of brand
Inorganic growth of a business (external)
Growth of a business by a merger or takeover
Types of external growth (inorganic)
- Backwards vertical integration (Raw materials)
-Forward vertical integration (taking over a business later in the production process)
-horizontal integration (two companies at the same stage in the production process)
-diversification (moving to a new market)
Advantages and disadvantages of horizontal integration
Advantages:
-removes a competitor from the market
-Increases market share of the business
Disadvantages:
-may negatively impact customer loyalty
- expensive to purchase another company
Advantages and disadvantages of forward vertical intergration
Advantages:
-guarantees an outlet to sell products in
-more control over pricing and displaying of products
Disadvantages:
-large amounts of upfront capital
Advantages and disadvantages of backwards vertical integration
Advantages:
-Guarantees supply of stock
-can limit supply to competitors
Disadvantages:
-increased capital requirements
-business may fail if not properly managed
Advantages and disadvantages of diversification (conglomerate, integration)
Advantages:
-spreads risk across different markets
-business gains customers and assets from acquired business
Disadvantages:
-may not have knowledge required to successfully run new business
Risk of entrepreneurs
Financial
Relationships
Health
