Business activity Flashcards
What is an Aim in business?
The overall target or goal of the business
What is a business objective
The steps a business needs to take to meet its overall aims
Financial Aims examples
- Business survival- common for small business
- Profit- aim to make profit within first 2 years
- Sales- a business will set a target for how much it wants to sell each month and year
- Market Share- percentage of the market the business occupies
- Financial security- business being able to pay off all its costs + have enough cash left to survive
What is business growth
when the business sells more output over a period of time
What is internal/organic growth?
Occurs when a business decides to expand its own activities by launching new products and/or entering new markets
Why do businesses organically/internally grow?
To improve their chances of increasing their customers, revenues and profits
Advantage + disadvantage of organic/ internal growth
Advantage:
- low risk
Disadvantage:
- slower growth
What is external growth?
External growth is growth outside the business, this usually involves a merger or takeover.
What is a merger?
A merger occurs when two businesses join to form a new (but larger) business.
What is a takeover?
A takeover occurs when an existing business expands by buying more than half the shares of another business.
What are the four merger and takeover methods?
- Horizontal growth
- Backwards vertical growth
- Forwards vertical growth
- Diversification
What is backwards vertical growth?
Occurs when a business takes control of a business earlier in the supply chain
eg. When an ice cream business takes over a dairy farm
What is forwards vertical growth?
Occurs when a business takes control of another that operates at a later stage in the supply stage
eg. a car company buying or merging with a car showroom
What is diversification?
Occurs when a business in unrelated markets join through a takeover or merge. This enables businesses to spread their risk over a wider range of products and services.
eg. when a clothes business expands into selling home goods + accessories
What is horizontal growth?
Occurs when two competitors join through merger or takeover. The new business then becomes more competitive and increase its market share. This gives it more control when negotiating and setting prices.
What is the purpose of business activity and enterprise
- spotting an opportunity
- developing an idea for a business
- satisfying the needs of customers
What are the characteristics of an entrepreneur?
- creative
- risk taking
- determination
- confidence
What is a business plan?
A simple plan that sets out details of the product or service being sold and how it will be finance, marketed and details of market research findings
What is the purpose of a business plan?
- reducing risk of failure
- helping a business succeed
What is captial?
Money invested in a company by shareholders
What is dividend?
A sum of money paid regularly by a company to its shareholders out of its profits
What is an entrepreneur?
Someone who starts or owns a business
Who/what is a stakeholder?
Anyone who has an interest in a business
External stakeholders examples
- Customers
- Suppliers
- Government
- Local community
Internal stakeholders examples
- Employees
- Owners
What is a sole trader?
A sole trader is a business that is owned and run by one person
Advantages and disadvantages of a sole trader
Advantages:
- keep all the profit they make
- get to be own boss
- easy to set up
Disadvantages:
- unlimited liability
- long hours
- capital can be hard to raise
What is a partnership?
Partnerships have between 2 and 20 business owners
Advantages and disadvantages of partnerships
Advantages:
- more ideas, greater range of expertise
- more people to share the work with
- more owners means more captial
Disadvantages:
- unlimited liability
- each partner is legally responsible
- profits are shared
What is a private limited company (LTD)?
A company where ownership of shares is restricted
Advantages and disadvantages of an LTD
Advantages:
- limited liability
- easier to get loan or mortgage
- owners keep control over business and how many people get shares and profits
Disadvantages:
- more expensive to set up
- legally obliged to publish its accounts every year
What is a public limited company (PLC)?
A company where shares are sold on the stock market
Advantages and disadvantages of a PLC
Advantages:
- more captial
- helps company expand
- limited liability
Disadvantages:
- more shareholders= more people wanting a share of profits
- can be hard to get a lot of shareholders to agree
- accounts have to be made public
What is limited liability?
Limited liability means business owner or owners are only responsible for business debts up to the value of their financial investment in the business. Only business assets can be taken not personal if the business goes into debt
What is unlimited liability?
The business owner or owners are personally responsible for all the debts of the business not matter what the value. If the business goes into debt both business and personal assets can be taken to cover the costs
What is market share
Market share is the proportion of total sales in a market made by one business
What is marketing?
Marketing is about meeting the needs and wants of customers
What is profit?
Profit is the difference between the total revenue of a business and the total costs of a business, when revenue is greater than cost.
What is satisficing?
Making just enough profit to provide the business owner with a decent living. More common in smaller businesses
Who are shareholders?
Shareholders are part-owners in a business
What is a sleeping partner?
A partner who invests but is not involved in the day -to-day running of a partnership
What is spotting an opportunity in business?
Identifying a need or demand in the market that can be met by the business
What is success?
Can be different for many businesses:
- profitability
- growth
- innovation
- sustainability
- reputation
What is survival?
Keeping the business operating for a certain amount of time
