Business Activity Flashcards by Alex Evans

Purpose of business activity

Spotting opportunities
Developing ideas
Satisfying needs for customers

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Characteristics of an entrepreneur

Risk taking
Confident
Creative
Applied
Perseverance
Determination

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Rewards of entrepreneurship

Getting a large profit
famous
Strengthens character
Independence
Own boss
Flexible (choose your own hours)
Sense of satisfaction
Satisfaction
Do what you are interested in
Job protection (you can’t be fired)
Cut the commute
High motivation / morale
Social enterprise
Better work life balance

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Risks of entrepreneurship

Loss of income
Cyber attacks
Mental health - pressure
Business failure
Weather / natural disaster
IP issues
Recession / economic / political problems and instability
Poor reputation
Employment laws and regulations
Changes in tastes and trends
Not managing money
Failure to plan for the future

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What is a business plan?

Written document of the plans and goals of a business

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What are the benefits of creating a business plan?

Plan ahead - helps you forecast future steps and identify future risks
Helps you to allocate resources
Better helps you to understand your competition

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What are the drawbacks of creating a business plan?

Businesses need to be flexible to a changing and adapting environment
Business plans can be costly and take time to make

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How does the business plan help with success/minimising risks?

It gives the entrepreneur a better idea at seeing whether the business will succeed or not

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What is the importance of creating a business plan?

Business plans can help bring funding from investors or bring on new business partners

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What is a sole trader?

A self-employed person who owns and runs their own business as an individual

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What is an advantage of being a sole trader?

Fewer reporting requirements and deadlines
Privacy in terms of their business dealings

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What is a disadvantage of being a sole trader?

Must pay tax on profits

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What is a partnership?

Relationship between two or more people to do trade or business

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What is an advantage of a partnership?

More time at home
Sharing expenses

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What is a disadvantage of a partnership?

Shared liability
Lack of stability

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What is a Private Limited Company (LTD)?

A legal entity in its own right and has a separate finance from the owner

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What is an advantage of an LTD?

Owners control who buy the shares
Unlimited liability

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What is a disadvantage of an LTD?

High set up costs
Harder to motivate and control workers

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What is a Public Limited Company (PLC)

A company that sells shares to the public stock exchange

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What is an advantage of a PLC

Limited liability
Easy to raise capital - more shares

What is a disadvantage of a PLC

Issue more information about itself
Has to prepare annual accounts

What does Limited Liability mean?

Debts stay with the business

What does Unlimited Liability mean?

All business owners assume liable for debts

What are the main objectives of a business?

Profit
Survival
Growth
Providing a service
Market share

What is meant by the public sector?

Companies owned by the Government

What is meant by the private sector?

Businesses that are privately owned

What is an internal stakeholder?

A stakeholder that works in/owns a business

What is an external stakeholder?

A stakeholder outside of the business that is affected by what a business does

What are some examples of internal stakeholders?

Owners Employees

What are some examples of external stakeholders?

Customers Suppliers Government Community

How does business activity affect owners?

If the business starts to lose money, the Owners will not make any money for themselves and could risk bankruptcy

How does business activity affect employees?

Business wants to make as much money as possible - so could reduce pay if needed.

How does business activity affect customers?

Business is looking to charge as much money as they can

How does business activity affect suppliers?

Business may choose not to purchase from said supplier so this clearly means that the suppliers will make less money

How does business activity affect the Government?

They benefit from how much money you make due to tax

How does business activity affect the community?

May cause problems for the community (i.e. Traffic)

How do owners affect business activity?

Owners can change the business plans, make people redundant etc.

How do employees affect business activity?

Can influence the success of an organisation by their productivity and efficiency in the tasks they do everyday. They can also resort to industrial action (strike) if they disagree with working conditions, pay or company policies.

How do suppliers affect business activity?

Can decide whether to raise prices for orders which can obviously affect a firm's profits. Also a supplier's reliability could affect production.

How does the Government affect business activity?

Can influence a firm buy introducing new laws that affect operations such as the minimum wage, or they can raise corporation tax which would eat into a firm's profits

How does the community affect business activity?

Can influence a business by protesting against the building of premises

What is organic growth?

Growth of a business internally by increasing sales. Sales can be increased in a number of different ways.

What is an external merger?

Where two or more businesses agree to join together

What is a external takeover?

Growth of a business by takeover (BUYING the other businesses).

What is meant by a horizontal merger/takeover?

A merger or takeover where two businesses are involved in a similar operation, e.g. Two mobile phone companies.

What is meant by a forward vertical?

When a business merges with or takes over a business that it supplies goods or services to.

What is meant by backwards vertical?

When a business merges with or takes over a business that it purchases goods or services from.

What is meant by diversification?

When a business merges with or takes over another business with which there is no connection.