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Business Studies > Business activity > Flashcards

Business activity Flashcards

1
Q

why would someone want to set up a business?

A

Financial reasons
becoming their own boss
for personal satisfaction
to earn a living from a hobby or interest
to benefit more of the effort they put in

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2
Q

financial reasons

A

to earn an income after becoming unemployed or to earn a profit which may be greater than their income when working for someone else.

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3
Q

for personal satisfaction

A

building your own business may help the individual reach the higher goals in life

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4
Q

to earn a living from a hobby or interest

A

may be passionate about the product or

service they provide. This could make them motivated and could make them happier going to work

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5
Q

to benefit more of the effort they put in

A

they will earn more money with more effort they put into working for their own business.
unlike working for someone else as no matter how much effort they put in they will still earn the same wages.

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6
Q

Name some business aims

A 
survival 
profit maximisation
growth
increasing market share
customer satisfaction
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7
Q

survival

A

the owners want the business to continue in the long term. This will provide them with employment and income

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8
Q

profit maximasation

A

the owners may want to increase the amount of profit they receive.

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9
Q

market share

A

this involves the owner of the business wanting to have the biggest percentage of customers as possible and perhaps to be the biggest business in the market.

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10
Q

what is an aim

A

a long term business goal

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11
Q

what is an objective

A

a short term business goal which is more realistic and achievable

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12
Q

benefits of becoming a sole trader

A

easy to set up
independence for the entrepreneur - all decisions are made by the owner without consultation, so without delay.
all profits are kept by the owner

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13
Q

disadvantages of becoming a sole trader

A

limited liability
limited capital when setting up the business
huge workload and responsibilities
poor decision making

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14
Q

benefits of partnerships

A 
shared workload
spread risk
east to set up 
shared raising of capital
more expertise
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15
Q

disadvantages of partnerships

A

shared profit
unlimited liability
disagreements can affect the business
imbalance of work and effort between the partners can cause problems

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16
Q

limited liability

A

when the owner of business can only lose the money invested into a business if the business goes bankrupt

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17
Q

unlimited liability

A

when the owners of a business can lose both the money invested into a business and personal possessions if the business goes bankrupt

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18
Q

name the economies of scale

A 
marketing economies
bulk buying
financial economies
technical economies 
managerial economies
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19
Q

marketing economies

A

larger firms can afford a higher advertising budget then smaller businesses but the cost can be spread over the increase of sales from the advertising.

20
Q

technical economies

A

larger firms are more able to afford modern better equipment and pay for this with money made from increased output

21
Q

financial economies

A

larger business can negotiate lower interest rates with the banks for vast sums of money they borrow plus the have more credibility.

22
Q

managerial economies

A

larger businesses can afford to pay highest salaries for managers that can run the business efficiently and profitably.

23
Q

why do business want to grow?

A

to increase profits by benefiting from economies of scales
to reduce competition
to diversify in order to spread risks

24
Q

economies of scale occur when

A

the cost per unit falls as a business expands

25
Q

what is diversification

A

diversification is when a business sells new products in a different new market

26
Q

what is integration? external growth

A

integration is where a business grow by joining or aquiring another business.

27
Q

horizontal integration

A

when a business joins another business at the same stage of the production process in the same market.

28
Q

vertical integration

A

when a business joins another business at a different stage of the production process eg movie directors owning cinemas

29
Q

How can integration benefit a business?

A

it will improve the corporate image as the business is now found in several sectors

joint advertising can promote all goods and services produced - spreads the cost of advertising

Following vertical integration the business has much more control over the supply of factors of production and so of costs

the business can keep profits at all stages of production

30
Q

what is a franchise

A

a franchise

31
Q

who is a franchisor?

A

a franchisor is the person who sells the franchise to the franchisee

32
Q

who is a franchisee?

A

a franchisee is the person who buys the franchise from the franchisor.

33
Q

Advantages of purchasing a Franchise to the franchisee -

A

well-known name potentially means that the business will already have customers

receives support and advice from the franchisor - the business is less likely to fail / go bankrupt

Franchisor may help with loans and finance and may provide finance at a low favorable rate of interest

The franchisor finds goods to sell so there is no pressure to find suppliers - will have a trustful supplier who mat help with loans on items.

Furniture and fittings may be provided by the franchisor

National advertising paid by the franchisor will make the franchise better known.

34
Q

What are the negatives of purchasing a franchise to the Franchisee?

A

Franchises can be very expensive - a set up cost is paid to the franchisor

limits the franchisees control over the business - the franchisee will have to put ideas forward to the franchisor and will have to get them approved by him/her before putting them into place.

Goods bought from the franchisor may be more expensive than goods of other suppliers

The franchisee may lose customers and business may suffer because of the actions of other franchisees who may create a bad reputation.

35
Q

franchisor benefits

A

Receives royalty payments from the franchisee

business grows without the franchisor doing much of the work

Franchisor sells stock to the franchisees

the franchisee has to deal with losses

36
Q

franchisor negatives

A

Has to pay for the following costs:

  • training costs
  • national advertising costs
  • costs related to the organisation and outlet

has less control over the individual outlets

the franchisor may suffer if an outlet is run badly by a franchisee

37
Q

Why do some businesses remain small?

A

The size of the market may be limited
short supply of capital restricts growth
desire of the owner - the owner may not want to grow their business due to the extra pressure.

38
Q

How are small businesses able to survive?

A

They provide customers with personal service - the owner of the business usually works within the business so is close to customers and may provide informal credit and delivery

Knowing and familiarizing with the customers means that the owner can be friendly towards them and greet them in a welcoming manner. This encourages customers to return and maintains customer loyalty.

The owner may be aware of customer needs. Due to being a smaller business the owner may be able to provide goods and services that fulfill a customers specific needs and wants which results in good customer services and repeat purchases.

Smaller businesses are often found in local communities and so they are close enough for customers to to buy products without the need to travel.- this encourages customers as it is easier for them to access items they may be looking to purchase. Also good for repeat everyday purchases such as milk.

39
Q

What do successful businesses depend on?

A

spending on market research , product development an investment in new factories and equipment.
increased advertising and sales promotions

40
Q

name the factors affecting business location?

A 
proximity to suppliers
proximity to customers
cost of business location
proximity to employees
infrastructure - transport links
proximity to competition
41
Q

Name the different sectors within a business?

A 
business operations
marketing
human resources
production
finance
42
Q

Name some characteristics of an entrepreneur?

A

hard working
determined
decision maker
risk-taker

43
Q

what are the advantages of being a private limited company?

A

The shareholders have limited liability
The business has continuity - if a shareholder sells their shares the business wont end.
they will have more capital than unlimited liability businesses as they can sell shares
companies can gain from specialized management employed by the board of directors.

44
Q

what are the disadvantages of being a private limited company?

A

may be expensive and difficult to organised as a range of documents are needed in order to ensure the business is set up and managed properly and legally.
profits are shared between the shareholders - dividends
capital may be limited as it cannot be raised by investors on the stock market.

45
Q

what are the advantages of being a public limited company?

A

They have access to more capital as they are able to sell shares on the stock market/stock exchange
Banks are more likely to lend them money (More credible) often at lower rates of interest as they know they will be likely to pay it back
public limited companies are some of the best known businesses. This encourages investment and greater share ownership in them but consumers also have more confidence in buying from them.

46
Q

what are the disadvantages of being a public limited company?

A

As shares are sold on the stock market anyone can buy them and the shareholders could possibly lose control if someone buys more than half of shares.
The business accounts must be made available to anyone
its expensive to st up and run a public limited company.

47
Q

What is a charity?

A

A charity is a non profit making organisation that is set up for “charitable purposes”

Business Studies (6 decks)

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