Business Economics Flashcards
The main business economics resources
- Labour (employees)
- Capital (machinery and buildings) - machinery, computers, information technology
- Land - to get forests, oil, gas, diamonds…rent
- Enterpreneurs (managers) - to combine other resources most effectively
Scarcity of resource - limited supply of resources
ECONOMICS
the study of how the resources (land labour capital and enterprise) are used by a country to meet its demands for goods and services and ideas.
Business outputs
- Goods (consumer goods/producer goods)
- services (non-physical items; act of comsumption may live on in the memory)
- ideas (intelectual property)
- externalities (consequences, f.e. pollution by a factory)
Type of costs of using resources
Total cost = historical cost (usually cheapest) + opportunity cost (alternatives)
Macroeconomics
Macroeconomics analyses the economy as a whole (nationally and internationally); f.e. inflation, unemployment, economic growth… deals with goverment
Microeconomic
Microeconomic studies an individual business and how it behave; f.e. supply and demand, prices etc.
Business economics/ Economics
- BE: internally - resources availability, production process, costs; externally - types of markets, the trends in demand; (-) wide range of different theories;
- E: (-) 1 main theory;
- (+)explain how economy works and impacts on businesses
types of business organizations
- Sole trader - business run by one person; unlimited liability - dbts may valued of all oersonal assets.
- The partnership (law, accountancy, architechture): limited/unlimited liability, decition made from aggreements of all members.
- Limited liability companies (business owned by shareholders with limited legal liabilities - pension funds, insurance companies and banks) : public/privatelimited company
Industrial sectors
- Primary sector(raw materials - agriculture, fishing, mining coal etc.): production and extractin of raw materials - resource land; oil, gas, water. declining sector
- Secondary sector(manufacturing, energy and construction industry): alcoholic beverages, chemicals, construction, elecricity, food mnufacturers, pharmaceutical and transport
- Teriary sector(services): major providor of employment; banks, investments, health care, media, etc.
FDI
Foreign direct investment - investment undertaken for the purpose of creating a lasting financial relationship between the donor and the recipient companies
Types of market structure
Monopoly
- 1 market
- gas, electricity and water - natural resources
- OFWAT, OFTEL, OFGEN in UK
- charge the same price and restrict the newcomers from entering
- high exit barriers
- high entry barriers
Monopolistic competition
- many small businesses
- slightly different products and services by advertising and branding
- low entry barries
- Low exit barriers
Oligopoly
- small number of of large firms
- HSBC, Halifax, BP, Shell
- Big business impacts on others and may collude newcomers
- high entry barriers
- high exit barriers
Perfect competition
- thoretical
- many small businesses selling similar products and services
- one price at the market
Porter’s value chain
to create velue that exceeds the cost of providing the product or service, therefore generating the profit margin
Inbound logistics- involve relationships with suppliers.
Operations – are all the activities required to transform inputs into outputs.
Outbound logistics – include all the activities required to collect, store , and distribute the output.
Marketing and sales – activities inform buyers about services
Service – include all the activities required to keep the product or service working effectively.
Marketing Mix Model 7P
- Product – the item or service that you offer to the costumers.
- Place – the method for making your product or service available to the consumers
- Promotion – the specific mix of advertising , selling, and public relations
- Price – the amount of money charged for the product or service
Process
People
Physical evidence
B.C.G. portfolio matrix
Elasticity
- The ratio of the percent change in one variable to the percent change in another variable.
- Useful to understand the dynamic response of supply and demand in a market, in order to achieve an intended result or avoid unintended results.
Market research and forecasting
1) Marketing Research:
2) Develop research process
3) Data source (secondary or primary)
4) Data Collection:
Qualitative research is an in-depth exploration of what people think, feel or do and, crucially, why. If you want to know why your customers behave as they do and what barriers there may be to their changing that behaviour, you would use qualitative research to explore those issues. Qualitative research does not give statistically robust findings.
Quantitative research provides a measure of how many people think, feel or behave in a certain way and uses statistical analysis to determine the results. If you want to know how many of your customers support a change in a product or service - and how strongly they support it — so that you can determine whether you have a business case for making that change, you would use quantitative research.
5) Analysis data
6) Formulating the conclusions and preparing the report
Total quality management
profit maximization
market segmentation targeting and positioning
Segmentation:
- Demographics. For example age, gender, income bracket, education, job and cultural background.
- Psychographics which refers to the customer group’s lifestyle. For example, their social class, lifestyle, personality, opinions, and attitudes.
- Behaviour which is based on customer behaviour. For example, online shoppers, shopping centre customers, brand preference and prior purchases.
- Geographical location (continent, country, state, province, city etc)
Targeting:
- Undifferentiated Targeting: This approach views the market as one group with no individual segments, therefore using a single marketing strategy. ( for a business or product with little competition where you may not need to tailor strategies for different preferences.)
- Concentrated Targeting: This approach focuses on selecting a particular market niche on which marketing efforts are targeted. Your firm is focusing on a single segment so you can concentrate on understanding the needs and wants of that particular market intimately. Small firms often benefit from this strategy as focusing on one segment enables them to compete effectively against larger firms.
- Multi-Segment Targeting: This approach is used if you need to focus on two or more well defined market segments and want to develop different strategies for them. Multi segment targeting offers many benefits but can be costly as it involves greater input from management, increased market research and increased promotional strategies.
Unemployment
- Frictional unemployment, also called search unemployment, occurs when workers lose their current job and are in the process of finding another one. There may be little that can be done to reduce this type of unemployment, other than provide better information to reduce the search time. This suggests that full employment is impossible at any one time because some workers will always be in the process of changing jobs.
- Structural unemployment occurs when certain industries decline because of long term changes in market conditions. For example, over the last 20 years UK motor vehicle production has declined while car production in the Far East has increased, creating structurally unemployed car workers. Globalisation is an increasingly significant cause of structural unemployment in many countries.
- Classical unemployment is caused when wages are ‘too’ high. This explanation of unemployment dominated economic theory before the 1930s, when workers themselves were blamed for not accepting lower wages, or for asking for too high wages. Classical unemployment is also called real wage unemployment.
- Seasonal unemployment exists because certain industries only produce or distribute their products at certain times of the year. Industries where seasonal unemployment is common include farming, tourism, and construction.
business cycle
