Business framework and external environment Flashcards
What are goods
Physical objects that a business sells to its customers
What are services
Non-physical products: activities that a business carried out for its customers
What are consumer durables
Products which last for several years and used a large number of times
What are needs and wants
Needs: essential for survival - water, food and shelter
Wants: not essential for survival - Xbox, TV and PlayStation
What is an entrepreneur
Someone who is willing to take the risk of setting up a business
What is the difference between the public and private sectors
The public sector is owned by The State and run by the Government. The private sector are organisations that are not owned by The State: sole traders, partnerships
What is the chain of production
The stages through which a product passes before being sold to a consumer
What are the factors of production
Land, labour, capital and enterprise
What is monopoly and oligopoly
Monopoly - A market where there is only one supplier
Oligopoly - A market that is dominated by a small number of large firms
What is demand and supply
Demand - the amount of a product that people are willing and able to buy at a particular price
Supply - the amount of a product that businesses are offering to be bought at a particular price
What are stakeholders
People and organisations who are affected by the activities of a business
List 2 advantages and disadvantages of being a sole trader
Advantages:
• the owner keeps all the profit
• the owner has complete control
• Quick and easy to set up
Disadvantages:
• Unlimited liability
• Long hours of work
• Business can’t open if owner is ill or on holiday
List 2 advantages and disadvantages of being in a partnership
Advantages:
• More than one source of capital
• Partners can specialise in different areas
• Workload is shared
Disadvantages:
• Profits have to be shared
• Can be disagreements
• Partners have unlimited liability
What is a deed of partnership and what’s included in it
A legal document setting out the terms and conditions under which that particular partnership would operate. It contains:
• Name if partners
• How profits will be shared
• How important decisions are made
• What happens if a partner wants to retire
List 2 advantages and disadvantages of being a Private Limited Company (Ltd)
Advantages:
• More capital can be raised by selling shares
• Owners have limited liability
Disadvantages:
• Profits have to be shared between the shareholders
• Slow to set up
• Original owners can lose control if they own less than 50% of the shares
List 2 advantages and disadvantages of being a Public Limited Company (plc)
Advantages:
• Large amounts of capital can be raised by selling shares through The Stock Market
• Expanding the company can lead to higher profits
Disadvantages:
• Profits have to be shared between shareholders
• Changing from an Ltd to plc is very expensive
• Original owners will probably lose control
List 2 advantages and disadvantages of being a franchisee
Advantages:
• More customers due to its brand name
• Support, training and advice from the franchisor
Disadvantages:
• Additional costs
• Less freedom in how you run the business
List 2 advantages and disadvantages of being a franchisor
Advantages:
• Risk-free income from initial fees and royalties
• Can expand without paying to set up new branches
• No liability at all
Disadvantages:
• Whole business could lose popularity
• Only earns the royalties
What is the fiscal policy
Government decisions about taxes and public sector spending
What are the effects of interest rates on businesses
High rate of interest is BAD for a business:
• Increases the costs of businesses with a bank overdraft or loan
• Decreases demand for their products
Low rate of interest is GOOD for a business:
• Decreases the costs of businesses with a bank overdraft or loan
• Increase demand for their products
What is the effect of inflation on businesses
High rate of inflation is BAD for a business:
• Increases the costs of goods
• Causes demand to fall
Low rate of inflation is GOOD for a business:
• Decreases the costs of goods
• Demand rises
What are exogenous shocks
These are unexpected events that seriously affect the running of the business
