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BUSINESS PAPER 1 > BUSINESS IN THE REAL WORLD > Flashcards

BUSINESS IN THE REAL WORLD Flashcards

1
Q

What are goods?

A

physical items to be sold

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2
Q

What is a service?

A

actions done by the business to aid the customer

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3
Q

Why are businesses set up?

A

to benefit others
fill a gap in the market
to make a profit
to be your own boss

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4
Q

What are the three sectors of the economy?

A

primary
secondary
tertiary

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5
Q

What is the primary sector?

A

where raw materials are extracted by mining, growing or collected (fishing)

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6
Q

What is the secondary sector?

A

where the goods are manufactured - building and construction

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7
Q

What is the tertiary sector?

A

where the service is provided

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8
Q

What is enterprise?

A

the process of identifying new business opportunities and taking advantage of them

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9
Q

What are some qualities of an entrepreneur?

A

innovative - new ideas and solutions
hardworking
organised
prepared to take risks

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10
Q

What are the factors of production?

A

Capital - equipment, factories etc that help the production of goods
Enterprise - the people that create things and take risks
Land - all the earth’s natural resources
Labour - the work done

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11
Q

What is opportunity cost?

A

the benefit that is given up in order to do something else -> puts a value on the product/business

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12
Q

What is a sole trader?

A

a company with only one owner

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13
Q

Advantages of a sole trader?

A

easy to set up - good start up business
be your own boss
decide what happens to profit
make your own decisions

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14
Q

Disadvantages of a sole trader?

A

work long hours
not many holidays
unlimited liability - liable for paying back a debt
unincorporated - the business doesn’t have its own legal identity -> if the business is sued, you’ll be sued personally

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15
Q

What is a partnership?

A

a company with 2-20 partners

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16
Q

Advantages of a partnership?

A

more owners -> more ideas and larger range of skills
work can be shared
more capital (money) is put into the business -> grow faster

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17
Q

Disadvantages of a partnership?

A

each partner is legally responsible
unlimited liability
more owners -> more disagreements
profit is shared

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18
Q

What are the two types of limited companies?

A

private and public

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19
Q

What is a limited company?

A

a company owned by shareholders
more shares -> more control

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20
Q

What is the difference between a public and private limited company?

A

public (PLC)- shares are sold on the stock exchange by anyone
private (LTD) - shares are only sold is all shareholders agree

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21
Q

Advantages of a ltd?

A

limited liability - you can’t lose more than what you invest
incorporated - continue trading after a shareholder dies
easier to get a loan/morgage
owners get control over decisions

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22
Q

Disadvantages of a ltd?

A

expensive to set up - lots of legal paperwork
legally obliged to publish its accounts

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23
Q

Advantages of a plc?

A

more capital -> help expand
limited liability
incorporated

24
Q

Disadvantages of a plc?

A

hard to come to agreements
easy for someone to buy enough shares to take over
accounts have to be publicised - people can see if they’re struggling
more people wanting a share

25
Q

What is a not-for-profit business?

A

a business that doesn’t try to make a profit

26
Q

What are the type of legal structures (limited/unlimited) a not-for-profit business can have?

A

unincorporated association - easy to set up, unlimited liability
incorporated - are ‘limited by guarantee’ (each member pays a fixed amount if it goes bust)

27
Q

What are the disadvantages of a not-for-profit business?

A

hard to manage/set up - rules to follow, apply for certain grants
uncertainty about finance
unreliable - no permanent staff
mainly funded by grants - not stable income

28
Q

What is another type of not for profit business?

A

social enterprises

29
Q

What is a business aim?

A

overall goals they want achieve

30
Q

What are some types of aims?

A

survival
maximise profit
growth
increase market share, shareholder value
achieve customer satisfaction

31
Q

What is a business objective?

A

helps business achieve their aim

32
Q

What should objectives be? (smart)

A

Specific
Measurable
Achievable
Realistic
Time

33
Q

What factors affect business objectives (pestle)

A

Politics
Economy
Social
Technology
Laws
Environmental expectations

34
Q

What is a stakeholder?

A

anyone who’s affected by a business e.g manager, customer, employees, supplier, owner

35
Q

What is revenue?

A

income earned
=sales x price

36
Q

What is a fixed cost?

A

a cost that don’t vary with output e.g rent, insurance

37
Q

What is a variable cost?

A

costs that increase as the firm expands output e.g raw materials, machinery

38
Q

Total costs =

A

variable + fixed

39
Q

Average unit cost =

A

total cost / output

40
Q

What does the average unit cost show?

A

how much each product costs to make - for a profit to be made, they must charge more than this

41
Q

Profit =

A

revenue - costs

42
Q

What is a business plan?

A

outline of what the business will do and how it plans to

43
Q

Why is a business plan useful?

A

makes the owner plan carefully
shows what resources are needed
calculate how much money is needed
plan objectives

44
Q

What is part of a business plan?

A

personal details
mission statement - describes aims
objectives
product description
production details
staff requirements
finance

45
Q

What are the disadvantages of a business plan?

A

take lots of time and money
some may be too optimistic
stick too tightly - if something unexpected happens and the manager doesn’t want to change the plan

46
Q

What influences the location of a business?

A

access to raw materials
competition
cost
transport
location of the market

47
Q

The average unit cost is lower when the business is?
What is this called?

A

larger - economies of scale

48
Q

Why does economies of scale happen?

A

purchasing economies of scale - large firm buys in bulk -> cheaper unit price
technical economies of scale - large firms can afford to buy/operate more advanced machinery than small firms

49
Q

What is diseconomies of scale?

A

when growth leads to increased average unit cost as it is more expensive to manage

50
Q

What are the disadvantages of diseconomies of scale?

A

more people -> hard to communicate
demotivated workers -> less productivity
production process becomes complex -> hard to coordinate

51
Q

How can businesses expand internally?

A

outsourcing - pay another firm to carry out tasks for it -> quicker, possible higher standard, loss of control over its operations, bad rep if done badly
open new stores -> low risk but extra costs
eccomerce - selling on internet
-> cheaper (no rent, no costs that opening a new store would have), regularly updated technology, technical problems

52
Q

What is franchising?

A

expansion by giving other firms the right to sell its products (in return for a fee)

53
Q

What are the advantages of franchising?

A

increases the franchisors income, market share, brand awareness
no risks for franchisor

54
Q

How can businesses expand externally?

A

merging - two firms join to create a larger firm
takeovers - when a firm buys over half of the shares in another firm

55
Q

Why is external expansion better than internal?

A

the business grows much faster

56
Q

How can a business merge/takeover?

A

with a supplier, competitor, customer, unrelated firm

57
Q

Why is external expansion not always successful?

A

less than half of them are successful -> hard to make 2 different businesses work as 1

BUSINESS PAPER 1 (4 decks)

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