Business in the Real World Flashcards
1
Q
Business definition
A
An organisation that provides a good or a service
2
Q
Good definition
A
Tangible product
3
Q
Service definition
A
Intangible item
4
Q
Customer definition
A
Someone who buys the product
5
Q
Consumer definition
A
Someone who uses the product
6
Q
How a product can be successful
A
Meets the needs and wants of customers and consumers
7
Q
Entrepreneur definition
A
Someone who starts up theirs own business and are willing to take risks
8
Q
Why start up your own business
A
Make own decisions Keep all profits Have a job / earn money Have a passion / want to develop an idea Flexible working hours
9
Q
Social enterprise definition
A
Not-for-profit organisation
Set up to achieve objectives other than profit
10
Q
Factors of production definition and examples
A
Resources that businesses use to provide their goods or services: Land Labour Capital Enterprise
11
Q
Land definition
A
Physical land and site where business is located
12
Q
Labour definition
A
Skills and numbers of employees employed in by a business
13
Q
Capital definition
A
Equipment used to provide goods or services
14
Q
Enterprise definition
A
Skills of people involved in business to identify opportunities and bringing together resources to meet these opportunities
15
Q
Opportunities cost definition
A
Sacrifices made when a decision is made
The trade-off when doing anything
16
Q
Characters of entrepreneurs
A
Innovative
Risk takers
Hard-working and determined
Organised
17
Q
Primary sector definition
A
First part of production process
Extracting raw materials
18
Q
Secondary sector definition
A
Second part of production process
Using raw materials to produce products
19
Q
Tertiary sector definition
A
Final part of production process
Provide services
20
Q
Functions of business
A
Marketing
Operations
Human Resources
Finance
21
Q
Types of change in business environment
A
Technological change
Economic change
Legal change
Environmental expectations
22
Q
Characters of entrepreneurs
A
Innovative
Risk takers
Hard-working and determined
Organised
23
Q
Primary sector definition
A
First part of production process
Extracting raw materials
24
Q
Secondary sector definition
A
Second part of production process
Using raw materials to produce products
25
Tertiary sector definition
Final part of production process
| Provide services
26
Functions of business
Marketing
Operations
Human Resources
Finance
27
Types of change in business environment
Technological change
Economic change
Legal change
Environmental expectations
28
Sole trader definition
business that is owned and managed by one person
29
Advantage of sole trader
Quick and easy to set up (no government registration required)
Own boss
Keep all profits
30
Disadvantages of sole trader
```
Unlimited liability
May lack finance
Heavy workload
All skills required
Difficult to take a holiday
```
31
Partnership definition
business created by 2 or more people to pursue a common goal
| maximum of 20 partners except solicitors, accountants, auctioneers and estate agents
32
Deed of Partnership definition
Legal document that sets out rules of partnership
Advised to be made but not necessary
Avoids disputed
If not made, profits are split up equally regardless of input per partner
33
Details in Deed of Partnership
How to divide profits
How decisions are made
How to value business if someone leaves
How to decide whether a person should go or not
34
Advantages of partnership
Share workload
More sources of finance
Share skills
35
Disadvantages of workload
Disagreement between partners
Unlimited liability
Liable for actions of other partners
Share profits
36
Company definition
Business that has its own legal identity
| Owned by shareholders
37
Advantages of company
Limited liability
Better status in eyes of some customers
Continues after death of founders
Can bring in investors
38
Disadvantages of company
Have to register (harder and slower to setup)
Have to disclose sales and profits figures
Have to have accounts independently checked
Original founder loses power due to investors
39
private limited company characteristics
ltd
cannot publicly advertise shares for sales
usually owned by family members
can control who shares can be sold to
40
public company characteristics
plc
can advertise and list shares on Stock Exchange
share capital over £50,000
can’t choose who can have shares
41
flotation definition
when ltd becomes a plc
| shares must be sold to general public and conform to rules of Stock Exchange
42
Advantages of ltd
limited liability
more status than sole trader
company exists after founders’ deaths
managers can run day-to-day business while owners keep control and dividends
43
Disadvantages of ltd
legal procedures to set up (time and money)
financial accounts must be available to general public
accounts must be checked by auditor (money)
must pay corporation tax
investors may clash with each other
44
Advantages of plc
can advertise shares to general public, more investors
attracts more media coverage
more status than ltd
investors more willing to buy shares as can sell their shares later
45
Disadvantages of plc
mistakes made more publicly known
can’t control who buys shares (risk of takeover)
more regulated than ltd (time and money)
investors may clash with original owners
46
Aim definition
General goal of business
47
Objective definition
Specific target that helps to achieve aims
| Also turns sims into something easier to measure and assess progress
48
Purpose of setting objectives
Helps with decision-making
Helps investors understand direction of business and persuades them to invest
Motivates everyone in business
Helps assess success
49
General objectives
```
Survival
Earning a profit
Shareholder value
Customer satisfaction
Market share
Growth
Being ethical
Environmental and sustainability targets
```
50
Effective objectives
```
Specific
Measurable
Achievable
Relevant
Time
```
51
Main stakeholders
```
Employees
Shareholders
Customers
Community
Suppliers
The government
```
52
Employees objectives as stakeholders
Secure jobs
| Higher earnings
53
Owens/shareholders objectives as stakeholders
Higher dividends and share price
54
Local community objective as stakeholder
Local jobs
| Minimal environmental impact on community
55
Government objectives as stakeholders
Legal behaviour
Taxes paid
Growth
56
Suppliers objective as stakeholders
Paid on time
| Kept informed of any changes to business e.g. proposed reduction in output
57
Customers objectives in stakeholders
Useful, accurate information on product/service
| Value for money
58
Importance of location in business
Costs
Sales
Image
59
Factors influencing location
```
Type of business
Proximity to marker
Competitors
Availability of raw materials
Availability and cost of labour
Transport links
Technology
Costs
```
60
Advantages of locating overseas
Cheaper labour
Access to resources not available in UK
Financial incentives from foreign governments
Avoids protectionist measures by foreign government
Market overseas may be growing fast
61
Disadvantages of locating overseas
Different rules and regulations in other countries
Customers may have different tastes
Competing against well-established opposing businesses in new country
62
Business plan definition
Document stating what business is trying to achieve and how to achieve it
63
Purpose of business plans
Helps set up business successfully
Raises finance
Sets objectives
Co-ordinates actions
64
Problems of business planning
Uncertainty
Lack of experience
Change
65
Reducing risk of business planning
Research market thoroughly
Talk to experts and consultants
Plan for variety of outcomes
Regularly review and update plan
66
Main sections of business plan
```
Background information on founders and their experience
Analysis of market and target customers
Firm’s objectives
Details of price and expected sales
How business will handle competition
Analysis of financial position
```
67
Methods of business expansion
Internal growth
| External growth
68
Internal growth definition
organic growth
| done by selling more of its own products
69
External growth definition
integration
| done by joining with another business
70
Measuring business size
Value of sales
Value of business
Number of employees
71
Internal growth methods
Franchising
Opening new stores
E-commerce
Outsourcing
72
Franchising definition
When one business sells rights to another business to use its name and sell its products
73
Advantages of selling a franchise
Can grow quickly
Franchisee can provide some finance
Motivates franchisees as running their own business
74
Disadvantages of selling a franchise
Lose some control
Have to share profits
Danger of one franchise affecting whole brand
75
Advantages of buying a franchise
Established beans
Access to training and supplies
Share marketing costs
Learn from other franchisees
76
Disadvantages of buying a franchise
Have to share profits
May have to work in franchisor’s guidelines
Have to contribute to group marketing
Sales may suffer if other franchisee gets bad reputation
77
E-commerce definition
When business and customer meet in a virtual environment online to trade and sell goods
78
Advantages of e-commerce
No rent costs
Another channel to access market
Allows business to operate 24-hours
More convenient for customers
79
Disadvantages of e-commerce
Distribution of products may be difficult and expensive
| Can render own physical stores useless
80
Outsourcing definition
When business uses other organisations to produce its products
81
Advantages of outsourcing
Faster than expanding own production facilities
| Don’t have to invest in expanding own production facilities
82
Disadvantages of outsourcing
Quality of products may be inadequate
| More expensive than producing products by themselves
83
External growth methods
Merger
| Takeover
84
Horizontal integration definition
when one firm joins with another firm at same stage of production process
85
Vertical integration definition
when one firm joins with another at different stage of production process
86
Conglomerate integration definition
when one firm joins with another firm in a different type of production process
87
Advantages of business expansion
Economies of scale
More power in market
More status (motivates staff)
Big firms are expensive to take over (job security)
Rewards for staff increase as business gets larger
88
Disadvantages of business expansion
Decision-making is slower (longer chain of command)
| Employees may not feel important (demotivates staff)
89
Economies of scale definition
When cost per unit decreases with greater scale of production
90
Diseconomies of scale definition
When cost per unit increases with greater scale of production
