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Business > Business In The Real World > Flashcards

Business In The Real World Flashcards

1
Q

Why do people want to start their own business?

A
  • Pursue an interest
  • Positive impact on society
  • Pursue a gap in the market
  • More flexible hours
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2
Q

Good

A

Item that is tangible

E.g. A product

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3
Q

Service

A

Something that is intangible

E.g. hairdresser

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4
Q

What are the four factors of production? (CELL)

A
  1. Labour
  2. Land
  3. Capital
  4. Entrepreneurship
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5
Q

Factors of production definition:

A

Inputs need to start a business

Input —> transform —> output —> Good/service

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6
Q

Capital

A

Investment in equipment required to produce/run a business such as factories and machinery

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7
Q

Enterprise

A

The skills of the people involved in a business to identify business opportunities and bring resources together.

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8
Q

Land

A

Physical site on which a business is based and the natural resources required

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9
Q

Labour

A

The skills available and number of workers employed by a business

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10
Q

Opportunity cost

A

A thing that is given up when you have to make a decision
E.g. If a business decides wether to invest in new product or marketing campaign
If they chosen new product, opportunity cost is marketing campaign

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11
Q

Entrepreneur

A

Someone willing to take a risk on a business idea

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12
Q

Characteristic of entrepreneur

A
  • Passionate
  • Hardworking
  • Resilient
  • Creative
  • Charismatic
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13
Q

Business environment

A

Factors that affect a business that they can’t control

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14
Q

What are the four factors of a business environment?

A
  • Technological
  • Legal
  • Economic
  • Environmental
  • Competitors
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15
Q

Technological

A

Tech developments

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16
Q

Legal

A

Government setting laws

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17
Q

Economic

A 
Economy - affects a business:
• GDP - growth
• Interest rates
• Tax 
• Exchange rate
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18
Q

Environmental

A

Things to do with the environment

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19
Q

Need

A

Essential, can’t live without.

E.g. Food, water

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20
Q

Want

A

Non-essential, something that is desirable

E.g. Holiday, phone

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21
Q

Aim

A

An overall goal or target a business hopes to reach.

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22
Q

Objective

A

A specific, measurable target that outlines how a business will achieve that aim.

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23
Q

Objective - SMART

A 
Specific
Measurable
Achievable
Realistic 
Time scale
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24
Q

Why do objectives change?

A
  • Priorities change - change as they increase in size
  • Grow - achieve them, new ones
  • External factors - cause objectives to change
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25
Q

Example of objective: Survival

A

Where a business aims to exist and cover its costs of running the business.

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26
Q

Example of objective: Social/ethical

A

Doing the morally right thing and behaving in a way that impacts society positively.

27
Q

Example of objective: Customer satisfaction

A

To increase loyalty, service and recommendation by ensuring these people are satisfied.

28
Q

Sole trader

A

Business owned and run by 1 person
• Unlimited liability
• Self employed

29
Q

Characteristics of a sole trader

A
  • Self employed
  • Limited funding
  • Niche markets
30
Q

Advantages and disadvantages of sole trader

A

Advantages:
• The sole owner has total control
• The sole owner keeps all the profit

Disadvantages:
• Few sources of finance available, risky
• Often the owner has to do all the jobs in the business

31
Q

Partnership

A

Business owned by 2-20 people
• Unlimited liability
• Dead of partnership
• Different skills/expertise

32
Q

Characteristics of partnership

A
  • Wider skills

* Deed of parthership

33
Q

Advantages and disadvantages of partnership

A

Advantages:
• Workload can be shared
• Extra skills brought in to the business

Disadvantages:
• Profit has to be split
• Potential disagreements in business decision making

34
Q

Unlimited liability

A

Owner is completely responsible for the business debts - Risk personal assets

35
Q

Limited liability

A

Owner (shareholder) is only responsible for amount invested

36
Q

Plc (public limited company)

A

Company where shares are sold in stock market to anyone

37
Q

Plc

Pros and cons

A
  • Limited liability
  • £50k minimum share capital
  • Publish accounts
  • Anyone can see share price
38
Q

Ltd (private limited company)

A

Company where shares are sold to friends and family

39
Q

Ltd

Pros and cons

A
  • Limited liability
  • £2 minimum share capital
  • Publish accounts
40
Q

Shareholders

A

People who have brought shares in a limited company.

41
Q

Dividend

A

Payment made to shareholders.

42
Q

Not for profit organisation

A

Businesses that have social and environmental objectives. They do not exist to make profit

43
Q

Franchise

A

A business that sells rights to another business to use name, product, or process

Franchisor - owns
Franchisee - rents

44
Q

Benefits and drawbacks for franchisor

A

Benefits:
• Growth is paid by the franchisee paying fees to the existing business
• Franchisor has fewer staff and fewer problems to manage

Drawbacks:
• A franchisee may not keep to their legal agreement, this could damage the image of the brand
• If one franchisee attracts poor publicity the whole business could be damaged

45
Q

Benefits and drawbacks for franchisee

A

Benefits:
• Safe strategy for franchisees as only 6.7% of new franchisees fail
• Most of the profits are kept by the franchisee

Drawbacks:
• The franchisor can end the franchisee without reason
• Management problems of the outlet do not have to be dealt with by the original business

46
Q

Business plans

A

Written document that sets out a businesses aims and objectives

47
Q

Importance of business plan

A
  • See if a business is viable
  • Gain sources of finance
  • Assess performance
48
Q

Growth

A

Increase in size or status

49
Q

Why do businesses want to grow?

A
  • Appeal to wider target market
  • Increase market share
  • Help achieve profit maximisation
  • Economies of scale (bigger business have lower unit costs)
50
Q

Organic

A

A business that grows from within using its own resources

51
Q

Takeover

A

When one business purchases another to have control of it

52
Q

Merger

A

When a business joins with another to become a larger business

53
Q

Outsourcing

A

When a business subcontracts to another business to produce a product for them

54
Q

E-commerce

A

The act of buying and selling a product/service using an electronic system

55
Q

Types of organic growth

A
  • Open more shops, offices, branches
  • Offer franchises to other businesses
  • E-commerce sales
  • Outsourcing
56
Q

Types of inorganic growth

A
  • Merger
  • Takeover
  • Acquisition
57
Q

Positives and negatives of organic growth

A

Positives:
• Easier to manage & control
• Slow & steady (less risk)

Negatives:
• Market share could fall if others grow more quickly
• No benefits from joining another business

58
Q

Positives and negatives of inorganic growth

A

Positives:
• Can share specialist skills and gain cost advantages
• Quick method of growth

Negatives:
• Can be very expensive
• It can be hard to integrate the two businesses

59
Q

Economies of scale

A

Occur when average unit costs fall as output increases.

60
Q

Diseconomies of scale

A

Occur when average unit costs rise as output decreases.

61
Q

Types of economies of scale

A
  • Bulk buying (purchasing)

* Use machinery (technical)

62
Q

Types of diseconomies of scale

A
  • Communication
  • Less motivation
  • Coordination / control
63
Q

Inorganic

A

A businesses that grows by joining with or buying another business

Business (8 decks)

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