business management unit 1

Question 1

Business

Answer 1

An activity where goods or services are produced, sold, or exchanged to make money.

Question 2

Enterprise

Answer 2

Another word for a business or company, often used to describe a large or important one.

Question 3

Entrepreneur

Answer 3

A person who starts and runs a business, taking on financial risks to make a profit.

Question 4

Public sector

Answer 4

Part of the economy is controlled by the government, like schools, hospitals, and police.

Question 5

Private sector

Answer 5

Part of the economy is run by private individuals or companies, not the government.

Question 6

Sole trader

Answer 6

A business owned and run by one person, who is responsible for all its debts.

Question 7

Partnership

Answer 7

A business owned and run by two or more people who share profits, risks, and responsibilities.

Question 8

Unincorporated

Answer 8

A business that hasn’t been legally registered as a separate entity from its owner(s), like sole traders or partnerships.

Question 9

Unlimited liability

Answer 9

When the owners of a business are personally responsible for all the business’s debts, even if it means using their personal assets.

Question 10

Incorporated

Answer 10

A business that’s been legally registered as its own entity, separate from its owners.

Question 11

Limited liability

Answer 11

When the owners of a business are only responsible for the money they invested in the business, not their personal assets.

Question 12

Privately held companies

Answer 12

Companies owned by a small number of people (like a family or a few investors), and their shares aren’t available to the public.

Question 13

Publicly held companies

Answer 13

Companies that have sold shares to the public, meaning anyone can buy them on the stock market.

Question 14

Economies of scale

Answer 14

Economies of scale refer to the cost advantages that a business can achieve as it increases its production level.

Question 15

Market share

Answer 15

The percentage of an industry or market that a particular company controls, relative to its competitors.

Question 16

Interest rates

Answer 16

The amount charged by lenders to borrowers for the use of money is typically expressed as a percentage.

Question 17

High interest rates

Answer 17

High interest rates can increase borrowing costs, making it more expensive for companies to finance operations or expansions. (Bad as it increases costs)

Question 18

Low interest rates

Answer 18

Low interest rates generally encourage borrowing and spending, which can stimulate business growth. (Opportunity)

Question 19

High rates of market growth

Answer 19

A situation where the overall market is expanding rapidly, often indicated by increasing sales and new customers. Companies in high-growth markets can see increased demand for their products or services, leading to higher revenues. (Increasing competition as well, opportunity as it gets more popular)

Question 20

Low rates of market growth

Answer 20

A situation where the market is stagnating or growing very slowly. Companies may face challenges in increasing sales, leading to a focus on efficiency and cost-cutting. Competitive pressures may rise as companies fight for a share of a limited market. (Threat)

Question 21

Political instability

Answer 21

A situation where there is uncertainty or volatility in a country’s political environment. Political instability can lead to uncertainty in regulations, taxes, and market conditions, which can hinder investment and growth.

Question 22

Industrial unrest

Answer 22

Discontent among workers that can lead to protests, strikes, or other forms of disruption in the workplace. Industrial unrest can disrupt production, leading to lost revenue and increased costs. Companies may need to invest in employee relations and working conditions to mitigate unrest.

Question 23

Strike action

Answer 23

A work stoppage initiated by employees to protest against their employer, often demanding better wages or working conditions. Strikes can halt production, causing significant financial losses.

Question 24

Advantages of sole trader

Answer 24

Complete control
Profit retention
Cheap and quick to set up
accounts kept private
strong motivation

Question 25

Disadvantages of sole trader

Answer 25

Full responsibility
Unlimited personal liability
difficult to raise finance
seldom obtain economies of scale
stress, heavy workload

Question 26

+ of partnership

Answer 26

Financial risk is spread
Greater finance available than a sole trader
Specialization –skills from different partners
Financial confidentiality
Shared responsibility

Question 27

• of partnership

Answer 27

unlimited joint and several liabilities
Share profits (less money)
Limited access to external finance compared with limited companies
Possible disagreements between partners
Economies of scale are not always available.

Question 28

+ private sector

Answer 28

Can be more efficient than public-sector businesses
Not controlled by the government
Can earn more money

Question 29

• private sector

Answer 29

Can prioritize profit over social or environmental concerns
Higher costs

Question 30

+ public sector

Answer 30

Focuses on helping people and providing essential services, even if they don’t make a profit.
Gets most of its money from the government, so it doesn’t rely on bank loans or shareholders.

Question 31

• public sector

Answer 31

It may be less efficient because it doesn’t have strict profit goals.
Financial support from the government can make it less efficient
The government might make business decisions based on politics, like opening new branches to gain popularity.

Question 32

+ of LTD

Answer 32

Limited liability
separate legal identity
The business continues even if a shareholder dies.
The original owner can often still control the business.
Can raise money by selling shares to family, friends, and employees
Greater status than an unincorporated business

Question 33

• of LTD

Answer 33

Setting up the business involves a lot of legal paperwork.
You can’t sell shares to the general public to raise money.
Selling shares is limited and has rules.
Financial details might need to be shared publicly, so there’s less privacy compared to sole traders or partnerships.

Question 34

+ plc

Answer 34

Shareholders only lose the amount they invested in.
The business continues
Can raise large amounts of money by selling shares to the public on the stock exchange.
Can easily sell shares
Some shareholders can control the company with a small portion of shares.

Question 35

• plc

Answer 35

Higher costs
Must publish detailed financial reports and other information to the public
Risk of takeover
Share prices fluctuate and can anger shareholders.

Question 36

parts of STEEPLE(PEST)

Answer 36

political, economical, social, technology

Question 37

political factors (O + T)

Answer 37

Opportunities:
Fiscal policy: lower taxes
Monetary policy: lower interest rates encourage investment
Threats:
Fiscal P: high taxation
Monetary P: A high interest rate is linked to the exchange rate and may damage domestic businesses due to reduced demand for exports

Question 38

economical factors (O + T)

Answer 38

Opportunities:
The nation with low inflation rate is more competitive in international trade
Threats:
Nations with high inflation rates are less competitive and could lead to lower GDP or higher unemployment

Question 39

social factors

Answer 39

Population
Religion
Life expectancy at birth
Safe drinking water
Literacy rate
GDP per capita
Population below the poverty line
Unemployment rate

Question 40

technological (O+T)

Answer 40

Threats:
Job loss due to automation reduced productivity
Shorter product life cycles, price transparency
Expensive start-up and replacement costs
Security
Opportunities
Hiring using e-services, working from home
New products and markets
Automation, efficiency gains
Access to data, reporting, and analyzing software

Question 41

economic influence on business

Answer 41

Control rate of inflation
Employment level high
Economic Growth
Healthy international trade balance

Question 42

political influence on business

Answer 42

Fiscal policy
Expenditure
Taxation – direct and indirect types of taxation
Monetary Policy
Interest rates
Money supply

Question 43

SWOT

Answer 43

strength, weakness (internal), opportunity, threat (external)

Question 44

Ansoff Matrix

Answer 44

market penetration
market development
product development
diversification

Question 45

market penetration + example

Answer 45

existing product, existing market

Ex. Samsung is well known for its penetration pricing strategy. By offering its phones at a lower entry price with more pricing tiers

Example: A coffee shop wants to increase its sales of coffee in its existing location. They could run a promotion offering a loyalty card that gives customers a free coffee after buying ten.

Question 46

market development + example

Answer 46

existing product, new market

Ex. Market development strategy examples include geographical expansion, attracting new users, upselling to existing users, branding, and expansion of the target market

Example: A popular ice cream brand in the U.S. decides to enter the Canadian market. They take their existing ice cream flavors and sell them in Canada. This strategy involves selling existing products in new markets.

Question 47

product development + example

Answer 47

existing market, new product

Ex. conceptualization, design, development and marketing of newly created or rebranded goods and services.

Example: A smartphone company that currently sells only smartphones decides to introduce a new line of smartwatches. They are still selling to the same customer base but are adding a new product to their offerings. This strategy focuses on creating new products for existing markets.

Question 48

diversification + example

Answer 48

new market, new product

Ex. a producer of leather shoes that decides to produce leather car seats.

Example: A well-known fitness center decides to start selling its own line of protein shakes and supplements. This is a diversification strategy because they are entering a new market (health products) with a new product line, separate from their core fitness services.

Question 49

external growth

Answer 49

Some businesses can’t grow anymore, so they grow using external growth (expansion – taking over another business, combining with another business – merging)

Example:
Facebook took over Instagram and Facebook grew

Question 50

internal growth

Answer 50

Internal Growth
Organic growth
Increasing existing production capacity through investments in new capital + technology

Development and launch of new products