BUSINESS OPPORTUNITIES (Manning) Flashcards
(87 cards)
1
Q
What is revenue?
A
The amount of money a business makes from selling their goods and services
2
Q
What are costs?
A
Amount of money a business spends in running operations
3
Q
What are profits?
A
Excess of revenue once all costs have been deducted
4
Q
What are fixed costs?
A
Costs that do not vary with output
5
Q
What are variable costs?
A
Costs that do vary with output
6
Q
What are semi-variable costs?
A
Costs that do vary with output, but not in direct proportion
7
Q
What are indirect costs?
A
Costs that are do not relate directly to the product/ proportion process
8
Q
What are direct costs?
A
Costs that do relate directly to the product/ proportion process
9
Q
What are total costs?
A
All costs involved in running a business
10
Q
Total revenue formula
A
Selling price x Quantity sold
11
Q
Total costs formula
A
Fixed + Variable costs
12
Q
Profit formula
A
Total revenue - Total costs
13
Q
Average costs formula
A
Total costs/ Output
14
Q
What is the importance of profit?
A
- expansion
- attract share holders
- reward staff (motivate)
15
Q
How to draw a breakeven chart?
A
- Draw and label axis
- Draw and label fixed costs (horizontal)
- Variable costs (starts at 0)
- Total costs (starts at FC, parallel to VC)
- Revenue (starts at 0, should cross TC)
- Draw and label breakeven
16
Q
Contribution per unit formula
A
Selling price - Variable costs
17
Q
Total contribution formula
A
(selling price-variable costs) x output
18
Q
Breakeven output formula
A
Fixed costs/ contribution per unit
19
Q
Margin of safety formula
A
Current of output - breakeven output
20
Q
What are benefits of breakeven?
A
- calculate profit figures
- generate sales targets
- generate ‘what if’ scenarios
21
Q
What are the drawbacks of breakeven?
A
- assume all units will be sold and at the same price
- figures can date quickly
- diagram assumes everything will be sold
22
Q
What is a local market?
A
Products/ services exchanged within a limited geographical location
23
Q
What is a global market?
A
P/S traded internationally
24
Q
What is mass market?
A
Products that sell to the whole market
25
What is a niche market?
Products that sell to a very small market, usually specialised goods
26
What is trade?
Business to business trading
27
What is a product?
Traded goods that have a physical presence and can be touched
28
What is a service?
An action carried put in return for a payment
29
What is seasonal markets?
P/S bought at certain times in the year
30
What is a market?
A place where buyers and sellers meet to bring about an exchange
31
What are examples of methods of exchange?
- retail
- internet
- telephone
- mail
32
What is the definition of competition?
Process by which businesses strive against each other to capture a larger market and increase their market share
33
What is the definition of market research?
Process of collecting information and data about a businesses customers, the market place and the activities of competitors within the market place
34
Define primary research
First hand information directly relevant to the needs of a business
35
Define secondary research
Second hand research adapted to fit the needs pf a business
36
What is quantitative data?
Statistical, numerical data that can be compared objectively
37
What is qualitative data?
Involves attitudes and opinions and is compared subjectively
38
What methods gather quantitative data
Surveys/ questionnaires
| Government reports
39
How can you gather qualitative data for a business
Interviews
| Consumer panels
40
Market share formula
Sales of business/ total sales of market x100
41
Market growth formula
Sales in year 2- year 1/sales in year 1 x100
42
What can marketing data be affected by?
- state of economy
- competition
- consumer trends
43
What is random sampling?
Each member of a group has an equal chance of being chosen
44
What is quota sampling?
Representative individuals are chosen out of a specific sub-group that share similar characteristics
45
Why is sampling beneficial?
1. Save finances- selected group researched
| 2. Saves time- more time devoted to ensuring the research is useful from sampling group
46
What are drawbacks of sampling?
1. Sample may be too small
| 2. May be biased- in random, may happen to be elected from only high income people
47
Define market segmentation
Process of breaking the market into sections where consumers share similar characteristics and needs and developing products or services for each of them
48
Define barriers of entry
Factors that can prevent new firms entering the market
| Eg: customer loyalty
49
What are homogenous products?
Products that are exactly the same and unchangeable
| Eg: travel money
50
What are differentiated products?
Products that have unique features that set them apart from other products in the market
51
What are methods of differentiation?
- celebrity endorsements
- brand name
- packaging
52
What is a monopoly?
One firm has total control over the market
| 25% of market share
53
What are features of oligopolies?
A few main firms dominate the market
54
What is monopolistic competition?
Large numbers of relatively small businesses in competition with each other, there aren't any dominant firms
55
What are methods of monopolistic competition?
- product differentiation
- price makers
- low barriers of entry
56
What is perfect competition?
Large numbers of small businesses in competition with each other, producing a homogenous product
57
How does population affect demand?
Increase in population=increase in demand
| Will shift to the right on graph
58
How does advertising affect demand?
Good advertising=^demand
59
How do substitutes affect demand?
Increase it
60
How do interest rates affect demand?
When they are high, people don't want to borrow because they have less disposable income
So with higher rates, demands decrease
61
How do fashion and trends affect demand?
Increases demands when they increase
62
How does income affect demand?
As is increases, so does demand (more able to as they have more money)- tend to buy higher end products
When income is low, demand is low for high end but high for low end products
63
How do complementaries affect demand?
Things that come together (strawberries and cream)
| If one increases, people may be less likely to buy the other therefore complimentary demand will decrease
64
Define demand
The quantity of a good or service that consumers are willing and able to buy at a given range of prices over a given period of time
65
What are rules of how to draw a demand curve?
1. Label y-axis price, x-axis quantity
| 2. Draw demand curve downward, from left to right (label D)
66
How does an increase in productivity of workers affect supply?
Increases supply
67
How does an increase in cost production affect supply?
Decreases
68
How does the increase in use of technology affect supply?
Increases
69
How does bad weather affect supply?
Decreases
70
How does good weather affect supply?
Increases
71
How does an increase in indirect taxes affect supply?
Decreases
72
How does an increase in the number of firms affect supply?
Increases
73
How does an increase in subsidies affect supply?
Increases
74
When might consumer protection be needed?
In markets where firms have power over the consumer that may lead to exploitation
Eg: in monopolies and oligopolies
75
What do consumers need protection to ensure?
- prices are not too high, affordable to most customers
- customer service meeting needs a consumer
- quality of product is fit for purpose
76
How may consumer protection be achieved?
-government legislation (eg: price fixing is illegal between firms)- more likely in oligopolies
77
How do monopolies impact businesses?
Charge higher prices to increase profit
| Use profit to invest in new/improved products to retain high barriers of entry
78
How do oligopolies impact businesses?
Engage in non-price competition to increase market share (eg: promotion, branding, loyalty rewards)
Avoid price competition as price wars are expensive
79
How does monopolistic competition impact businesses?
Price competition to attract customers
| May merge/takeover with competition to reduce competition
80
How does perfect competition impact businesses?
Invest in methods to differentiate their product so they can attract more customers
81
Define laws of demand
States that the higher the price the lower the quantity demanded- the slope is downwards on graph
82
What are factors that affect demand?
```
Changes in population
Change in taste and fashion
Increase or decrease of income
Advertising
Interest rates
Complementary
```
83
What are factors that affect supply?
```
Change in cost of production
Technology
Weather
Productivity of workers
Number of firms
```
84
What does high elasticity mean?
That a change in price will cause a more than proportional change in the quantity demanded
-price increase= demand decrease
85
What is price inelastic/ insensitive?
If a good has inelastic price elasticity of demand than a change in price causes a less proportional change in the quantity demanded
-price increase= demand decreases (just a little)
86
How can businesses make demands for their goods more price inelastic?
- encourage customer loyalty
- reduce/ restrict competition in market
- increase brand value
87
What are rules on how to draw a demand curve?
1. Label Y (price) and X (quantity)
| 2. Draw demand curve downward, from left to right (label; D)
