Business Revision Flashcards
Explain the impact on a products profit as it moves through different stages of the product life cycle (5)
Research and development stage - the product is not yet introduced in the market, there are no sales being made so there is no profit.
Introduction stage - The product is just launched in the market so advertising costs are high to gain customer awareness and sales are low leading to a low profit.
Growth stage - sales are increasing as the product is gaining more awareness however advertising costs are still high and a profit may be made.
Maturity stage - sales are at their peak and advertising costs are low as the product is well known, profits are high.
Decline stage - sales begin to decrease as the product is getting forgotten about, profit is low.
Discuss the advantages and disadvantages of using market skimming as a pricing strategy (3)
An advantage is that at the early stage customers will buy the product as they might think that they “must have it” even if the product is expensive as it will have low market share.
Another advantage is that it can recover the costs of production quickly. This is because the price is initially set high.
However, a disadvantage is that it doesn’t work when there is a number of competitors in the market. This is because customers will go to competitors if the businesses price is high.
Distinguish between desk and field research (4)
Desk research collects second-hand information by using newspapers or articles, where as field research is collecting first-hand information by using questionnaires or interviews.
Desk research can be unreliable as information may be bias or out of date, where as field research the information is reliable as information is not from a secondary source and is up to date.
Desk research is not costly as the research has already been carried out, where as field research can be costly as research has to be carried out, interviewees may have to be paid.
Information gathered from desk research may not apply to the business, where as information gathered from field research is specific to the business.
Describe the impact of current employment legislation on organisations (3)
One impact is that staff must be trained on the requirements of the equal opportunities legislation. This can be time consuming and costly for the organisation to carry out.
Another impact is the organisation must ensure they have accessibility for everyone. This means the business may have to invest in installing ramps or lofts for handicap people.
Another impact is that the organisation must investigate any harassment or discrimination accusations against an employee or customer. This can be very time consuming for the organisation.
Describe the actions a business can take to overcome cash flow problems (5)
One action a business can take is finding a cheaper supplier. This will reduce the costs of purchases, which increases the money available from each sale.
Another action a business can take is to sell assets that aren’t being used effectively by the business. This will release cash that can be used elsewhere in the business.
Another action a business can take is to ask the supplier for extra time to pay bills. This provides the business time to raise money for the bills.
Another action a business can take is to increase advertising/sales promotions. This will increase the amount of sales the business is getting, which increases the money coming in.
Another action a business can take is to apply for a bank loan/overdraft. This will help the business solve immediate cash flow problems, however it will have to be paid back over time with interest.
Describe the following terms found in a statement of financial position (3)
- Non-current assets
- Working equity
- Non-current liabilities
Non-current assets are investments that are owned for more than a year.
working equity - money the business can access immediately
non-current liabilities - liabilities such as loans and debentures which are to be settles within one financial year
Describe the benefits of quality standards for an organisation (4)
One benefit of using quality standards is that the business can gain a competitive edge. This is because customers will see a business with a quality standard better than businesses that don’t, this will encourage customer loyalty as the businesses products will be seen as a higher standard.
Another benefit is that the business will gain a good reputation. This is because the business will look like they are doing something positive, this will attract customers as the organisation will be seen as credible and reliable.
Another benefit is that the business can charge a higher price. This is because a product with a quality standard is already seen as higher quality, this means customers will be more likely to pay a higher price, which increases sales revenue.
Discuss the costs and benefits of operating as a multinational (7)
One cost of operating as a multinational is the tax rates. This is because the organisation is operating in multiple countries and some of which may have high tax rates, which increases the organisation’s costs.
A benefit of operating as a multinational is that cheaper labour is available in some countries. This is because minimum wage laws vary and the business may have to pay some of their workers lower wages, which decreases costs.
However, a cost of this is that the business may be put in a negative light. This is because the organisation will look like they are paying their workers too little and this will gain the business a negative reputation and can lead to customers shopping at a competitor.
A benefit of operating as a multinational is that the business can benefit from economies of scale. This is because the business will need a large stock, which means they can buy a large amount of supplies at a low costs, which saves the business money.
A cost of operating as a multinational is that communication will be difficult. This is because the different language and cultures can make communication challenging, this can lead to misunderstandings or confusion. Additionally, the different time zones between countries can also make communication difficult as not everyone may be available for discussion at a certain time.
Discuss the methods of appraisal an organisation could use (5)
One-to-one appraisals take place once a year and involve a line manager reviewing an employees progress towards their targets.
360-degree appraisals involve line managers, subordinate and peers evaluating an employee’s performance and gathering feedback.
Peer-to-peer appraisals is when employees in a similar position provide
feedback on aspects of an employee’s performance.
Discuss the use of VLEs (3)
One benefit of VLEs is that it allows users to see assignments and when they are due. This makes task management more efficient as they can easily check what work they have to do.
Another benefit is that it allows users to interact with each other using chat functions. This means employees can be kept motivated by getting advice and support from peers.
A cost however is that some VLEs may be to complicated for users. This can make it difficult for them to manoeuvre through the site and hard to access materials, this increases stress levels and decreases motivation.
Describe 3 financial ratios (3)
The gross profit percentage ratio is:
- gross profit/sales revenue x 100
The profit for the year percentage ratio is:
- Profit for the year/sales revenue x 100
Current ratio is:
- Current assets: current liabilities
Discuss the use of labour intensive production (5)
Labour intensive production uses high skilled workers. A benefit of this is that they will be more productive and produce a high quality of product output.
A cost of this is that employee wages are likely to be high. This is because workers are skilled and will have to be paid more and high skilled staff will also require extensive training, this increases the organisation’s costs.
Labour intensive production is easier to customise products. This is because human workers are flexible and use their own initiative, this leads to increased customer satisfaction levels.
A cost of this is that the product output may be inconsistent. This is because the expertise of workers may vary and human workers are likely to make errors and mistakes, which can lead to some customers feeling unsatisfied.
Another cost of labour intensive production is that products are produced slower. This is because human workers may get tired, which slows down production.
Describe the benefits of using computerised inventory control (4)
One benefit of using computerised stock control is that it is accurate. This is because it is a computer system being used, which means it is less likely to make errors/mistakes.
Another benefit is there is little to no training costs for using computerised stock control. This is because using it is very simple and straightforward for employees to understand.
Another benefit is that decision making is made quicker. This is because stock levels are easy to monitor.
Another benefit is that there is a auto reorder function which saves time. This means when stock is low the system will automatically do a reorder which saves the organisation time from monitoring it and doing it themselves.
Describe factors which should be considered when setting a re-order quantity (3)
One factor to be considered are Re-order levels. This is the minimum amount of stock a business will hold before it reorders from suppliers.
Another factor is the lead times. This is the time it takes between a business placing an order and the supplies arriving.
