Business, sectors and objectives, Stakeholders, Integration and Pricing. Flashcards
What is Profit Maximisation
When you try to make the most profit possible. This is likely to be the aim of the owners and shareholders.
What are the 4 business objectives?
Profit maximisation, Survival, Growth and Providing a service.
What is a Stakeholder?
Everyone who is affected by a business because they have a stake in what the business does.
Who is the most important stakeholder?
The owner
What are internal stakeholders?
Stakeholders that work in the business itself.
What are external stakeholders?
Stakeholders that are outside the business.
What are the three business sectors?
Primary, Secondary and Tertiary
What is the definition of the primary business sector?
The first stage of the production process. Eg. Fishing, mining, farming, and forestry
What is the definition of the secondary business sector?
Manufacturing industries that make a product from raw materials. Eg. Car manufacture and computer manufacture.
What is the definition of the tertiary business sector?
Businesses that provide a service rather than a physical product. Eg. Shops, banking, insurance and hotels
What are the four factors of production?
Land, Labour, Capital and Enterprise.
What grants are available for entrepreneurs?
Government grants and advice grants.
What is diversification integration?
When you take over or merge with another business that in involved in a different business activity.
What is horizontal integration?
When you merge or take over a business that is involved in the same business activity.
What is the trend between price and demand?
As price increases, quantity demand decreases.
What is the trend between price and quantity supplied?
As price increases, quantity supply increases.
What we the 3 ways of distribution?
- Producers -> consumers
- Producers -> sales outlet -> consumers
- Producers -> wholesaler -> sales outlet -> consumers
What is competitor pricing?
When you look at your competitors prices to give you an indication on what you should price your product at.
What is cost-plus pricing?
When you look at your costs before deciding on a price.
When is competitor pricing important?
When you are selling homogenous goods eg. Tennis balls or pencils
When is cost-plus pricing important?
When you are making a product with high costs.
What is penetration pricing?
When you try and penetrate into a market by lowering your price to try and tempt your customers away from competitors.
What is skimming?
When a business introduces a new technical product that is superior to competitors so consumers are willing to pay a premium for the best products. Eg. The tablet market
What is forwards vertical integration?
When you merge or take over your sales outlets.
What is backwards vertical integration?
When you merge or take over your suppliers.
What are the four types of integration?
Diversification, horizontal, forwards vertical and backwards vertical.
Why is E-commerce necessary?
Because of competition, to gain extra profit and to boost productivity.
What are the 3 ways a business can grow?
Internal expansion, takeover and Merging with other companies.
What is E-commerce?
The interaction between producers and consumers over the Internet.
What is differential pricing?
Differential pricing is when different businesses charge different prices for the same product when selling to different customers e.g. train tickets
What is promotional pricing?
Promotional pricing is when the price is reduced to either attract customers to an existing product or to sell off old products i.e. in a sale
What is psychological pricing?
Psychological pricing is where prices such as £9.99 are used to make the customer think they are saving money.
What is predatory pricing?
Predatory pricing is an illegal pricing strategy where prices are set deliberately very low by dominant competitors in the market, to restrict or prevent competition.
What are takeover and merger examples of?
Integration.
