Business Studies Flashcards
Business
An organisation which produces a product or supplies a service
3 reasons for starting a business
Money
To produce goods
Distribute products
Goods and services
Goods - physical products for sale
Service - things a business person does for you in exchange for money
Land
Labour
Land - Location of business
Labour - People to work in business
Capital
Enterprise
Capital - money to get a business started
Enterprise - motivation to get a business started
Factors of production
Land, labour, capital, enterprise
Opportunity cost
Where you have to choose an option and lose another option
Primary sector
Materials extracted from the earth
Secondary sector
Goods are manufactured from raw materials into finished goods
Tertiary sector
Involved with customers and market reach
Primary sector examples
Mining
Fishing
Secondary sector examples
Plastic
Metal
Tertiary sector examples
Lorries
Transport of goods
Characteristics of an entrepenuer
Risk taker
Hardworking
Smart
Objectuves of an entrepenuer
Be their own boss
Start a business
Independence
Changes that lead to a constantly changing business environment
Changes in technology
Economic situation
Legislation
Sole trader
A person who is the exclusive owner of a business and keeps all profits
to himself
Partnership
A legal agreement between two or more people that determines shared ownership of a business
Private limited company (Ltd)
A business owned by shareholders
Public limited company (Plc)
A company that has offered shares of stock to the general public
Not-for-profit organisation
Business set up to help society rather than make a profit
Benefit and drawback of sole trader
Easy to set up
Unlimited liability
Benefit of partnership
Capital needed is very small
Benefit of private limited company
Reduce risk of personal liability
Benefit of public limited company
Protection of limited liability for owners and
investors
Benefit of not-for-profit organisations
Limited liability
Limited liability
Business owners are only responsible for business debts
Unlimiyed liability
The business owner or owners are personally responsible for all of the debts of the business
Which legal structures benefit from limited liability
Private and public limited company
Purpose of setting objectives in the business
Objectives give the business a clearly defined target
Role or objectives in running a business
Gives the business an important target which they have to do
How and why business objectives differ between businesses
Businesses operate in different sectors
business operations vary in size and scale
Why business objectives may change as business evolves
As businesses get larger they have bigger objectives than when just starting a business
The use of objectives in judging success
After a business has set its objectives, it can review them to see how successful they have been
Stakeholder
Someone in the business who is affected by the decisions of a business
Identify 5 stakeholders of a business
Customers
Workers
Managers
Owner
Supplier
Manager
Responsible for the quality of the employees and good performance
Business plan
A document which sets out the future plans for a business
How a business may face conflict between stakeholders
Workers want higher wages but owners don’t want to spend more money
Factors that influence location of a business
Weather
Distance from rivals
Close to customers, potential workers
Accessibility
Why businesses create business plans
To help set up a new business
To help business raise finance
To help the business set objectives
Sections of a business plan
Goals
Pricing
Knowing your market
Customers
Competitors
Location
Promotion
Finance
Benefits of a business plan
Helps a business plan for the future
Help the business owner to define their business idea
Drawbacks of a business plan
Business may fail to move forward if too busy gathering and analysing information for business plan
Plans are only good if they are put into motion correctly
Fixed cost
Business costs, such as rent, that are constant whatever the amount of goods produced
Variable costs
A cost that varies with the level of output
Total costs
Minimum financial cost of producing some quantity of output
Examples of fixed costs
Rent
Insurance
Repayments
Examples of variable costs
Raw materials
Production supplies
Delivery costs
Total cost =
Total fixed cost + total variable cost
Revenue =
Sales x avergae price of sales
Profit =
Loss =
Profit = selling price - cost price
Loss = cost price - selling price
Organic (internal) growth
When a business decides to expand its own activities by launching new products or entering new markets
External growth
Usually involves a merger or takeover
Merger
When two businesses join to form a new larger business
Takeover
When an existing business expands by buying more than half the shares of another business
Benefit and drawback of growth
Benefit - reduced competition
Drawback - compromised quality
Benefit and drawback of franchising
Benefit - easier to make money
Drawback - loss of some decision making control
Benefit and drawback of opening new stores
Benefit - faster growth
Drawback - increasing production output may lead in quality decline
Benefits and drawbacks of e-commerce
Benefits - lower operational costs
Drawback - cost of setup
Benefit of outsourcing
Allows the business to increase its capacity
Benefits of merger
economies of scale which reduce unit cost
Benefit and drawback of takeover
Benefit - New business becomes more competetive increasing market share
Drawback - Very expensive and risky
Economies of scale
The cost advantages that a business can exploit by expanding their scale of production
Diseconomies of scale
Occurs when average unit costs begin to increase, often as a result of business growth
Purchasing economies of scale
As a business gets bigger, it is able to buy in bulk
Technical economies of scale
As a business gets bigger it can purchase more advanced machinery and equipment
Causes of diseconomies of scale
Communication problems
Technical issues in production process
As firm expands into different locations or internationally decisions take longer to reach all employees
Average unit costs =
Total cost ➗ total output quantity
E-commerce
Any form of business activity conducted electronically
E-commerce examples
Online purchases
Websites
Online shopping
Examples of digital technology
Mobile phone
Social media
Ethics
Moral principles that govern business behaviour or the conducting of an activity
Trade off
A compromise between one thing and another
How there may be a possible trade off between ethics and profit
Ethical behaviour such as paying fair wages can be more expensive for the business
Examples of ways businesses can behave ethically
Paying workers higher wages
Improved working conditions
Reducing pollution
Benefit and drawback of business behaving ethically
Good image/reputation
Expensive
4 environmental considerations
Recycling
Noise pollution
Air pollution
Waste disposal
How businesses and consumers accept greater environmental responsibility in their decision making
Reducing the amount of packaging on products
Benefit and drawback to business behaving in more environmental way
Benefit - Investing in greener energy can result in a cost saving eventually
Drawback - Greener products may involve more expensive production methods
Global warming
The current rise in the average temperature of Earth’s air and oceans
Scarce resources
Resources are only available in limited supply
Possible trade off between sustainability and profit
Some sustainability values may well go directly against profit
Interest rates
The cost of borrowing money
Employment
An engagement of a person in the labour force
Consumer spending
Total money spent on final goods and services by individuals and households for personal use and enjoyment in an economy
How businesses might be affected by changes in the rate of interest
Higher interest payments, less disposable income and bigger overheads
How and why business might be affected by changes in the level of employment
Higher unemployment means many households have less money could lead to less spending
How demand for products and services may change as incomes fluctuate
As one’s income rises, they will begin to demand more goods
Globalisation
The process by which businesses start operating on an international scale
Exchnage rates
The price of one country’s currency expressed in terms of another country’s currency
2 benefits of globalisation
Access to more customers
Gain economies of scale
Drawbacks of globalisation
Competing against foreign markets and imports
More staff can be poached by UK overseas companies
Impact of exchange rates on profit and sales of businesses that import and export
Strong exchange rates make imports cheaper but exports more expensive
How UK businesses compete internationally
Importing
Exporting
2 examples of employment law
Discrimination
Minimum wage
1 example of health and safety law
Employees must be informed of the first aid arrangements
1 example of consumer law
The products you buy have to comply with their description
Impact of legislation on a business
The consequences of meeting or not meeting legal obligations
Benefits of providing a safe working environment
Reduced costs
Reduced risk
Fewer accidents
Market
The place where buyers and sellers meet
Competition
The businesses that compete for a share of the market
Risk
The possibility of something either good or bad happening
Impact of competition on businesses
Encourages businesses to improve their products and services
A situation where businesses face little or no competition
Where there are no similar substitutes for its product
Why entrepenuers embark on running a business
Can make their own business desicions and do what they want with the business
Activities entrepenuers can undertake to minimise risk
Carrying out market research to find out what customers want
Inflation rate
Increase in price of goods and services
National minimum wage
Under 18 = £6.40
Age 18 to 20 = £8.60
Age 21 or over = £11.44
Why is it good to recruit internally
It’s a cost-effective way to fill open positions while also improving employee retention rates
A quick process
applicants will already be known to the business
Flotation
Occurs when private limited company decides to become a public limited company
Drawback of patnership
Unlimited liability
Drawback of private limited company
Shared profits
Drawback of public limited company
Shared profit
Drawback of not-for-profit organisations
Less profit for owner
Drawback of merger
Expensive
Drawback of outsourcing
Takes long time to grow internally
Procurement
Getting the right supplies from the right supplier
Delayering
A process where a business removes layers of its management to make its structure more flat
Delegation
A process where tasks are given to members of staff, who then give tasks to employees further down the chain of command
Increase rate increase=
Business debt increase
