Business Unit 1 Flashcards

Question

What is an Oligopoly

Answer 1

A market structure that consists of a small number of firms, who together have substantial influence over a certain industry or market No one company has the power to undermine the others or steal market share

Answer 2

- Very high barriers to entry - Interdependence: The firms under an oligopoly market are interdependent, which means that the actions of one firm affect the actions of other firms - Few firms - differentiated products

Answer 3

When all companies sell identical products, market share does not influence price, companies are able to enter or exit without barriers, buyers have perfect or full information, and companies cannot determine prices.

Answer 4

- No barriers to entry or exit - All products are Homogenous(all Identical) - Many Buyers and sellers, so many that no one firm or business has control over the market, as everyone has an equal share

Answer 5

the high startup costs or other obstacles that prevent new competitors from easily entering an industry or area of business Benefits older businesses as it stops new ones from stealing market share

Answer 6

That all products are identical and have no differences, despite being made by different businesses

Answer 7

A company that can dictate the price it charges for its goods because there are no perfect substitutes

Answer 8

groups of independent producers who work together to set prices, production, or other business practices to achieve higher profits than they would under perfect competition

Answer 9

the marketing of products or services to other businesses and organizations

Answer 10

When a business advertises to a wide range or broad audience, advertising to everyone

Answer 11

- Large customer base - Can benefit from economies of scale(due to higher output levels) -

Answer 12

- High barriers to entry, very expensive set up costs - Products are all very similar, this means businesses have to spend a lot on marketing - High competition, struggle for new businesses as they have very little market share

Answer 13

When a business targets specific segment of people within a larger target audience

Answer 14

- Businesses can make their own price, as they offer expert product or services - Low barriers to entry, start up costs - Little to no competition

Answer 15

- unable to benefit from economies of scale, due to low levels of output - If successful will attract more competition - Very vulnerable to market changes, if trends or fashion changes it could loose what little customers it has as they are unable to change

Answer 16

a process companies use to break their potential customers into different sections

Answer 17

- allows a business to target its desired audience, by tailoring their marketing strategies - Leads to a better customer experience and satisfaction, increasing customer loyalty - Increases recourse efficiency, as a business is able to focus on certain demographics

Answer 18

- High research and development costs are high - High Promotional costs - Producing products for every segmentation in a market is impossible

Answer 19

Demographic - Age, Social class, Gender, Income Psychographic - targeting groups based on personality & emotional behavior Geographic - Targeting based on area, country

Answer 20

Selling goods or services to overseas markets - Higher earnings - Spread risk - Saturation of the home market - Economies of scale - Survival

Answer 21

- reach more customers. - It increases the visibility of your brand - potential for higher revenue - can reduce competition as your specialty may not exist in other countries - Spreads risk

Answer 22

- It can be difficult to determine if there is an available market - There may be different laws and standards which need to be met - Large number of barriers to entry - International politics and market conditions can eliminate profits - It creates a need for international product delivery

Answer 23

A business whose operations and sales fluctuate depending on the time of year, example: Christmas sales, beach clothing

Answer 24

- Concentrated Revenue Opportunities

Answer 25

- Inconsistent income - Low customer engagement - Less situational freedom

Answer 26

the final point of sale, businesses sell a product to the final consumer consumers buy products and services for consumption or sharing with others rather than for reselling

Answer 27

The total revenue generated by the sales of all products and services in a given market. In other words, it is the measurement of the total volume of a given market

Answer 28

the percentage of total sales (by value) or total output that a business has in a specified market.

Answer 29

Total Sales (divided) Total Market Sales X 100 = %

Answer 30

An increase in the sales volume of products, services, and economic activity over time

Answer 31

Change in market size during year 1 and 2 (divided) by the size of the market in year 1 X 100 = %

Answer 32

it is sensitive to price. A fall in price leads to a bigger increase in quantity demanded, although the price of one unit is less the increase in sales means the total revenue earned is more

Answer 33

A product or service for which the price does not change even if supply or demand go up or down, it is insensitive to price

Answer 34

An economic measure of how responsive the quantity demanded for a good or service is to a change in income.

Answer 35

the percentage change in quantity demanded (divided) by the percentage change in income

Answer 36

the amount of a product or service that customers are willing and able to pay for at a given time

Answer 37

the number of goods/services businesses are willing to sell at a given price in a specific time period

Answer 38

Income - More money people have the more they'll buy Price - increase in demand will cause a fall in quantity demand, but will make it appear to be a higher quality Changing tastes - As things go in and out of fashion demand for certain products will also change

Answer 39

Technology - better a businesses technology, it can produce better quality and/or quantity of goods, increasing its output Production Cost - if the cost of production increases, the supply of products will decrease Transport - Traffic on roads, bad sailing and flying weather Government policies - the lower the tax, the higher the supply of that product, if stricter regulations are imposed then a products supply would fall off

Answer 40

Straight line labelled demand, going from top left to bottom right price running vertical quantity running horizontal

Answer 41

Straight line labeled supply, going from bottom left to top right Price running vertical Quantity running horizontal

Answer 42

The consumer cost assigned to some product or service such that supply and demand are equal, or close to equal.

Answer 43

A product that can be used as an alternative to another product, with both products serving similar functions and having similar uses.

Answer 44

Products and services that see a rise in demand when incomes rise

Answer 45

A good whose demand drops when people's incomes rise

Answer 46

Products and services that see a rise as peoples income significantly rises

Answer 47

the process of collecting, collating and analysing data about the market

Answer 48

- Research that is conducted by yourself or someone you've hired to do it for you

Answer 49

- Ensures that collected information is up to date and relevant to your business - Allows for the researcher to gain control over ownership of the data

Answer 50

- Expensive - Time consuming - Risk of bias

Answer 51

research method that involves compiling existing data sourced from a variety of channels

Answer 52

- Cheap as the data already exists - Can answer some questions - Easily accessible

Answer 53

- Lack of relevance, rarely answers all the questions you have, not specific to your needs - Lack of Accuracy, old or incomplete data

Answer 54

a method that aims to explore consumer response to a product or marketing campaign by making it available on a limited basis to test markets before a wider release

Answer 55

It uses mathematical analysis and data to shed light on important statistics about your business and market

Answer 56

- Data relatively easy to analyse - Numerical data provides insights into relevant trends - Can be compared with data from other sources (e.g. competitors, history)

Answer 57

- Focuses on data rather than explaining why things happen - Doesn't explain the reasons behind numerical trends - May lack reliability if sample size and method is not valid

Answer 58

Based on opinions, attitudes, beliefs and intentions. This kind of research deals with questions such as "Why"? "Would?", or "How?" Qualitative research aims to understand why customers behave in a certain way or how they may respond to a new product

Answer 59

- Essential for important new product development and launches - Focused on understanding customer needs, wants, expectations = very useful insights for a business - Can highlight issues that need addressing – e.g. why customers don’t buy - Effective way of testing elements of the marketing mix – e.g. new branding, promotional campaigns

Answer 60

- may not be generalisable or representative as opportunity or non-probability samples are used - Samples are often small - Time consuming to collect data, as well as analysing and drawing conclusions as it is not quantitative

Answer 61

A group of consumers brought together to discuss their opinions on a product/ market.

Answer 62

a group of individuals who have been carefully selected to represent a target market for a product, service, company, or industry, and are typically used in the testing of what ever the business outputs

Answer 63

a person who investigates, reports on, and helps settle complaints made against businesses

Answer 64

In market research, sampling means getting opinions from a number of people, chosen from a specific group, in order to find out about the whole group

Answer 65

A technique in which each sample has an equal probability of being chosen

Answer 66

A technique in which each sample has an equal probability of being chosen

Answer 67

A sample that has been created to mimic the characteristics of a market, sampling a target group

Answer 68

Protects consumer rights by ensuring businesses follow fair competition laws. This includes investigating infringements, imposing fines and sanctions, and taking action against companies practicing anti-competitive behaviour or mis-selling products or services.

Answer 69

- Keep them from fraudulent business practices, defective products, and dangerous goods and services

Answer 70

The Act is designed to ensure that products are safe. It makes businesses that produce, rather than just sell, liable for any damage caused by poor quality or defective products

Answer 71

Businesses owned by the government, they provide goods and services for the benefit of the community. They are run by the government. They operate with money raised from taxes.

Answer 72

to provide essential services and benefits to citizens, and prevent companies from dominating a market and charging high prices for essentials like healthcare in the UK

Answer 73

Part of the economy owned and controlled by individuals or private organizations, and in almost all cases seek to make a profit

Answer 74

- To make a profit by increasing revenues and reducing costs - Market share Growth: Businesses target growing their percentage of the total market sales. More market share often equates to more influence within the industry - To survive - To increase shareholder value

Answer 75

It is costly or impossible for one user to exclude others from using a good

Answer 76

Non rivalrous means that when one person uses a good, it does not prevent others from using it

Answer 77

the facilities that support everyday economic activities : roads, phone lines

Answer 78

- Factors that are taken into consideration when choosing a place to start a business - labor, future expansion, location sustainability, transportation cost, land cost, customer ease and energy cost

Answer 79

A footloose industry is one which is not tied to any particular location or country and can relocate to another place without effect from factors of production such as resources, land, labor, and capital.

Answer 80

goods or services that are considered to be beneficial to individuals and society as a whole, but are often under-consumed and not utilized to the fullest

Answer 81

goods and services that are non-excludable and non-rivalrous

Answer 82

The buying and selling of goods or services over the internet

Answer 83

The dominance of a small number of firms within a particular industry or market

Answer 84

A single person who is the exclusive owner of a business, still have employees and the owner is entitled to keep all of the profits after tax but is also personally liable for the business' debts

Answer 85

- Keep all the profit they make for themselves - Make all the key decisions on their own - legally the easiest of all types of ownership to start, least rules and regulations - Low start up costs

Answer 86

- Unlimited Liability - Sole reasonability, the pressure of making all the important decisions can overwhelm some people - Profits are subject to Income Tax, means you cant, for example, leave profits in your business and pay yourself these further down the line or in the next tax year - Barriers to finance, lenders are more wary of sole traders because of the unlimited liability aspect and, in some cases, because of the private nature of these businesses, may have to borrow a smaller amount, and pay higher rates

Answer 87

Type of business that has 2 or more owners

Answer 88

- Shared Risk, partners contribute capital and share the risk of going bust between them - Shared responsibility, Takes pressure of and allows for shared responsibility for decisions made - Easy formation, Profits in partnership businesses flow directly to the personal tax returns of partners, providing easy access to earnings - Partners bring new skills and ideas to a business; Decision making can be much easier with more brains - More capital can be brought into the business - Shared workload

Answer 89

- Profits are shared between partners, typically equally, this can lead to inconsistency as one partner may do more work then the other - Unlimited Liability - Less control over your business as yo share it with your partner, slower decision making - Don't usually pay income tax, means the responsibility is passed to the partners - Potential for conflict, A fallout between partners is not uncommon and can potentially compromise a business

Answer 90

A business that is owned by its shareholders, run by directors and where the liability of shareholders for the debts of the company is limited. It does not publicly trade shares, and is limited to 50 shareholders

Answer 91

- Limited Liability, the business owner or owners are only responsible for business debts. up to the value of their financial investment in the business - Tax efficient, can claim corporation tax relief on their profits, can increase profits, dividends paid to shareholders are also taxed at a lower rate - Separate legal identity, creditors cannot seek direct payment from the personal assets of the business's owners in case of debts or bankruptcy on behalf of the business - Easier to raise capital, due to their credibility it is easier attract new investors.

Answer 92

- Limited access to capital, shares cannot be sold to the general public, and private limited companies have restrictions on how they can issue shares. This may limit the amount of capital raised to expand the business, as well as this their can only be a max number of shareholders (50), father limiting capital - Lack of Flexibility, Have to comply with a set of rules and regulations to operate. It is necessary to file documents such as annual returns, financial statements, and annual accounts with Companies House on time. Failure to do so can lead to penalties, and in the worst-case scenario, the company could be struck off the register. - Shared ownership, Lack of control - many shareholders, no single share holder is able to have complete control over the business - Slower decision making, shareholder must come to an agreement on important decisions which can take a long time when they disagree with each other.

Answer 93

A company who's shares are available to be purchased by the general public

Answer 94

- Limited liability - Large access to capital, as shares can be sold to the general public - Due to them being large businesses they are often able to benefit from economies of scale

Answer 95

- High barrier to entry, it is expensive to set up, requiring a minimum set up cost of £50,000 - There is a greater risk of a hostile takeover by a rival company as the company cannot control who buys its shares - Shareholders might clash when making decisions, slowing down the process

Answer 96

A legal business structure that is owned and governed by, and functions for, the benefit of those who use its services. They are owned by those that work for it, are served by it, or both.

Answer 97

- equal voting rights for members - Limited liability for members - No limit on the number of members - Additional members area source of finance

Answer 98

- members have equal voting rights regardless of investment - which may not suit an investor-driven business. And can lead to disputes over contribution - There is a legal limit on payments of dividends on shares, which may not suit an investor driven business

Answer 99

The owner(s) of a business are entirely responsible for its debts.

Answer 100

A business with specific social objectives that serve its primary purpose. Social enterprises seek to maximize profits while maximizing benefits to society and the environment

Answer 101

A organisation that is exclusively not for profit, and engages in activities that are legally considered to be of 'public benefit'

Answer 102

Sets out the terms of the partnership. For example it states how much money each partner invested in the partnership and what role each partner will have in the partnership

Answer 103

Owners of the company and therefore get to make decisions about how a company operates. To be a shareholder in a company, you need to own at least one share of the company. Shareholders can be individuals, companies, or other types of organisations.

Answer 104

broad term to describe a business registered with a state to become a separate legal entity

Answer 105

Businesses may decide to share a proportion of their profits with shareholders, and this payment is called a dividend

Answer 106

The portion of a company's profits that is not paid out as dividends to shareholders but is instead retained by the company for future use

Answer 107

- Increased Stock Value - Retained profit makes your business look better on paper with more money in your accounts, in turn attracting further investment - Financial Safety Net - boosts your corporate liquidity, this lends stability to your business with a financial safety net for any unexpected expenses, without taking on new liabilities - Funding for Growth - Another advantage to retaining profit is it gives you a fund for research and development. You can reinvest your earnings into the company and drive growth

Answer 108

The money used to cover all of a company's short-term expenses, which are due within one year. Working capital is the difference between a company's current assets and current liabilities

Answer 109

- Cannot be relied on as a long term source of finance as retained profit will eventually run out, and it is unpredictable how much retained profit a business will have each year

Answer 110

Liquidity Management: Adequate working capital enables a company to meet its immediate financial obligations, including paying suppliers, salaries, and utility bills. This liquidity management is vital for business continuity

Answer 111

- Increased risk of bad debts and shorter collection periods can impact cash flow - Excessive Working Capital leads to unnecessary accumulation of raw materials, components and spares

Answer 112

selling products owned by the business

Answer 113

- Can be a quick and easy way to raise finance

Answer 114

- Selling assets wont guarantee that you'll have enough money to finance what you need - Selling assets can put you in a difficult financial position if your business fails and you're unable to repay your debts

Answer 115

Money that comes from within a business

Answer 116

money that comes from outside a business

Answer 117

money that a business makes from selling its goods and services

Answer 118

Number of sales X Sales price

Answer 119

the amount of money that the business makes when taking into account costs

Answer 120

Total sales (Revenue) - Total costs

Answer 121

Costs that change in proportion to production output or sales

Answer 122

Costs that are independent of volume

Answer 123

A cost composed of a mixture of both fixed and variable components, costs are fixed for a set level of production or consumption, and they become variable after this production level is exceeded

Answer 124

A fixed amount of money that is given to a business by the bank that has to be repaid over time with interest

Answer 125

- Are paid back over time - Keep ownership of your business - Relatively quick access to a large sum of money

Answer 126

- Have to be paid back with interest - Harder for new businesses to acquire as they have no or very little credit history - Valuable collateral, the more money you wish to borrow, the more assets you'll have to pledge, failure to pay the money back will result in these assets being seized by the bank

Answer 127

A facility that can be part of the current account of a business. Business overdraft borrowing takes place when the business makes payments out of its current account and exceeds its available balance

Answer 128

- Easier to obtain for new businesses than other sources of finance as they do not require credit history or past profit and loss statements - Can be arranged Quickly

Answer 129

- Short term source - Interest charged is not predictable, as it depends on a variable interest rate and on the amount overdrawn on each day of the charging period. - The lender may not grant the entire amount requested, as the business's financial situation will be taken into consideration

Answer 130

When a business sells its accounts receivables to a third party at a discount, enabling companies to immediately unlock cash tied up in unpaid invoices without having to wait the usual payment terms

Answer 131

- Improves cash flow, as it allows you to get the cash from your invoices without having to wait for your customers to pay - Fast access to capital

Answer 132

- Loss of Profit, receive less than the total amount the invoice was worth - Loss of control over your business - Looks bad to your clients -Credit ratio downgrading- The creditworthiness of a corporation resorting to factoring will be reduced, as this system trades receivables with solid debts : book debts will not be available as security anymore. Access to credit will be reduced.

Answer 133

Leasing is a way of renting an asset that the business requires, such as a coffee machine. Monthly payments are made and the leasing company is responsible for the provision and upkeep of the leased item

Answer 134

- Don't have to outright buy the asset - Don't have to store what your leasing when your not using it, as you can just give it back to the leaser - Tax advantages, Lease payments can be deducted as a business expense, allowing a company to benefit from a tax advantage.

Answer 135

- If leasing is continued eventually it will become more expensive than buying the asset for yourself - Wont have full control as you don't own it

Answer 136

- A type of asset finance that allows firms or individuals to possess and control an asset during an agreed term, while paying rent or instalments covering depreciation of the asset, and interest to cover capital cost. - Hire purchase grants eventual ownership through installment payments

Answer 137

Flexibility - Both the monthly payments and the length of the agreement can be adjusted to meet the needs of the business Cash Flow - businesses can spread the cost of equipment, allowing them to manage cash flow and keep valuable working capital within the business. Paying a fixed amount each month over a set period will also help financial forecasting Ownership - Unlike other types of business lease agreements, once you have made the last hire purchase instalment, your business will own the equipment - Lower rate of interest then other forms of sources of finance Immediate access - By spreading the cost of high-value assets over time, your business can access the equipment immediately, rather than having to wait to save up the necessary funds. This supports business growth and expansion.

Answer 138

Asset deprivation - All assets depreciate over time, depending on the equipment, it could be at the end of its use by the time you finish the payments and would need replacing Overall Cost - End up paying more than if you bought the product outright Ongoing fixed payments - If you experience any financial difficulties in the future and are unable to pay, the lender may seize the asset

Answer 139

long term source of finance. It is a sum of money borrowed from the bank that is secured against a property and paid back in instalments

Answer 140

- Lower interest rates than other unsecured borrowing - Fixed monthly payments allow for easier and more accurate business planning and forecasting - Allows for more control over a property than renting, as you own it

Answer 141

- Interest, the total cost of the asses is much higher than if it were bought for cash

Answer 142

Where a business sells a major asset then leases the same asset back from the new owner in order to raise finance

Answer 143

Operational flexibility – cash out now, allowing a business to stay or move premises in the future as the company expands/contracts. Restore finances – bolster the firm's balance sheet by reducing debt and improving free cash flow.

Answer 144

- In the long term you pay more by renting, due to interest - Can reduce the value of the firms assets that can be used as security against future loans. -May eventually loose use of the asset when lease ends (a competitor may be prepared to pay higher)

Answer 145

The money invested in a company by the shareholders, In return for their investment, Long term finance, shareholders gain a share of the ownership of the company

Answer 146

- No interest - Investors bring advice & contacts - Increases brand notoriety - Less risk, no regular payments

Answer 147

- More share holders means less control, as there are more who own part of the business - Business becomes vulnerable to take over, due to it selling so more and more shares

Answer 148

An investor who provides young companies with capital in exchange for equity

Answer 149

- They can provide valuable guidance and mentorship to startup founders, helping them navigate challenges and make informed decisions - May have connections with key players in the industry, enabling startups to forge new partnerships and gain credibility

Answer 150

- Loss of control, decision making and authority will be shared as venture capitalists often want equity from the entrepreneur for payment - Dilution of ownership, this can reduce share profits and control over the direction of the company - High Expectations, venture capitalists expect a lot from an entrepreneur in a short time, causing a stressful work environment and causing demotivation

Answer 151

A sum of money provided by the government to a business that does not have to be repaid

Answer 152

- Does not need to be paid back

Answer 153

- Time consuming, in order to apply for a grant, a lot of research and paperwork will have to be completed - Difficult to receive, many businesses and individuals apply for grants and your application will be competing against there's

Answer 154

A price that can be specifically tied to the production of specific goods or services,

Answer 155

Costs that are not specifically linked to the product or service

Answer 156

The difference between sales and variable costs of production

Answer 157

Revenue - Variable Costs

Answer 158

The amount sales can fall before the break-even point is reached and the business begins to not make any profit

Answer 159

Current Sales - The breakeven point

Answer 160

The point at which revenue and total costs are the same, and neither a profit or loss is being made

Answer 161

Fixed costs (divided by) Sales price per unit - Variable costs Fixed costs ---------------------------------------------------- (Sales Price per unit - Variable costs)

Answer 162

Revenue running on the vertical axis Output on the horizontal axis Revenue line running from bottom left to top right Total Costs line running from the starting point of fixed costs to the top right corner Fixed costs are represented by a straight line going from somewhere on the revenue axis across the rest of the graph Breakeven point where revenue and Total costs meet, profits to the right and loss to the left

Answer 163

- Shows how many products a business need to sell in order to make a profit - helps visualize, boosting moral as goals can be set

Answer 164

- Ignores storage costs - assumes all products are sold - only looks at one product

Business Unit 1 Flashcards

(188 cards)