BUSINESS UNIT 1 Flashcards
Business resources
capital - money tools machinery equipment
land - production of good and services includes natural resources renewable and non renewable
labour - the workforce includes manuel skilled and management
enterprise - skills needs to take a risk when setting up, developing and organise a business
entrpenueleral characteristics
vision
risk taker
clear objectives
innovative
judgement
determination
self motivation
perserverance
communitvation skills
motives for being an entrpeneur
control over hours and working life
create a job
money
spotted a gap in the market
take advantage of an opportuinity
building experience
made redundant
unable to find employment
risks of becoming an entrpeneur
financial
lack of secuirty - no PTO, sick days, irregular hours
business failure - 1/2 fail in 5 years
health issues - due to stress/ long hours
rewards of becoming an entrepenur
profit
success
contribution to society
independence
capital growth
dividends payment
risks of a start up
high rate of failure
difficult to test without trading
easy to be over optimistic
aggressive competitors
underestimate persistace and effort
main reasons for start ups failing
customer deamnd - poor market research, unrealistic, competitors eg price cuts
poor execution - wrong employees, poor management, growth too quick/slow, failure to manage cashflow
external shocks - economic change, legal/social/tech change
example of startup failing
silver jet airlines - 25th jan 2007 - 30th may 2008
def of calculated risk
riak that has been given thoughtful consideration. potential losses/costs/benefits have been weighed and considered
why do the government encourage enterprise
creates employment - less benefits
stimulates economic dev
increase country reputation
increased comp
compete internationally bringing in more money
def of central business activity
to provide customers with goods and services that meet their needs and wants by providing similar goods/services for the marketplace. must compete with its competitors to make profits and survive to do this a business must add value and be competitive
def of service
intangable which cannot be touched or stored. paying for a skill
def of added value
a business makes a product/service more desirable to consumers. differences between selling price and cost of production
value added equation
value added = sales revenue - the cost of bought in good and services
ways to increase added value
introduce new/improved products
reduce cost of bought in items
how is a product made more desirable
quality
originality
customer service
additional features
builiding a brand
convenience
delivery options
def of competitive advantage
advantage a firm has over its competitors which allows it to attract and retain more customers and generate greater sales/profits
def of cost advantage
ability of a firm to produce an good/service at a lower cost if a firm has CA itll be able to sell its output at a lower price than competitor allowing it to gain a larger market share
methods of cost advantage
economies of scale - increased size lowers cost
economies of experience - accumulated experience built over time, producing goods more efficentley, specialists
superior tech - using more up to date machinery/products allows them to produce more efficently and often cheaper eg audi
def of differientation advantage
firms ability to separate itself and its products from thst of its main competitors making it more attractive
methods of differientation
unqiue selling point USP - originality eg free gifts, improves quality, limite editions, aftercare, loyalty cards, one off product
create a brand - unique design of symbols, words or a combination to create an image that identifies the product from its competitors
advantages of having a USP - differientation
charge higher price
increase market share
increase demand
lowers advertising costs
stands out against comp
- examples - nike (celebs in ads), amazon (convenience), dyson (bagless)
advantages of create a brand - differientation
charge premium prices
customer loyalty
save money on advertising
advantages of having cost advantage
gained through EOS increasing profit margin per unit
popular with consumers on low income
popular when economy goes into recession
smaller/less comp meaning can be eliminated easier
gain wider share of market
works for price sensitive products
disadvantages of having cost advantage
tends to reduce overheads through automisation so products are standardised
to remain comp prices may need reduced meaning lower profit margin
increased comp
may compromised quality
advantages of differientation
charge premium prices
useful in new markets where the consumers are unaware of other brands
suits those with strong brand image
difficult for a comp to do
disadvantage of differientation
extra costs may overweigh prices charged
contintious ad money needed
continious r&d money needed
can result in higher selling prices putting consumers off
def of sustainable comp ad
when a firm sustains a comp ad over a prolonged peroid of time over its rivals which cannot be copied or eroded
def of a body corporate
a company with a legal existence separate to its owners eg soletrader/partnership is NOT one
def of a legal entity
a body corporate
def of continuity of existence
if an owner or shareholder died then the shares are spread out amongst the company and business continues eg a soletrader/partnership do NOT have this
ad of sole trader
easy set up with little formalities
keep all profits
accounts private - comp ad
personal sat
freedom
grow at own pace
freedom from gov regulations
dis of sole trader
limited finance
limited ops for EOS
unlimited liability
not a body corp
no continuitity of existence
occupied full time
no fresh ideas
def of partnership
between 2-20 people with similar ideas or skills
def of general partnership act 1890
take on equal responsibility, with limited liability
def of sleeping partner
invest and take profits without taking a part in running the business
def of deed of partnership
states responsiblities, clarifies losses/profits spilit as well as assets, includes - trading name, function, capital invests, profit ratio, control, rules on admitting new partners, rules on ending
ad of partnership
own boss
easy set up
accounts kept private - comp ad
increased specialisation
increase finance availability
shared responsibility
people to help pay debts
dis of partnership
unlimited liability
actions of one affect all
disputes
not a legal entity
no continuetity of existence
finance difficulties
characteristics of limited companies
body corporate
limited liability
own legal identity
must be registared in UK company house by delivering the documents with fees in which they will then receive the certificate of incorporation
public - plc after its name, min of 50k share capital
private - limited after its name, max 50k share capital
def of memorandum of association
gives the
name,
public/private
basic structure
objectives
authorised share capital
profit divides
def of the articles of association
refers to the internal management of the company
gives rights of shareholders
role of directors
issuing dividends
holding of meetings
def of the companies act 2006
changes that had to be made to articles of association, the memorandum of association, form 10 and form 12 had to be changed by 2008
def of form 10 and 12
10 - records details of the directors
12 - directors declare their compliance with all legal requirements
ad of company status
shareholders have limited liability
no limit on shareholders - opportuinity to raise capital
easier to borrow money
continuitity of existence
body corp
more status than other business meaning others are more prepared to deal making trade credit easier to get
dis of company status
costly
timely
accounts open to public
strict legal requirements on the running
original owners have less influence
always under pressure to return profit
vunerable to take overs (public)
ad of plc
raise more capital
extra capital is critical for r&d
easier to borrow money
improve corp image
dis of plc
costly
time consuming
accounts public - loss of comp ad
have to concentrate of keeping shareholders happy
long term research may suffer due to paying yearly dividends
subject to take overs
loss of control
ad of ltd
easier to raise capital than partnership/soletrader
no limit on number of shareholders
shareholders have limited liability - risktaking
no outsiders can purchase shares - no takeovers
body corp
continueity of existence
dis of ltd
accounts open to public - loss of comp ad
limitations on capital
shared profits
def of franchsing
an entrepeneur develops a business who will then sell the rights to a franchisee and allow them to sell under that name in an area
def of product and trade name
less common - franchsior provides trademarks and logos, ad campaigns and products but not a complete business system. franchisee pays upfront fee but no adittional royalties eg soda
def of business format
most common - franchisor offers a complete system of doing business and use of trademarks/logos in return they pay an upfront fee and ongoing royalties eg subway
ad of franchisee
prebuilt customer base
prebuilt reputation
training arrangements - cheaper
pre sorted area and equipment
provided assistance
easier to loan money
ads done large scale - money saving
franchisor sells stock - EOS
r&d done for you
higher sucess rate
dis of franchisee
loss of control
no control over reputation
franchsior mistakes affect you
have to pay royalties reducing profits
ad of franchsior
expand without risking own capital
less work
dis of franchsior
reputation ruined easy
diseconomies of scale
def of social enterprise
works to deliver goods/services to make a profit/breakeven they are driven by social/enviromental purposes. set up to fufill social needs eg unemployment any profit made is reinvested to the purpose
qualities to be a social enterprise
primaraliy social objectives/aims and ethical values
profits reinvested into business or community
directly involved in producing goods/services
self sustaining
doesn’t rely on donations
examples of social enterprises
divine choclate
jamie olivers 15 restaurants
the big issue
bryson house
ad of social enterprise
profits to change
donations for change
revenue for change
dis of social enterprise
depends on funds
big risk
def of stakeholders
groups affected by or have an interest in the operations/objectives of the business
examples of internal, connected and external stakeholders
internal - directors, managers, employees
connected - shareholders, customers, suppliers, consultants, competitors, advisors
external - government, locals, media, pressure groups
examples of how business can use social media
podcasts
media compaigns
celeb giveaways
task of the owners, staff, customers use of social media
owners - maintain positive profile
staff - build customer network, monitor brand preformance, max website visits, generate sales, respond to customers, establish the business
customers - provide feedback
task of creditors, pressure groups and locals of social media
creditors - communicate reguarding price changes, discounts, special offers, however they may not request payment
pressure groups - publise business activity
locals - promote corporate soical responsibility, free publicity
ad of using social media
boost links to website
cheaper
increase brand awareness
improve customer service
can be found through more links generating more sales
dis of social media
commit to the resources managing - expensive
ineffective use
user resistance
failing to respond to negative feedback
def of quality management
the ability of a product to meet consumer expectations reguarding its use aswell as the actual build quality of the product itself
OR
a measure of the excellence or extent to which something is fit for its purpose and includes aspects such as reliability, safety, durability, usability, after sales service and customer care
why is quality management important
performance
charge premium prices
adds value
cost effectiveness - low level defects, less returns
reliability - good reviews
retaining customers - encourages repeat buying
improves brand image
attracts good staff
implications of quality management
costs - refunds, reductions, returns
damaged rep - complaints, dissatisfied, product recall,
loss of sales - market share, loyalty
legal issues - fines, sued, dangerous products
decreased prod - employee demot, increased costs, health and safety issues
def of quality
