Business Unit 1 ( Business Activity ) Flashcards
1.1 Role of business enterprise and entrepeneurship
Describe the 3 purposes of business enterprise & entrepreneurship
1. Spotting an opportunity
- Spotting a gap in the market
- Improving a product or service already provided
- Producing a product more cheaply
2. Developing an idea
- Designing the product or service
- Planning production
3. Satifying customer needs
- Producing the product or providing the service
- Marketing the product or service
1.1 Role of business enterprise and entrepeneurship
Outline the 4 characteristics of an Entrepreneur
1. Creativity
- Thinking up ideas & solving problems
2. Risk-taking
- Being prepared to put their own or others money at risk.
3. Determination
- Not being put of by difficulties
4. Confidence
- Being positive, believe in their own ability to make things happen.
1.1 Role of business enterprise and entrepeneurship
Describe the;
A) Financial risks and rewards
B) Non-Financial risks and rewards
Of being an Entrepneur.
A1) Financial Risks;
- If the business does not succeed, there is a risk of losing savings and gaining debts
A2) Financial Rewards;
- The potential to make alot of money
B1) Non-Financial Risks;
- Health - The strain of running a business can cause mental and physical illness
B2) Non-Financial Rewards;
- Independence - being your own boss & in control of what you do
- Self-satisfaction - feeling good because the business is a success
- Making a difference - improving the lives of customers; socially responsible goods and services.
1.2 Business Planning
Explain 2 advantages of writing a business plan.
1. Reduce the risk of failure - the business must think about their prices of not only themselves but competition.
2. Be as successfull as possible - the business decides the kind of people it needs to run the business.
1.2 Business Planning
Describe the steps involved in developing a business idea.
1. The idea
- Identify what the business sells and resources
- Identify the aims and objectives of the business & how to meet them
2. The people
- Identify who will be involved
- Identify the HR requirements the business needs.
3. Market Research
- Identify the market the business will target
- Identify marketing activities - price, product, place, promotion.
- Identify marketing resources
4. Finance
- Identify how much finance is needed & what for
- Identify how the money is raised.
- Also needed to** present to investors**.
5. Competitors
- Identify the competitors
- Identify how the product or service will be different - better, cheaper?
1.2 Business Planning
Identify the different purposes of a business plan.
1. Identifying the market, E.g. - age, gender and income of customers.
2. Identifying the resources needed to operate the business.
3. Identifying the finance needed to start or grow the business & how it will be achieved.
4. Achieve the business’ aims and objectives, for example making a profit.
Makes business objectives SMART;
- Specific
- Measurable
- Achievable
- Realistic
- Timely
1.3 Business Ownership
Describe the Advantages & Disadvantages of a Sole trader
A) Advantages;
1. Easy to set up - few forms to complete
2. Easier to control - only owner makes decisions
3. Business information can be kept private
4. All the business profits go the owner
B) Disadvantages;
1. There is no continuity - the business stops when they die
2. It is much more difficult to raise finance, only 1 person
3. Owner has unlimited liability.
4. They may have to work long hours - only 1 person
1.3 Business Ownership
Describe the Advantages & Disadvantages of a Partnership
A) Advantages;
1. The partners can work together on business decisions
2. Business information can be kept private
3. They can raise finance quicker than a sole trader - more people
4. Workload can be shared between the owners.
5. Brings more skills to the business
B) Disadvantages;
1. Partners may disagree on decisions, possibly causing arguments
2. Profits have to be shared between the owners
3. There is no continuity ( New deed of partnership needed )
4. The owners have unlimited liability.
1.3 Business Ownership
Describe the Advantages & Disadvantages of a Private limited company ( Ltd )
A) Advantages;
1. Business cannot be outright bought - Shareholders decides who buys
2. The business continues even is shareholders die
3. The owners ( shareholders ) have limited liability
4. Almost anyone can set up a private limited company
5. Business information is more private than a Plc
B) Disadvantages;
1. It is not very easy to set up - Registrar of companies require legal documents
2. It is harder to raise finance compared to a Plc ( Shares aren’t public )
3. Banks tend to trust Ltd’s less than Plc’s
1.3 Business Ownership
Describe the Advantages and Disadvantages of a Public limited company.
A) Advantages;
1. Anybody can buy shares, making it easier to raise finance.
2. Banks are more willing to hand out loans to plc’s
3. The business continues even if shareholders die.
4. The owners ( shareholders ) have limited liability.
B) Disadvantages;
1. Business information is more public than that of a Ltd
2. Since shares are public, it’s harder to control & the business can be bough outright.
3. Takes time to set up - Registrar of Companies require legal documents.
1.3 Business Ownership
Describe the features of;
A) Limited Liability
B) Unlimited Liability
A) Limited Liability
- Shareholders will not lose personal possesions for business losess
- Helps business start up and raise finance as people are more willing to invest.
- Can be complicated to set up due to documents needed ( Registrar of Companies )
B) Unlimited Liability
- Owners must pay back all debts owed
- If the business goes bankrupt, owner has to sell assests
- People may be discouraged because of the risks
- This can limit creation and expansion of certian businesses
1.3 Business Ownership
Describe the suitability for the following types of businesses;
A) Sole trader
B) Private limited company
C) Partnership
D) Public limited company
A) Suitable for Start-ups that;
- Only need a small amount of finance
- Usually have a low financial risk
- require limited or non-specialists skills.
B) Suitables of start-ups and business that;
- need larger amounts of finance ( sole traders & partnerships )
- have an increased or high financials risk
- have owners who wish to keep control
C) Suitable for start-ups or business that;
- need larger amounts of finance ( sole trader )
- have a fairly low financial risk
- need a wider range of skills ( sole trader )
D) Suitable for an established business that;
- wishes to grow
- needs very large amounts of finance
- has a** very high financial risk.**
1.4 Business aims and objectives
Describe the main different business Objectives & Reasons behind them.
1. Survival
- May be an objective for a new business to allow it to become establised and secure in the market.
- Could also be for a business in a competitive market.
2. Profit
- New business may seek profits to help them survive.
- Established businesses may want to earn profits to reinvest and expand.
3. Growth
- New business may set objectives for their growth of sales or market share to help them survive.
- Established business may want to grow, reduce compeition.
4. Providing a service
- Helps a business to get a good reputation, enabling them to attract new customers.
- This can help a business to survive or increase their profits.
1.4 Business aims and objectives
Explain why business may have different objectives.
1. They are at different stages of their development
2. Their owners have different motivations
3. They are influenced by different motivations
4. They are experiences different economic conditions.
1.5 Stakeholders in business
Describe of Roles & Objectives of internal stakeholders.
A) Owners
1. Role
- Provide finance to start-up and expand the business
- They may manage or run the business or they may employ managers
2. Objectives
- Make profits
- See the business grow
B) Employees
1. Role
- Produce goods and services
2. Objectives
- Sastifaction of having a job and earning an income.
- Be treated fairly be employers.
- Enjoyment of social aspects of working with colleagues.
