Business Year 11 Flashcards
What is Mechanisation
When machinery is used, but labour is still required to work the machinery.
Example of Mechanisation
A combine harvester requiring a driver
What is Automation
When machinery is used and is controlled by a computer.
Example of automation
Amazon warehouse robots
Advantages of using technology on a production line
- Large amounts can be made (economies of scale)
- Productivity (output) of the business increases
- Quality increases as there are less mistakes (more consistency), lowering costs and increasing customer satisfaction
- Better for repetitive or dangerous jobs
- Production can be flexible/varied
Disadvantages of using technology
- Redundancy may lead to problems with unions
- Staff need to be retrained for new skills or new staff are required
- Expensive initial costs
- Faults in systems can cause large disruptions
Job production definition
Involves producing each product individually
Examples of job production
Custom Bentley
Oscar dress
Bridge
Advantages of job production
- Higher quality as more time and money invested
- Workers more motivated as it is not repetitive
Disadvantages of job production
- cost of production is higher
- labour costs higher due to skilled workers
Batch production definition
When there are set stages of production. One process has to be completed before the next starts. Each batch goes through the same processes but batches slightly differ from one another.
Example of batch production
Bread
Advantages of batch production
- different demands can be met by making batches different
- can use machinery to save costs
- can produce large quantities
Disadvantages of batch production
- Demotivated workers due to repetitive tasks
- down time between stages/batches
- less economies of scale as materials change
Flow production definition
Continuous movement of items through the production processes
Advantages of flow production
- produce on mass
- economies of scale
Disadvantages of flow production
-whole production line stops if one thing breaks
Process production definition
Involves a series of automated processes, which when applied to a variety of raw materials results in a large quantity of finished product
Examples of process production
Turning crude oil into petrol
Example of flow production
Viennetta Ice-cream
Cars
Advantages of process production
- large amounts can be made
- most processes can be automated, keeping costs low
Disadvantages of process production
-expensive to set up an automated process system of production
Division of labour definition
To organisation of production into a number of specialised ‘simple’ repetitive processes
Specialisation definition
Occurs where workers specialise in carrying of simple production tasks.
Added value definition
The increased worth that a business creates for a product. It is the difference between what it costs a business to produce/supply a product and the price that it is able to charge for the product/service.
6 examples of adding value
Quality- higher quality, higher price Design and formula- contains distinctive features Convenience Speed and quality of service Branding- recognisable Unique selling point
Efficiency definition
Achieving minimum productivity with minimum wasted effort or expense
Lean production definition
A Japanese production system which helps ensure that waste is kept to a minimum. One feature of this is JIT.
Just in time JIT definition
Stocks of materials and components are not stored but are used immediately when they arrive at the factory
TQM - total quality management definition
The process where all workers are responsible for quality throughout the process of production.
This increases efficiency as you can find problems early on
Technology (how it helps efficiency)
This leads to efficiency as it minimises costs long term. Machines are less likely to make mistakes so maximises productivity
Reasons for a business to raise money
- start up business
- to invest in business growth
- to buy new equipment
- to solve cash flow problems
- to move to new premises
Internal finance
Comes from within the business e.g. retained profits
External finance
Comes from outside the business e.g. Grants
Example of internal, short term finance (up to 12months)
Cash in bank
Example of internal, medium term finance (1-3 years)
Retained profit
Sale of assets
Example of internal, long term source of finance (3+ years)
Retained profit
Owners investment
Example of external, short term source of finance
Overdraft
Trade credit
Example of external, medium term source of finance
Bank loan
Lease
Hire purchase
Grant
Example of external, long term source of finance
Bank loan Mortgage New partner Share issue Lease Hire purchase
Opportunity cost definition
The cost of missing out on something else
Example of opportunity cost to the case study
If the business uses the finance to develop new products they cannot also pay for new premises
Revenue definition
The money a business receives from selling goods/services
Variable costs definition
Costs that change as output changes
Average costs definition
All the costs of producing a particular product or service divided by the number sold
Total costs definition
All the costs of producing a particular product or service
Fixed costs definition
Costs which remain the same (short term), regardless of output
Example of variable costs
VAT is paid on goods produced and sold, this will differ depending on the output of your business
Example of fixed cost
Rent
Why are average costs useful to a business
They can then decide on a selling price
5 ways average costs can be reduced
- reduce the amount paid for material and supplies (negotiate or find new supplier)
- reduce wages (redundancy)
- increase efficiency of production (e.g. change from batch to flow)
- economies of scale
- JIT
Break even definition
The point at which sales are equal to costs
Where on a graph can you find the break even point
Where total costs and sales revenue cross over
Margin of safety definition
The difference between the actual level of output and the break-even output
Benefits of break even
- Helps to set a sales target
- Helps with loans as it may convince banks that you will be able to pay back money
- Can help you decide whether to increase prices or reduce costs
Disadvantages of break even
- Forecast figures may turn out differently
- Figures often relate to one product, a business will usually sell more than one product
- It assumes all output is sold
Definition of cash flow
The movement of money into and out of a bank account
Definition of inflows/incomes
Refers to the money received by a business
Definition of expenditure/outflows
Refers to the money going out of a business
Net cash flow definition
The difference between inflows and outflows
Positive net cash flow definition
When inflows are greater than outflows
Negative net cash flow definition
When inflows are not enough to cover outflows
Opening balance definition
The money in a business’s bank account at the beginning of a month (the same as the previous closing balance)
Closing balance definition
The money in a business’s bank account at the end of a month
Cash flow statement definition
The actual amount of cash flow at a certain point
Cash flow forecast
A prediction or estimate of the amount of income and expenditure
Why is cash important to a business
Without t they would be unable to make purchases
How can a business improve a cash flow position
- reduce costs (outflows)
- increase sales revenue (inflows)
- consider finding a source of finance e.g. loan
What are the uses of cash flow forecast
E
What are the disadvantage of cash flow
A
What are the benefits of cash flow
A
Gross profit definition
The amount of profit made by a business as a result of buying and selling goods or services, but without paying for any expenses
Net profit
The gross profit minus expenses of a business
Expense definition
An expense is a cost of running a business that occurs as part of a company’s operating activities during a specified accounting period
Accounting definition
The process of keeping financial records
Why is keeping financial records important
- Know if the business is making profit
- To plan for future investments
Profit margin definition
The ratio of profit over revenue, expressed as a percentage.
What is an example of an external influence
Brexit
Exchange rates
Exchange rates definition
The value of one currency in terms of another
Strengthening exchange rate definition
When one currency is increasing in value compared to another
Weakening exchange rate definition
When a currency decreases in value compared to another
Imports definition
Goods and services are bought from other countries and the money goes out of the UK
Exports definition
Good and services are sold to other countries and so the money comes into the UK
Exchange rates anagram
S-trong P-ound I-mports C-heap E-xports D-ear
Evaluation points
Look in book near end
How do interest rates affect a business
- cost of borrowing money changes
- customers costs of loan will also change, may have an impact on sales
- it is the reward for saving
How are interest rates set
Bank of England sets them, other banks generally follow what they decide on
Effect of changing interest rates for consumers and impact on business
Their costs increase (e.g. mortgage) so they have less disposable income to spend on non-necessities
Effect of changing interest rates for savers and impact on business
They get a better return for saving money, so spend it less frequently
Effect of changing interest rates for borrowers and impact on business
Loan repayments increase, less disposable income
Effect of changing interest rates for homeowners and impact on business
Mortgage repayments increase, less disposable income
Effect of changing interest rates on business and impact to the business
Loans cost more, less people but their product or service.
Less likely to grow and costs increase so sales revenue falls
How to structure 3/6 mark answer
- knowledge point
- how it effects the business (context)
- impact it has on the business (explanation why you say this point)
Advantages of high levels of unemployment
- more available workers
- will be able to employ workers more cheaply
Disadvantages of high levels of unemployment
- people don’t buy non-necessities
- workers become demotivated due to threat of losing their job
How does offering grants in Bowton benefit the area
Higher employment More visitors Employees move to area Increase revenue for businesses House price increase More tax/less benefit money
What is income tax
Employees pay
Corporation tax
Business pay
What is the EU
A political and economic union
What is the eurozone
Group of countries that use the euro
Advantages of being in EU
Access to single market
Greater access to more potential employees
Increase market size
What type of market is the EU
Single market
What are the single markets ‘four freedoms’
Free movement of:
- goods
- people
- services
- capital
What is a tariff
A tax paid on imports
What is a quota
A limit on the total quantity of a product that can be supplied to a market
How do toms toys benefit from the single market
- Tariffs not paid on 40% of goods that come from the EU
- Tariffs increase costs so make them less competitive
How do toms toys benefit from not being in the EU
- Encourages domestic trade as tariffs placed on items from Europe
- Possible new trade deals with non-EU countries e.g. USA, Canada, Australia, New Zealand
Benefits of EU membership
- Common standards
- Grants and subsidies
- Lack of Tariffs and quotas
- Larger candidates to employ
- larger choice of goods
Problems of EU membership
- Environmental standards
- Minimum wage
- Social charter
What is globalisation
The process by which business activities in different countries are becoming more and more connected to each other
Example of globalisation to toms toys
Import 70% of toys from abroad
What is international trade
Companies in one country produce and sell in others
Advantages of globalisation for UK
- increase choice for customers
- lower prices (through competition)
- Cheaper labour
- larger market
- economies of scale
Disadvantages of globalisation for UK
- low profits (if prices are cut)
- lower sales (competition)
- business closures and loss of jobs
Disadvantages to China (factories set up there)
Exploitation of workers
Pollution
Culture
Advantages to China of factories being set up there
Creates jobs
Tax for government
Advantages of using euro
No exchange costs
Reduced uncertainty
Comparing prices is easier
Disadvantages of using euro
Interest rates set by ECB
What is inflation
When prices of goods and services are generally rising
Why does inflation occur
Excess demand in economy, business increase prices
If costs increase then next business increase prices
How to control inflation
If too high, raise the interest rate to reduce the demand for products
3 ways governments spend money
- provide goods and services
- provide benefits
- provide grants
What is income tax
Tax on a persons income
Some traders by this, like toms toys
What is national insurance
Deducted from income to support NHS and state pensions
What is Corporation tax
Tax paid by limited companies profits
What are business rates
A tax paid by businesses on the property they use
What is council tax
Tax paid by homeowners and tenants on the property they live in
What is VAT
Tax on spending
International competitiveness
Page 4 second book
Types of government action to increase international competitiveness
Cut corporation tax Cut income tax Invest in infrastructure Invest in education and training Grants to businesses
How does cutting corporation tax help to increase international competitiveness
Business lower prices
Encourages inward investment
What is inward investment
Foreign firms set up in the uk
Leading to the need for other businesses in the UK to supply raw materials
How does cutting income tax help to increase international competitiveness
Productivity will increase as people work harder
How does investing in infrastructure help to increase international competitiveness
Goods can be distributed more efficiently
Changes in the UK population
More ethically diverse
Ageing population
Examples of competitive environments
Monopoly market
Perfect competition
Monopoly market
A market dominated by one seller (more than 25% market share)
Perfect competition
A market in which there are a large number of sellers
Examples of how competition is increased
New businesses entering market
Selling new products
Cutting prices
Increasing advertising
How can competition be decreased
Taking over or merging with competitors
Internal growth
Examples of environmental issues caused by business activity
Air/noise/water pollution
Using non renewable energy
Spoil landscape
Waste disposal
Negative externalities/external costs definition
Occur when production and/or consumption impose external costs on third parties
Definition of sustainability
The use of resources and supplies which does not lead to environmental damage
Move back to bowton
How to be more sustainable for gg toys
Use recycled materials for product and packaging
Use renewable energy
External costs
Costs to third parties
Private costs
Costs to a consumer or business as a result of business production or consumption
Social costs
Total external and private costs
