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GCSE Business > Chapter 1 > Flashcards

Chapter 1 Flashcards

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1
Q

Who do businesses sell too?

A

Customers

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2
Q

What are goods ?

A

Physical item likes books or furniture

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3
Q

What is a service ?

A

Actions performed by other people to aid customer eg. Barbers and plumbers

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4
Q

What are needs ?

A

Products or service somebody cannot live without

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5
Q

What is a want?

A

A good or service that a person can survive without.

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6
Q

Why would a person set up a business?

A
  • think they can provide a good or service
  • see a business opportunity
  • distributes good , have supplier
  • set up to benefit other people
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7
Q

What is the primary sector?

A
  • Produces raw material which are used to make goods or services
  • can be extracted from the ground (mining)
  • can be grown, for example farming
  • can be collected , for example fishing
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8
Q

What is the secondary sector ?

A
  • manufactures goods, turn raw materials into finished goods

- building and construction industries are also secondary sector

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9
Q

What is the tertiary sector?

A
  • provides services
  • firms provide services for consumers, like hairdressers, shops and restaurants
  • some firms provide services for other businesses , like warehousing and advertising
  • financial services like banking and insurance
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10
Q

What is enterprise?

A
  • enterprise involves identifying new business opportunities and taking advantage of them
  • enterprise involves starting a new business or helping an existing one expand with new ideas
  • entrepreneur takes the risk
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11
Q

What is always there when starting a business?

A

Risk and potential failure, but the rewards is profit

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12
Q

Why might someone become an entrepreneur?

A
  • financial reasons
  • identifying a gap in the market
  • independence, being own boss , working flexible hours
  • dissatisfied with current job
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13
Q

What qualities must an entrepreneur have?

A
  • hardworking
  • organised
  • innovative
  • willingness to take risks
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14
Q

What are the four factors of production?

A

Land
Labour
Capital
Enterpise

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15
Q

What is land as a factor of production?

A
  • territory and all of earths natural resources
  • non renewable resources such as gas , oil and coal
  • renewable resources like wind or tidal power
  • material from mining
  • water
  • animals found in area
  • all of these are scarce resources , cant satisfy demand of everyone
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16
Q

What is labour as a factor of production?

A
  • the work done by people who contribute to the production process
  • education, experience and training effect labour
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17
Q

What is capital as a factor of production

A

-equipment , factories and school that help produce goods or services

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18
Q

What is enterprise as a factor of production?

A

Refers to the people who take risks and create things

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19
Q

What is opportunity costs?

A

Benefit thats given up in order to do something else, the cost of the choice thats made. Businesses must adapt to put scarce resources in the right places

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20
Q

What are sole traders ?

A
  • one owner

- most small businesses are sole traders

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21
Q

Advantages of being a sole trader?

A
  • easy to set up
  • get to be own boss
  • decide what happens to profit
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22
Q

Disadvantages of a sole trader?

A
  • might have to work longer hours
  • unlimited liability
  • unincorporated
  • hard to raise money
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23
Q

What is unlimited liability?

A

You are liable for all money owed by the business

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24
Q

What does unincorporated mean?

A

Business doesn’t have its own legal structure , so if anyone sues the business they are suing the owner

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25
Q

What is a partnership ?

A
  • between 2 -20 people starting business

- each partner has equal say and equal share of profit , unless they have a deed of partnership that says different

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26
Q

Advantages of partnerships ?

A
  • more owners means more ideas and a greater range of skills and expertise
  • more people can share work
  • more owners means more capital can be put into the business , so it can grow faster
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27
Q

Disadvantages of partnerships ?

A 
- each partner is legally responsible for what all the other partners
 do 
-unlimited liability 
-more owners means more disagreement 
-profits are shared between partners
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28
Q

What is a limited company ?

A
  • can be private or public
  • incorporated, separate legal identity from owners. Companies name is liable for money , property and tax
  • limited liability
  • shareholders own company
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29
Q

What is limited liability?

A

If anything goes wrong the company is liable not the owners

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30
Q

What is a private limited company ?

A
  • shares are owned by shareholders and can only be sold if all shareholders agree
  • have Ltd in there name
  • sell up to 50 shares
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31
Q

Advantages of private limited companies ?

A
  • limited liability
  • incorporated, continue if shareholders died
  • easier to get loan or mortgage
  • owners have lots of controls as all shareholders have to agree to sell shares
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32
Q

Disadvantages of a private limited company?

A
  • more expensive to set up than partnerships because of all the legal paperwork
  • legally obliged to publish accounts every year (doesn’t have to be public )
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33
Q

What is a public limited company?

A

Companies shares are sold on the stock exchange.

Plc after name

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34
Q

Advantages of public limited companies ?

A
  • much more capital can be raised
  • helps company expand and diversify
  • limited liability and incorporated
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35
Q

Disadvantages of public limited companies ?

A
  • hard to get shareholders to agree how to run the business
  • easy to buy shares, shareholders have lack of control and could be taken over.
  • accounts have to be made public
  • more shareholders means more profit sold
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36
Q

How to choose a business structure

A
  • small businesses tend to have unlimited liability while larger businesses have limited liability
  • if you want more control , Ltds and sole traders are easier to control than plc and partnerhsips
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37
Q

Can you change the structure of business ?

A

Yes

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38
Q

What happens usually if a business grows ?

A

Sole trader or partnership may decide to change to a limited company

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39
Q

What is a not for profit business?

A
  • owners dont make a profit and the main goal is not profit
  • they still need to be able to cover costs though but surplus cash is put into projects
  • many have charitable status , get tax relief. Get donations. social entreprises
  • can be hard to manage, due to financial uncertainty so most workers are volunteers
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40
Q

What is a social enterprise ?

A

-make money by selling products , but use profits to better society

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41
Q

What legal structures do not for profit businesses have?

A
  • can be unincorporated. Have unlimited liability and easy to set
  • bigger organisations tend to be incorporated so people running have limited liability
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42
Q

What aims do businesses have?

A
  • growth
  • increase market share
  • survival
  • maximise profit
  • increase shareholder value
  • Achieve customer satisfaction
  • do what is right socially
43
Q

What are objectives?

A

A specific aim, can be used to measure a firms success and are targets for a business

44
Q

What should objectives be?

A 
Smart
Measurable 
Achievable
Realistic
Time
45
Q

How does the size of the business effect the objectives?

A
  • smaller businesses probably depend on word of mouth to survive so an objective would be customer satisfaction . Also growth and survival would be important
  • larger businesses get more attention so may try to act ethically
46
Q

How the level of competition effects the objectives ?

A

In a highly competitive market , you might focus on customer satisfaction to give an edge or to gain a greater market share.
Firms not facing much competition will want to grow or make a profit

47
Q

How the type of business effects the objectives?

A

-not for profit will have different objectives to a normal business

48
Q

How new legislation will effect a businesses objectives?

A

Companies may need to adjust objectives if laws are introduced. For example living wage.

49
Q

How change sin the economy effect objectives ?

A

-recession, companies growth may be put on hold

50
Q

Changes in technology, how it changes objectives?

A

Keep up to date with technology , to stay with competitors , change objectives so staff can use equipment

51
Q

How environmental expectations affects the businesses objectives?

A

Adapt ethical policy

52
Q

How a business can use objectives to measure success?

A
  • once they have set objectives they can check if they have met them.
  • for example you could measure the business by it profit.
53
Q

What is a stakeholder?

A

Anyone effected by the business

54
Q

Do stakeholders all want the business to achieve in the same way?

A

No , the stakeholders will have different opinions and different objectives for the firm

55
Q

How the owners of a business are a stakeholder?

A
  • most important stakeholder
  • make a profit if business is successful
  • in a ltd company the share holders are the owners. They will be looking for high dividends and high share prices
56
Q

How employees are stakeholders?

A
  • interested in job security and promotions. Improved if the firm grows
  • want a decent wage and good working conditions, objectives are ethics , growth , profit
57
Q

How the local community are stakeholders ?

A
  • will suffer from noise and pollution
  • may gain good jobs and money for local activities
  • local economy may improve
  • main objectives are environmental impacts , ethics , profit and growth
58
Q

How are the suppliers stakeholders?

A
  • firm buys raw materials from suppliers.
  • if a firms profit increases more materials will be needed which will be good for the supplier
  • suppliers benefit most from profit , growth
59
Q

How the government is a stakeholder?

A
  • receive taxes if the firm makes profit

- may benefit from profit , growth or job creation

60
Q

How the customers are stakeholders ?

A
  • want high quality products for low prices

- benefit when objectives are based on customer satisfaction

61
Q

How to work out revenue ?

A

Sales x price

62
Q

How stakeholders effect the business?

A
  • owners make decisions , most influential
  • need to consider interests of other stakeholders when setting objectives
  • stakeholders will often have conflicting opinions
  • stakeholders will often be ignored
63
Q

Most important stakeholder for a business?

A

Customers

64
Q

Why the workers are important stakeholders?

A

If not happy may be unproductive

65
Q

Stakeholders that can be ignored?

A

Local community if selling products elsewhere

66
Q

What is revenue

A

Income earned by a business

67
Q

What is equal to total costs ?

A

Variable costs +fixed costs

68
Q

What are fixed costs ?

A

Fixed costs dont vary with output. They have to be paid even if a firm produces nothing. Examples , rent , insurance and fixed salaries. Only fixed for a short period of time, expanding firms foxed costs will go up.

69
Q

What are variable costs ?

A

Costs that will increase as firm expands output. Example, factory labour, raw materials , running machinery.

70
Q

How to work out average unit cost ?

A

Total costs/output

71
Q

What is the average unit costs ?

A

-how much each product costs to make

72
Q

How to work out profit ?

A

Revenue - costs

73
Q

What is a business plan?

A

Outline of what a business wants to do and how to do it

74
Q

What should everyone do before starting a business?

A

Make a business plan

75
Q

Why business plans are useful?

A
  • if a firm wants to make big changes
  • forces owner to think carefully and helps them organise and find out what resources
  • can convince banks
  • if business is bad idea , you will see it earlier .
76
Q

What sections are on a business plan?

A
  • personal details
  • mission statement
  • objectives
  • product description
  • production details
  • staffing requirements
  • finance
77
Q

Drawbacks of a business plan ?

A
  • writing one can take lots of time and money
  • being too optimistic may end up with problems in the end
  • managers may stick too tightly to the plan
78
Q

What to take in mind when choosing the locations of a business?

A
  • location of raw materials
  • locations of market
  • labour supply
  • competition
  • cost
79
Q

Why the locations of raw materials should be taken into account when choosing a location for the business?

A

-raw materials being near locations will decrease transport costs

80
Q

Why labour supply is important when choosing a location?

A
  • close to an area of high unemployment , this will keep wages low
  • also good selection of people to choose from
  • close to quality places that provide training lie colleges
81
Q

Why competition is important when deciding the location of a business ?

A
  • being near competitors could be an advantages as it is easy to find skilled labour , already local suppliers and customers will know where to come
  • other businesses may want to stay away from competitors to maintain sales
82
Q

Why location of market is important when deciding the location?

A
  • some firms pay more to transport finished products than raw materials, far from customers
  • services locate where people can find them
  • firms sell products across the world may set up production sites in other countries
83
Q

Why the cost is important when deciding the location?

A
  • cost of labour varies per country. India and china have low wages
  • some areas will have more expensive property prices
  • government can give tax breaks and grants to firms who locate in specific areas
84
Q

What is internal expansion?

A

Organic growth , when a business grows by expanding its own activities

85
Q

Why internal expansion is good?

A
  • relatively inexpensive, firm carries on doing what it is good at
  • easier to make sure quality is maintained and new staff are well trained
86
Q

Disadvantages of internal growth ?

A

-can take a long time

87
Q

E-commerce as a Method of internal growth?

A
  • sell via the internet
  • larger market access to greater number of people
  • cheaper than setting up and running new store
  • technology has to be regularly updated and fixed
88
Q

Opening new stores , as a method of internal expansion?

A
  • low risk

- lots of extra costs , rent, wages

89
Q

Outsourcing , as a method of internal expansion?

A
  • business could pay another firm to do a task for them that they could do(outsourcing)
  • outsourcing firm may be able to do tasks more quickly , cheaply or to high standard
  • business does lose control and could get a bad reputation
90
Q

What is franchising?

A

Where a company expands by giving other firms the right to sell its product and use trademarks, in return for a fee or a percentage of profit.

91
Q

Who are the franchisors ?

A

Product manufacturers

92
Q

Who are the franchisees ?

A

Firm selling product

93
Q

What is external expansion ?

A

Expanding by working with other businesses

94
Q

What is a merger?

A

When two firms join together to form a new larger firm

95
Q

What is a take over?

A

When an existing firm expands by buying more than half the shares of another firm

96
Q

Why external expansion is good?

A

Firms can grow much more quickly

97
Q

Four ways a firm can merge or takeover ?

A
  • firm joins with a supplier. Allows the firm to control supply, cost and quality of raw materials
  • firm joins or takes over a competitor. Creates more economies of scale and a greater market share
  • two un related firms join together. Firm will expand by diversifying into new markets, no over reliance on one product or market
98
Q

Are mergers and takeovers usually successful?

A
  • less than half are successful. Difficult to get 2 businesses to work as 1. Management style differs , employees culture will be different.
  • takeovers usually are hostile and unpopular , which can create a bad feeling
  • mergers and takeovers usually lead to cost cutting , people made redundant.
99
Q

What is economies of scale?

A

Being a larger firm means that the average unit cost of each product falls, the reduction of costs is called the economies of scale.

100
Q

What is purchasing economies of scale?

A

When a large firm buy its supplies in bulk and so gets them at a cheaper unit price than a small firm

101
Q

What is technical economies of scale ?

A
  • occur because larger firms can afford to buy and operate more advanced machinery than smaller firms
  • also law of increased dimensions means that for example a facotry thats ten times as big will be less than ten times expensive
102
Q

Advantages of economies of scale?

A
  • lower average unit cost , more profit
  • also lower average unit costs means larger firms can afford to charge customers less for products than smaller firms can. So customers will be more likely to buy their products , leading to increased sales and profits
  • business can expand as can reinvest profits.
103
Q

What is diseconomies of scale ?

A

Where large firms average unit cost per product increases

104
Q

How diseconomies of scale can come about ?

A
  • bigger the firm , the harder and more expensive it is to run properly
  • big firms make communication harder, so decisions can take time to reach everybody. This can demotivate workers, they feel insignificant.
  • production processes may become more complex and difficult to coordinate

GCSE Business (6 decks)

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