component 1 - Business opportunities Flashcards
what are the 3 business sectors?
-private
-public
-voluntary
what type of businesses are in the private sector?
businesses who’s main goal is to make a profit and are owned by private investors
what type of businesses are in the public sector?
businesses who’s goal is to help British citizens and are owned by the government. They are funded by taxes.
what type of businesses are in the voluntary sector?
businesses that aren’t concerned about profit and that’s main goal is to help raise money eg charities
what are the 4 sizes of businesses?
-micro businesses
-small businesses
-medium businesses
-large businesses
what is a micro business?
a business with less than 10 employees and turnover under £2million
what is a small business?
a business with less than 50 employees and turnover under £10million
what is a medium business?
a business with less than 250 employees and turnover under £50million
what is a large business?
a business with more than 250 employees and turnover more than £50million
what are the 4 factors of production?
-capital
-enterprise
-labour
-land
what is the mnemonic for the factors of production?
CELL
what is capital?
the finance invested in the firm by the owner/shareholder
what is enterprise?
bringing together the factors of production in order to produce a good or service
what is land?
where the business is based or where it can get extractable resources
what is labour?
the people who work in the business
what are the 3 production sectors?
-primary
-secondary
-tertiary
what is the focus of the primary sector?
extracting raw materials
what is the focus of the secondary sector?
manufacturing processes
what is the focus of the tertiary sector?
private companies that provide a service
what does interdependent mean?
all sectors rely on eachother
what is an aim?
a long term goal
give 2 pros of an aim
-helps give a business direction and work towards a goal
-helps a business see their progress
give 3 examples of aims
-profit
-growth
-market share
what is innovation?
coming up with new ideas
what are objectives?
shorter term, more specific goals
what is the mnemonic for objectives?
SMART
-specific
-measurable
-achievable
-realistic
-time based
what is the mnemonic for examples of objectives?
PIGSS
-profit
-image
-growth
-social
-survival
state the equation for profit
profit = total sales - total costs
give 3 uses of profit
-expansion of business
-measurement of success
-investor pressure
state 3 ways growth can be measured
-value of sales
-volume of sales
-market share
give 2 ways a business can grow
internally or externally
give 2 examples of how a business can grow organically
-by opening new stores
-by launching new products
give 2 examples of how a business can grow externally
-merger
-takeover
what is the focus of the tertiary sector?
when the business has enough capital to cover costs in order to exist
what is cashflow?
the inflow and outflow of cash in a business
what does it mean by a business behaving socially?
what does it mean by a business behaving socially?
give 2 ways in which a business could behave socially
-creating employment
-supporting local community
what does it mean by a business behaving ethically?
when they behave in a way which is morally correct
give 2 ways in which a business can behave ethically
-by treating stakeholders in a fair manner
-by reducing negative impacts on the environment
give 2 reasons why businesses set objectives
-to monitor/measure performance
-to motivate employees
give 2 aims of a business in the private sector
-profit
-expansion
give 2 aims of a business in the public sector
-help people
-improve quality of public services
give 2 aims of a business in the voluntary sector
-offer services to the community
-to open more branches
what is a stakeholder?
someone with an interest in a business
give 2 examples of internal stakeholders
-owners
-employees
give 5 examples of external stakeholders
-customers
-the government
-local community
-suppliers
-competition
give 3 examples of conflict in a business
-owner vs employee
-owner vs customer
-owner vs supplier
give 3 reasons someone might start their own business
-to make a profit
-to fulfil and interest
-to be their own boss
what is an entrepreneur?
An individual who has an idea that they develop by setting up a new business and helping it grow
give 3 qualities of an entrepreneur
-risk taking
-determined
-creative
what is an opportunity cost?
The next best thing that could’ve been chosen but wasn’t. Eg the cost of losing out on an opportunity
give 3 ways in which business opportunities can be identified
-spotting trends
-notice something missing
-copying ideas from elsewhere
what is a business plan?
a report describing the strategies involving the functions in a business
give 5 things in which a business plan contains
-the idea
-finance (costs)
-market research
-aims and objectives
-competition
give 3 pros of a business plan
-helps clarify objectives and identifies how to meet them
-helps with organisation
-helps analyse risk
give 3 cons of a business plan
-factors may change
-time consuming
-may lack experience
give 2 sources of help for writing a business plan
-enterprise agencies
-accountants
what is a market?
a place where buyers and sellers come together
give 2 types of markets
-local
-global
give 2 types of marketing
-mass
-niche
what is mass marketing?
creating a product or service that appears to all types of consumer
what is niche marketing?
targeting smaller/specific segments
give 2 pros to a business operating in a local market
-good relationship and understanding with customers
-reputation spreads quickly
give a con of a business operating in a local market
-small market size so less potential sales
-give 3 cons to a business operating in a global market
-slower communication
-more competition
-slow spread reputation
give a pro|to a business operating in a global market
-large market size meaning more potential customers
what is market segmentation?
grouping customers into categories based on characteristics eg age and gender
give 3 methods of market segmentation with examples
-demographic eg age, gender, income
-geographic eg urban, rural
-psychographic eg personality and emotion
give 2 pros of market segmentation
-helps with advertising as can be more specific so is more specific
-most and least profitable customers can be identified
give a con of market segmentation
-business may become too narrow minded so sales may be limited
give 2 pros of niche marketing
-more specific
-allows business to charge premium prices
give 2 pros of mass marketing
-large audience
-more potential customers
what is market share?
the percentage or proportion of the total sales of a product in comparison to it’s market
what is market growth?
the percentage change in sales over a period of time
what are the 3 cs?
-customers
-competition
-costs
give 2 ways a market is measured
-in volume/quantity of products sold
-value of the goods sold
give 3 factors that could influence market growth
-economic growth
-fashion/trends
-changes in taste
give the formula for market share
sales of one product/total sales in market x 100
what is extrapolation?
the use of trends established by previous data to make predictions about future values
give 2 pros of extrapollation
-cheap and simple
-not much data is required
give 3 cons of extrapolation
-may be unreliable
-assumes past trends will continue
-ignores qualitative factors eg changes in taste
give 3 reasons why businesses compete
-market share
-profit
-to be market leader
give 4 types of competition
-monopoly
-oligopoly
-monopolistic
-perfect
what is monopoly competition?
-when a market is dominated by a firm with a market share over 25%. They are known as the pricemakers
give 3 features of monopoly competition
-larger firms have control over the market
-high capital costs to set up for new businesses
-customers already have loyalty
what is oligopoly competition?
when a market is dominated by a small number of large firms
give 3 features of oligopoly competition
-brand loyalty
-strong brand identities
-barriers to entry
what is monopolistic competition?
when a large number of firms compete in a market, however each have a differentiation
give 2 features of monopolistic competition
-easy for new firms to enter the market
-product differentiation
what is perfect competition?
when there are a large number of similar sellers who are too small to influence the price of the product
give 2 features of perfect competition
-all sellers produce very similar products
-freedom of entry for new businesses
give 3 pros of SMEs
-create jobs
-pay tax to the government
-create competition
give 3 cons of SMEs
-small scale and more likely to fail in hard times
-smaller budgets so hard to compete
-harder to raise finance eg less branding
give 2 pros of PLCs
-can raise finance by selling shares on stock exchange
-reputation as well established
give 2 cons of PLCs
-risk of takeover
-financial information available to anyone
give 4 internal factors that influence a business
-finance
-marketing
-operations
-human resources
give 4 external factors that influence a business
-political factors
-customers
-suppliers
-competition
give 3 ways of how a business can improve competitiveness
-improved marketing
-reducing costs
-improved quality
give 2 reasons why competition benefits the government
-provides jobs = less unemployment
-more disposable income = more tax
what is demand?
the amount of a product of service that consumers are willing or able to buy at any given price
give 5 factors that influence demand
-tastes and fashion
-seasonal factors
-price
-incomes and wealth
-marketing
what is market equilibrium?
the point at which consumers are willing to purchase at a given price and suppliers are willing to sell at the given price (where consumers and suppliers both agree)
why may market equilibriums shift/change?
due to patterns of demand and supply
what does price elasticity of demand mean?
how sensitive demand is to a change in price
what does it mean if demand is elastic?
demand is sensitive to a change in certain factors eg price or income
what does it mean if demand is inelastic?
demand isn’t sensitive to a change in price
give 3 things that influence pricing decisions
-costs of production
-competition
-customer demand
what is the equation for price elasticity of demand? how can you tell if it is elastic or inelastic?
%change in quantity demanded/%change in price
if answer is 1+ = elastic
if answer is 1- = inelastic
give 3 types of product with examples
-luxury (iphone 15)
-normal (walkers crisps)
-inferior (Aldi crisps)
what is market research?
finding out information about the wants and needs of customers in order to identify and satisfy demand
give the 3 steps for market research
-identify
-anticipate
-satisfy
what is primary research?
collecting information first hand
give 3 methods of primary research
-focus groups
-questionnaires
-interviews
give 2 pros of primary research
-up to date
-relevant to business
give 2 cons of primary research
-may be expensive
-time consuming
what is secondary research
-collecting already existing information
give 3 methods of secondary research
-census
-magazines
-newspapers
give 2 pros of secondary research
-readily available
-cheap
give 2 cons of secondary research
-may not be relevant to the business
-may not be up to date
give 2 types of data
-qualitative and quantitative
what is qualitative data
the collection of information based on subjective factors eg opinions and reasons
what is quantitative data?
the collection of information based on numerical values (usually gathered by closed questions)
give 3 pros of being a sole trader
-full control
-keep all profits
-quick decision making with less conflict
give 3 cons of being a sole trader
-unlimited liability
-limited skillsets
-more responsibility and work load
give 3 pros of being an LTD
-limited liability
-shared workload
-varied skillsets
give 3 cons of being an LTD
-profits shared
-more potential conflict
-slower decision making
give 2 pros of break even analysis
-helps planning and target setting
-cheap to construct and can be carried out quickly
give 2 cons of break even analysis
-factors may change so may be misleading
-assumes all output is sold
what are the 4 business ownership types?
-LTD
-PLC
-sole trader
-partnership
give 3 pros of a partnership
-shared workload
-varied skillset
-more sources of finance
give 3 cons of a partnership
-unlimited liability
-potential conflict
-profits split
give 3 business oportunities
-increase in customer demand
-gap in the market
-new developing market occurs
give 3 sources of guidance available to entrepreneurs
-already established businesses
-banks (loans)
-accountants (advise)
give 3 reasons why consumers need protection from exploitation by businesses
-to ensure consumer satisfaction of purchase
-to ensure goods sold don’t contain harmful side affects
-to protect from misleading advertisement
what are subsides?
Financial assistance provided by the government to support economic activities (businesses) that it wishes to encourage.
give 4 factors that impact the supply of a product
-cost of production
-technology
-number of existing firms
-subsides
state 3 business opportunities for entrepreneurs
-can be own boss
-make a profit
-fulfil and interest
what are inferior goods?
goods that will increase in demand when incomes fall (elastic)
give an example of an inferior good
supermarket own branded food
what is a normal good?
a good that is least affected by income. these are usually a need (usually inelastic)
give 2 examples of normal goods
bread and milk
what is a luxury good?
a good that will increase in demand as income increases (these are elastic)
give an example of a luxury good
designer clothing
give 2 advantages of margin of safety
-helps the business to understand the level of cushioning they have
-helps alert the business about financial threats and indicates them to change selling price
give 2 disadvantages to margin of safety
-doesn’t guarantee returns, only an indication to the business so doesn’t prevent loss
-business may choose to ignore their margin of safety, making it ineffective
what is quantitative data?
data involving numerical values and can be measured
