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Business > Definitions for Understanding business activity > Flashcards

Definitions for Understanding business activity Flashcards

1
Q

Business activity

A

The process of producing goods and services to satisfy consumer demand.

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2
Q

Need

A

A good or service which is essential to living.

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3
Q

Want

A

A good or service which people would like, but is not essential for living.

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4
Q

Economic problem

A

Unlimited wants cannot be met because there are limited factors factors of production. This creates scarcity.

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5
Q

Factors of production

A

The resources needed to produce goods and services- Land, capital, labour and enterprise.

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6
Q

Scarcity

A

There are not enough goods and services to meet the wants of the population.

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7
Q

Opportunity cost

A

The next best alternative forgone by choosing another option.

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8
Q

Specialisation

A

People and businesses concentrate on what they are best at.

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9
Q

Division of labour

A

Production is divided into separate tasks and each employee does just one of those tasks.

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10
Q

Adding value

A

Selling price - cost to make the product = Value added

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11
Q

Ways of adding value

A

-Branding
-Excellent service quality
-Extra product features
-Convenience

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12
Q

Primary sector

A

Firms whose business activity involves the extraction of natural resources.

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13
Q

Secondary sector

A

Firms that process and manufacture goods from natural resources.

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14
Q

Tertiary sector

A

Firms that supply a service to consumers and other businesses.

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15
Q

Chain of production

A

The production and supply of goods to the final consumer involves activities from primary, secondary and tertiary sector businesses.

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16
Q

Mixed economy

A

An economy where the resources are owned and controlled by both the private and the public sectors.

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17
Q

Private sector

A

The part of the economy that is owned and controlled by individuals and companies for profit.

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18
Q

Public sector

A

The part of the economy that is controlled by the state or government.

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19
Q

Entrepreneur

A

An individual who has an idea for a new business and takes the financial risk of starting up and managing it

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20
Q

Characteristics

A

-Innovative
-Self-motivated and determined
-Self-confident
-Multi-skilled
-Strong leadership qualities
-Initiative
-Results driven
-Risk-taker
-Good at networking

21
Q

Business plan

A

A detailed written document outlining the purpose and aims of a business which is often used to persuade lenders or investors to finance a business proposal.

22
Q

Advantages of a business plan

A

-Business is much easier to run
-Decreases chance of losing sight of business objective
-Help motivate the employees
-Can be used to persuade lenders

23
Q

Revenue

A

The amount a business earns from the sale of its products

24
Q

Measuring business size

A

-Number of employees
-Value of output
-Market share
-Capital employed

25
Q

Internal growth

A

When a business expands its existing operations.
-Increasing the number of goods it can produce.
-Developing new products
-Finding a new market for its product

26
Q

External growth

A

When a business takes over or merges with another business

27
Q

Four types of external growth

A

-Horizontal integration: 2 businesses in the same sector and same industry.
-Forward vertical integration: 2 businesses in the same industry but one is the customer of the other.
-Backward vertical integration: 2 businesses are in the same industry but one is the supplier of the other.
-Conglomerate integration: 2 businesses who are in completely different industries

28
Q

Why businesses remain small

A

-Owners choice
-Market size
-Access and availability
-Market domination

29
Q

Why businesses fail

A

-Poor planning / Lack of objectives
-Liquidity Problems
-Poor choice of location
-Poor management
-Failure to invest in new technologies
-Poor marketing
-Lack of finance
-Competition
-Economic influences

30
Q

Sole traders

A

A business that is owned and controlled by one person who takes all the risks and receives all the profit.

31
Q

Partnerships

A

A business formed by two or more people who will usually share responsibility for the day-to-day running of the business. Partners usually invest capital in the business and share profit.

32
Q

Franchise

A

A business system where entrepreneurs but the right to use the name, logo and products of an existing business.

33
Q

Joint venture

A

When 2 or more businesses come together to work on a project.

34
Q

Unincorporated business

A

A business that does not have a separate legal identity from the owners. They have unlimited liability.

35
Q

Unlimited liability

A

If an unincorporated business fails then the owners may have to pay of business debt with their own personal wealth.

36
Q

Limited liability

A

The shareholders in a limited liability company which fails only risk losing the amount they have invested in the company.

37
Q

Shareholder

A

A person or organization who owns shares in a limited company.

38
Q

Private limited company

A

Usually a small to medium sized company owned by shareholders who have limited liability. The company cannot sell shares to the general public.

39
Q

Public limited company

A

Usually a large business owned by shareholders who have limited liability. The company can sell shares to the general public.

40
Q

Dividend

A

A payment to shareholders as a reward for their investment, comes from profits

41
Q

Public corporations

A

A business organization that is owned and controlled by the state.

42
Q

Objective

A

Aims and targets that a business works towards in order for it to run successfully. It should be SMART

43
Q

SMART

A

-Specific
-Measurable
-Achievable and agreed
-Realistic and relevant
-Time-specific

44
Q

Market share

A

The revenue of a business expressed as a percentage of total market revenue

45
Q

Different business objectives

A

-Survival
-Profit
-Growth
-Market share
-Corporate social responsibility

46
Q

Social enterprise

A

A business with social objectives that reinvests most of its profits back into the business or into benefiting society at large.

47
Q

Stakeholder

A

An individual or group which has an interest in a business because they are affected by its activities and decisions.

48
Q

Internal stakeholders

A

-Owners and shareholders
-Managers
-Employees

49
Q

External stakeholders

A

-Lenders
-Suppliers
-Customers
-Government
-Local community

Business (2 decks)

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