Glossary For Theme 1 Flashcards
Outlay
- an amount of money spent on something
Markup
the amount added to the cost price of goods to cover overheads and profit
Segment
What part of the market your product or advertisement may be aimed at
Supply and demand
how much volume of products you can make, to keep up with the demand of the public
Me too approach
Copying someone’s ideas
Burn rate of cash
the amount of money that a company uses before it starts generating its own cash
Why is Big data useful
access to big data sets to reveal trends and patterns of consumer behaviour
Smart money
money invested from people with expertise
Added value
the amount of money by which the value of a product has risen
could be as a result as a persons or firms part in producing a good service
USP
unique selling point, the aspect of a businesses activity that makes it distinctive and sets it apart from the competition
Branding
Branding the way of defining business, its aims and its values in a way that can be communicated with consumers
Values
standards of behaviour or moral principals
Differenciate
being able to stand out against the market, eg differentiating yourself
Segmentation
Breaking down into smaller parts
Demographics
relating to the structure of a population
Market research can
finding out what people want in a product or service
Secondary data
information which is already available from within an existing business and from outside the business
Positioning
Where the product fits in the market, and its position compared with its competitors
Portfolio
The range of products offered
Gap in the market
an opening or opportunity to develop a new product
What does a market map let you do
- See all the products or services in the market
- Identify any competitors
- Spot any gaps in the market
- See the position of the product in the market place
Two keywords for market mapping are:
position, and gap
Market segmentation
the process of dividing an entire market up into different customer segments.
Targeting/target marketing
deciding which customer segments the company will focus on
Psychographic segmentation -
dividing your market into segments based upon different personality traits, values, attitudes, Interests, and lifestyles of consumers.
What may be strengths of other businesses (competition)
- Price
- Quality
- Location
- Product range (portfolio)
- Customer service
Customer needs
- Quality
- Convenience
- Longevity
- Safety
Should align with price point
The four main uses of market research
- To identify and understand customer needs
- To identify gaps in the market
- To reduce risk
- To inform business decisions
Free market
Is a system of buying and selling goods and services with little or no government control. (good for consumers)
Monopoly
when one business dominates the whole market.
Price fixing
prices are kept at a set price - customers may be forced to pay more than expected
Monopoly
when one business dominates the whole market.
Aims
the overall goals a business wants to achieve
Objective
The practical steps of a particular goal the business wants to achieve
Primary sector
mining, farming, resource gathering
Secondary sector
(manufacturing sector) factories
Tertiary sector
retail, chef, waiter etc
Quaternary sector
ICT (information and communications technology)
Quinery sector
non profit services - healthcare, charities, government
Fixed costs
they are costs that do not vary with the amount that the business produces (eg utilities and rent prices)
Variable costs
These are costs that change as output changes (eg raw materials to make products)
Break even
Going from loss to profit
Cash
is the asset that the business holds which allow it to buy supplies and wages
Salary
is the money you get before tax per year
solvent
When the companines revenue is higher than the costs
Wound up
when the company seizes to trade (its gone)
Cash flow allows you to
- Taking in more staff
- Opening a new branch
- Identifying risk
- Taking money out of the business for personal use
Overdraft
a facility where you are allowed to go into debt for a certain period of time
Arrear
Behind on payment
Liquidity problem
A business that doesn’t have enough cash
Margin of safety
the amount of sales that a business need to generate above break-even point.
External sources of finance
finances provided by people or institutions outside the business creates a debt that will require payment
Trade credit
items are bought from auppliers on a buy now pay later basis
Venture capitalists
- do not expect money back straight away
- Shares in the company can only be sold if all the shareholders agree to it.
Difference between private and public limited company
lies in the ownership of their shares
In a private limited company, there is restricted ownership. Shares in the company can only be sold if all of the shareholders agree with it
In a public limited company anyone can buy shares
Who can buy shares from a public limited company
In a public limited company, anyone 18+ can buy shares
Private limited company
- can start up with as little as £2 in share capital, whereas a public limited company must have at least £50,000 worth of shares to begin trading.
- Private company can sell shares privately - I.e. maybe to bring in another person
What are debts incurred from a business examples
- capital borrowed from bank
- money owed to suppliers
- employees wages
Public limited company
-> Must have at least £50000 worth of shares to begin trading
-> Anyone can invest as long as your above 18
-> needs at least 2 shareholders
Sole trader / proprietor
One person business
Partnership
Group of owners between 1 and 20 people
What does unlimited liability mean
If they are in debt and the business fails, they need to sell their belongings in order to pay back their business, even if assets are their personal belongings
What is limited liability
If the business fails, only the COMPANIES assets are sold to repay debts. The owners belongings are left untouched
Limited companies have limited risk
How many people do you need to set up an limited liability company
You need 2 people to set it up
What is a consumer co operatives company
Owned by customers
What is a co operative company
Companies that normally have important objectives rather than making money
What are Workers co operatives
Owned and run by their owners
Private sector companies
companies are owned by private organisations or by individuals
Public sector companies
companies are run by cantorial government or local authorities, public sector businesses
do not try to make profit, and are funded from taxes such as council tax rather than shareholders
Advantages for franchises
- higher survival rate over the first five years due to already established brand
- Selling a WELL-KNOWN name-to the public, already good reputation
- Advice/training, GUIDANCE and expertise from the Franchiser.
- FEWER DECISIONS to make in operating the business.
- Maintain MOST of the PROFIT.
- No competition within the specified area.
- Benefit from national marketing.
What is the use of cash flow forecasts
1) can use the, to plan further strategies
- may estimate its cash flow in a year
2) can draw up cash flow forecasts if they want to borrow money from loans eg the bank
Advantages and disadvantages of trade credit
Advantages
- gives the business more cash to use in the immediate future
- does not incur interest charges
Disadvantages
- can only be used to buy certain goods
- bills usually have to be settled within 30, 60 or 90 days
What are the uses of cash flow forecasts
-> businesses may use them to plan future strategy
Eg it might help estimate that in a years time the net cash flow will be negative, helping the Business plan for the future
-> businesses may need do draw up cash flow forecasts of they want to borrow money
External sources of finance examples
- family and friends,
- bank loans and overdrafts
- venture capitalists
- trade credit
Advantage of sole traders
-> complete control
-> more profit as no need to split
-> easy to set up
Disadvantages of sole trader
-> unlimited liability
-> hate to raise capital initially
-> Heavy workload
-> no sick leave/pto
advantages of sole traders.
-> full control
-> easy to set up
-> more profit (doesn’t have to be shared between multiple people)
Advantages of PLC
-> the owners have limited liability
-> any new shareholders need to be invited, which protects the business from outside influence
Did advantage of plc
more paperwork
Time consuming to set up
Disadvantages of franchises
- Some profit paid to the Franchiser.
- Cannot make all the decisions, especially product range and prices.
- Only Franchiser product/service can be sold.
- Popularity of the product depends on the franchiser’s product/service.
- Few holidays and long hours.
- Franchisce may “sign-up” with a disreputable organisation, which takes
his/her fee for little or no return. - may be fired from their role if they are not good enough
- High amounts of money need to be invested in order to buy a franchise
