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igcse 9th-10th > igcse business section 1 > Flashcards

igcse business section 1 Flashcards

1
Q

need

A

good or service essential for living

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2
Q

want

A

a good or service not essential for living but people would like to have - they are unlimited

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3
Q

economic problems

A

there are unlimited wants but limited resources to produce those wants which creates scarcity

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4
Q

factors of production

A

those resources needed to produce goods and services, 4 factors of production, and in limited supply

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5
Q

scarcity

A

lack of sufficient resources needed to fulfill the total wants of the population

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6
Q

what are the 4 factors of production

A

land - natural resources
labor - people available
capital - finance/ machinery / equipment
enterprise - skills and abilities

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7
Q

opportunity cost

A

the next best alternative given up by choosing another item

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8
Q

specialisation

A

when people or business concentrate on what they’re best at

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9
Q

why specialisation is very common now

A
  • increase in specialised machinery
  • increasing competition meaning needing to keep costs low
    -people now recognise that higher living standards result of specialisation
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10
Q

division of labor

A

when the production process is split up into different tasks and each person does a specific task- form of specialisation

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11
Q

adv of division of labor

A

-workers are more trained and specialised so efficiency increases
-less time wasted moving from one bench to another
-quicker and cheaper as less skills are needed

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12
Q

business

A

combine factors of production to make products which satisfy peoples wants

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13
Q

added value

A

difference between selling price of a product and the cost of brought in materials and components

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14
Q

how to increases added value

A

-lower costs but keep prices the same
-increases prices and keep costs the same

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15
Q

primary sector

A

the industry that extracts and uses natural resources of earth and produces raw materials used by other businesses

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16
Q

secondary sector

A

the industry that manufactures goods using raw materials provided by the primary sector

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17
Q

tertiary sector

A

industry that provides services to consumers and other sectors of industry

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18
Q

de-industrialization

A

when there is a decline in the importance of the secondary manufacturing sector of industry in a country

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19
Q

how do the 3 sectors change importance?

A
  • primary products may become depleted
    -developed economies are losing competitiveness to newly industrialised countries
    -as a country’s wealth increases, so does the living standards, so customers spend on more on services
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20
Q

mixed economy

A

has both public and private sector

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21
Q

capital

A

is the money invested into the business by the owners

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22
Q

entreprneur

A

a person who organises, operated, and takes risk of starting a new business venture

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23
Q

benefits of being an entrepreneur

A

-independence
-able to put own ideas into practice
-may become famous and successful
-may be more profitable than working as an employee
-able to make use of personal skills and interests

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24
Q

limitations of being an entrepreneur

A

-risk , if there is poor planning
-capital is needed
-lack of knowledge and experience
-opportunity cost

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25
Q

8 characteristics of a successful entrepreneur

A

-hard working
-risk taker
-self-confident
-effective communicator
-innovative
-creative
-independent
-optimistic

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26
Q

a business plan

A

a document containing business objectives and important details abt operations, finance and the owners

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27
Q

contents of a business plan

A

-desc of the business
-products and services
-the market
-business location and how products will reach customers
-organisation structure and management
-financial info
-business strategy

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28
Q

why governments support business start ups

A

-to reduce unemployment
-to increases competition
-to increase output
-to benefit society
-can grow further

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29
Q

how governments support business start ups

A

-business ideas and help: training, advice, and support sessions
-premises
-finance: loans at low-interest rates
-labour: trains employees
-research: facilities and at universities

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30
Q

who would find it useful to compare the size of businesses

A

-investors
-governments
-competitors
-workers
-banks

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31
Q

capital employed

A

total value of capital used in the business

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32
Q

how to measure business size

A

-number of people employed
-value of output
-value of sales
-value of capital employed

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33
Q

limitations of number of people employed

A

some firms are capital intensive
-“should part-time workers be counted as one employee?”

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34
Q

limitations of value of output

A

a business might produce few but very expensive products a year

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35
Q

limitations of value of sales

A

could be misleading as not all businesses sell the same products

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36
Q

limitations of capital employed

A

business may be labour-intensive, which requires less costs

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37
Q

why owners may want to expand

A

-higher profits
-more status and prestige
-lower average costs
-large shares of markets

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38
Q

internal growth

A

when a business expands its existing operation

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39
Q

external growth

A

when a business takeover or merges with another business (integration)

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40
Q

takeover

A

when one business buys out the owner of another business, then becomes part of the predator business

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41
Q

merger

A

owners of 2 businesses agree to join their businesses tgthr to make one business

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42
Q

horizontal integration

A

when one business merges with or takes over another one in the same industry and same stage of production

43
Q

vertical integration

A

when one business merges with or takes over another one in the same industry but diff stage of production, (forward or backward)

44
Q

conglomerate integration/ diversification

A

when one business merges with or takes over another one in a completely diff industry

45
Q

benefits of horizontal integration

A

-reduces number of competitors in industry
-opportunities for eos
-bigger share of total market

46
Q

benefits of forward vertical integration

A

-merger gives an assured outlet for its products
-profit margin is made by the retailer and absorbed by expanded business
-retailer could be prevented from selling competing products
-info abt consumer needs and preferences can be obtained from the manufacturer

47
Q

benefits of backward vertical integration

A

-merger gives an assured supply of components
-profit margin of the supplier is absorbed by expanded business
-supplier could be prevented from selling to other manufacturers
-costs of components could be controlled

48
Q

benefits of conglomerate

A
  • business diversified its activities in more than one industry
    -might transfer ideas
49
Q

problems from expansion

A

-difficult to control
-poor communication
-short of finance
-can be more difficult than expected

50
Q

ways to overcome problems from expansion

A

-operate in small units (decentralisation)
-use IT equipment
-expand more slowly
-ensure long-term finance
-introduce different styles of managements

51
Q

why businesses may want to remain small

A

-market size
-owners objective
-type of industry

52
Q

causes of business failures

A

-lack of management skills
-change in the business environment
-over expansion
-liquidity problems and poor finance

53
Q

why new businesses are at greater risks of failing

A

-lack of finance and resources
-poor planning and research
-lack of experience and decision making skills

54
Q

sole trader

A

a business owned by one person

55
Q

sole traders require some legal requirements to set it up

A

-the name of the business is significant
-the owner must register and send annual accounts to the government tax office
-health and safety laws, license

56
Q

adv of being a sole trader

A

-there are few legal regulations to worry abt
-can choose their own decisions
-close contact with customers
-no need to share profits
-complete secrecy
-he is his own boss

57
Q

disadv of being a sole trader

A
  • no one to discuss a business matter
    -unlimited liability
    -sources of finance are limited
    -likely to remain small, doesn’t benefit from eos
    -if owners ill, no one else to take control
58
Q

limited liability

A

liability of shareholders in a company is limited to only the amount they invested

59
Q

unlimited liability

A

owners of a business can be held responsible for the debts of the business.

60
Q

to who is sole trader recommended

A

-people setting up a new business
-those who do not need much capital
-will be dealing mainly with the public

61
Q

partnership

A

2 or more people agree to jointly own a business

62
Q

partnership agreement

A

written and legal agreement between business partners, not essential but is always recommended

63
Q

what does the partnership agreement contain

A

-amount of capital by each partner
-tasks of each partner
-how profit is shared
-how long it will last
-arrangements for absence, retirement and new partners

64
Q

adv of partnership

A

-more capital
-shared responsibilities
-both partners are motivated as they both will gain profit

65
Q

disadv of partnership

A

-unlimited liab
-unincorporated business
-can disagree
-one partner could be inefficient or dishonest
-limited number of 20 partners

66
Q

partnership is suitable for..

A

-business without legal complications
-some professions only allow to form partnerships not companies
-simple mean of running a business

67
Q

incorporated business

A

companies that have separate legal status from their owners

68
Q

shareholders

A

owners of limited companies. they buy shares which represent part ownership of the companies

69
Q

private limited company

A

businesses owned by shareholders but cannot sell shares to the public

70
Q

adv of private limited companies

A

-shares can be sold to a large number of people
-limited liab
-company kept in control if they dont sell too many shares

71
Q

disadv of private limited companies

A

-there are significant legal matters to be dealt with
-the shares cannot be sold to anyone without teh agreement of every shareholders
-accounts are less secret than sole trader and partnership
-cannot offer shares to public

72
Q

public limited companies

A

businesses owned by shareholders but can sell shares to the public, their shares are tradeable on stock exchange

73
Q

adv of public limited companies

A

-limited liab
-incorporated business
-raises large capital sums
-no restriction on buying , selling or transferring shares
-having high status makes it easier to attract suppliers and banks

74
Q

disadv of public limited companies

A

-complicated and time consuming legal formalities
-more regulations and control
-selling shares is expensive
-may lose control

75
Q

annual general meeting

A

-legal requirements for all companies. shareholders may attend and vote on who they want to be on the board of directors for the coming year

76
Q

dividends

A

payments made to shareholders from the profit, after tax, of a company. they are the return to shareholders for investing in the company

77
Q

franchise

A

business based upon the use of brand names, promotional logos, and trading methods of an already existing successful business. franchisee buys a licence from franchisor

78
Q

adv to franchisor

A

-franchisee buys a license from the franchisor to use the brand name
-expansion is much faster
-responsibility of the franchisee
-all products are obtained from the franchisor

79
Q

disadv of franchisor

A

-poor management could lead to bad reputation
-franchisee keeps profit of the firm

80
Q

adv of franchisee

A

-less chance of failure, as products are already well known
-franchisor pays for advertising
-all supplies obtained from the franchisor
-fewer decisions to make
-training is provided by franchisor
-banks are more willing as there is less risk

81
Q

disadv of franchisee

A

-less independence
-may be unable to make decisions that suit the local area
-license fee and a part of the annual turnover must be paid to the franchisor

82
Q

joint venture

A

where 2 or more businesses start a new project tgthr, sharing capital risks and profits

83
Q

adv of joint venture

A

-sharing costs
-have local knowledge
-sharing risks

84
Q

disadv of joint venture

A

-profits shared
-disagreements may occur
-may have culture differences

85
Q

public corporation

A

-business in the public sector that is owned and controlled by state

86
Q

adv of public coporation

A

-some industries require government ownership
-if the industry is controlled by monopolies, then its wasteful to have competitors
-governments can nationalise any failing business
-important, nonprofitable programs

87
Q

disadv of public corporation

A

-no private shareholders to insist on high profits and efficiency
-subsidies may lead to inefficiency as managers think that government will always help
-no close competition, so lack in incentive
-governments can use these businesses for political reasons

88
Q

business objectives

A

aims and targets that a business works toward

89
Q

benefits of setting a target

A

-a clear target will motivate people
-decisions will be focused on “will this help achieve our objectives?”
-united the whole business
-can compare the objectives, see if they’re successful or not

90
Q

different business objectives

A

1.survival
2.profit
3.return to shareholders
4.growth
5.market share
6.service to the community

91
Q

profit

A

total income of a business less total costs

92
Q

profit as objective

A

-pay rent
-provide finance

93
Q

return to shareholders as objective

A

-increasing this will discourage shareholders from selling their shares
-it can be increased by increasing share prices

94
Q

growth as objective

A

-more secure jobs
-increases salary and status
-open new possibilities and spreads risks
-higher market share
-economies of scale

95
Q

market share

A

the percentage of the total market sales held by one brand or business
company sales/total market sales *100

96
Q

why increase market share?

A

-good publicity
-increases influence over suppliers
-increases influence over customers

97
Q

social enterprise

A

has social objectives as well as an aim to make profit to reinvest back into the business

98
Q

social enterprise objectives

A
  1. social: provide jobs and support society
  2. environment: to protect it
  3. financial: make a profit
99
Q

why business objectives could change

A

-has survived for years and now aims toward higher profits
-a business might be in a country facing recession so now has short-term survival objectives
-has achieved market share and now has objectives of increasing returns for shareholders

100
Q

stakeholder

A

a person or group of people who have direct interest in the performance and activities of a business

101
Q

internal stakeholder groups

A

-owners: profits/ return on capital
-workers: income/ security/ satisfaction
-managers: salaries/ status/ control

102
Q

external stakeholder groups

A

-customers: goods and services/ quality/ good -value
-governments: employment/ tax/ national output
-the community: jobs/ environment/ safe products
-banks

103
Q

objectives of public sector business

A

-financial: to reinvest back into the business
-service
-social: increase employments

igcse 9th-10th (4 decks)

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