Introducion To Business Flashcards
Enterprise
Another word for a business
Entrepreneur
The action of a risk taker starting their own business
- takes the initiative in trying to exploit a business opportunity
- takes time to understand and calculate the risks involved
- makes an investment to set up the business
Characteristics of an entrepreneur
Self belief
Confidence
Persistence + drive
Creative skills
Leadership skills
Ability to work under pressure
Risk taker
GDP
Gross domestic product - total market value of the goods and services produced by a country’s economy during a specified period of time.
Ways businesses may assess risk
Making sacrifices e.g relationships
Planning, financial documents
If this business fails, can i afford it?
Will customers actually buy the product?
To i have the resources to make this business work?
Aspects of the decision making process
Risks, rewards, opportunity cost, Uncertainty
Opportunity cost
The cost of the next best alternative foregone (the thing you are not doing)
Uncertainty
Interest rates, inflation
External factors, economic factors, confidence people have when spending money
Uncertainty in the economy can cause…
…people not not spending as much
Labour
The human input into the production process
Decent supply of labour, well skilled
Land
Natural resources available for production
Examples - coal, oil, wind
Enterprise (factors of production)
Entrepreneurs organise factors of production and take risks
Individual(s) who will take risk and use other actors (land, labour, capital)
Capital
Goods used in the supply of other products
E.g machines + assets, taking advantage of machinery to be more efficient
The decision making process is..
One of the most critical processes in a business. Effective and efficient decisions will bring results to your business.
Added value is…
Equivalent to the increase of value that a business creates by undertaking the production process
E.g buying sweets in bulk, putting them in new packaging (which is more enticing for customers) and then selling them for more
Added value =
The difference between the price of the finished product or service and the cost of the inputs involved in making it
Finished product - making costs = added value
Examples of added value
Online convenience
Branded (reputation)
Good quality
Attractive packaging
Customer service(can charge more)
Products and features
Benefits of added value
Charging more
Creating a point of difference from the competition (unique selling point)
Protecting from competitors trying to steal customers
Focusing a business more closely on its target market segment
Accounting and finance
Analyse financial data,
interpret trends and provide valuable insights that guide the company’s direction,
manage assets
Operations and management
Converting materials and labour into goods and services efficiently as possible to maximise the profit of an organisation
Stock control
Machinery and technological advancements
Lean production - reduction of waste, increase efficiency + quality
Marketing
Monitor data across the marketing life cycle
Promoting products
Identifying needs through quality, price etc
Market research
Target market
Advertising
Human Resources management
Implementing and managing various talent development and performance management programs
Recruitment and selection
Training
Employees
Employer retention
Welling of the workforce
Customer service
Managing customer service staff
Handling customer complaints and queries
Implementing customer service strategies
Analysing customer service data
Retain customers
Sales team
Create predictable revenue by streamlining the sales process with the best practices and automation
Constraints
Limiting factors
Constraints of a business
Employee skills
Competition
The economy
Finance available
Legistration
Primary sector
Activities undertaken by directly using natural resources
E.g fishing, forestry, agriculture
Secondary sector
Involves converting raw materials into finished goods
E.g construction / manufacturing, assembly plant, goods can be finished or unfinished
Tertiary sector
Financial services
Leisure services
Transport
(Accounting for 80% of the UK’s economy)
Stakeholders
Any individual or organisations who have a vested interest in the activities and decision making of a business (owners, employees, managers are internal creditors) and society and suppliers are external creditors
(Stakeholder) shareholders and owners are mainly interested in…
Success of the business
Profit
Return on investment
Employee and customer satisfaction
Business growth
(Stakeholder) managers and employees are interested in…
Good, stable pay
Good working conditions
Dedicated work force
Fair hours
Roles and eponsibility
(Stakeholder) customers are mainly interested in…
Value for money
Good quality
Low price
Good customer services
Shareholders
Part owner for the business
Private sector
Businesses are operated and owned by private individuals and companies
They are generally run for profit
E.g sole traders, partnerships, PLCs, LTDs
Public sector
Businesses and organisations are run on behalf of the public usually by the government or are funded and report to the government
They are generally not run for profit - exist to provide goods and services to the unlicensed using public funds
E.g NHS, schools, police
Third sector organisations
Value driven, not necessarily motivated by profit but a desire to archive social goals (public welfare)
E.g voluntary and community group, charity, social enterprises (oxfam and Red Cross)
The private sector splits into….
Unincorporated and incorporated
Unincorporated
Same legal identity to company / business, unlimited liability
Incorporated
Owners and business are a separate legal identity, limited liability
Sole traders
Start the business them selves but two or more makes a partnership. If the sole traders dies then the business tends to fail and any debts are passed on to family, unlimited liability.
Stakeholder vs shareholder
Stakeholders have an interest in the business e.g customers, employees
A shareholders is a part owner e.g through shares
How to measure business size
No. Employees
Amount of shares
Profit
No. Factories and shops
Value of assets
Factors that influence business size
Market size and growth
Finance - ability to access resources
Nature of the product
Reasons why a business might want to grow
Owners want a higher return on investments
Growth into new markets can spread risk
A bigger business is better placed to fight external risks (competition and economy)
Opportunity to gain unit cost reduction through EOS
Why do small businesses survive
Customer services
No diseconomies of scale
Less likely to have large overhead bills
External growth
The increase in a company is sales and profits that is a result of buying other companies or of forming a business relations with them, quickest form of growth
Takeover
A type of acquisition that occurs when one organisation purchases another, usually when a large company buys a smaller one. The purchasing company is called the acquirer while the one being purchased is called the target.
Joint ventures
Involves two or more businesses pooling their resources and expertise to achieve a particular goal. The risks and rewards of the enterprise are also shared.
Reasons behind joint venture :
Business expansion
development of new products or moving into new markets, particularly overseas.
Joint venture knowledge mark
JV partners benefit from each others expertise and resources
Synergy
Two businesses so nine and make more profit than what they made individually added together.
Strategic alliance
Not as long term as a joint venture
An arrangement between two companies that have decided to share resources to undertake a specific, mutually beneficial project.
Less involved and less permanent than a JV
JV and Stategic Alliance entities
JV - new entity
Strategic Alliance - separate entities
Economies of scale
When unit costs fall as output rises
Diseconomies of scale
Unit costs rise as output rises
Purchasing EOS
As a business gets bigger they can buy in bulk and benefit from bulk buy discounts
Financial EOS
Occurs when mass producing a good results in a lower average cost
Managerial EOS
Larger firms may benefit from having specialised management teams, better coordination and more efficient decision making processes
Technical EOS
Large-scale businesses can afford to invest in expensive and specialist capital machinery
Marketing EOS
A large firm can spread its advertising and marketing budget over a large output and it can purchase its inputs in bulk at negotiated discounted prices if it has sufficient negotiation power in the market
Risk-bearing EOS
The larger scale producer can purchase raw materials from different sources so safe guarding against strikes or crop failures
Concentration EOS
When firms within the same industry cluster together, they can take advantage of the existing infrastructure and supply networks
