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AA IB Business HL > Introduction > Flashcards

Introduction Flashcards

1
Q

What does a business do, essentially?

A

organize input to produce output, which must be more valuable

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2
Q

Types of input

A

land
labour
capital
entrepreneurship

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3
Q

Goods

A

physical products

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4
Q

Services

A

intangible products

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5
Q

Profit

A

total revenue - total costs

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6
Q

Revenue

A

price x quantity

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7
Q

Expenses

A

everything that the business has had to pay to acquire the input and get the revenue

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8
Q

Inventory/stock

A

what you have that you are able to sell

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9
Q

Strategy

A

method used by a business to achieve its goals

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10
Q

Primary sector

A

extractive sector, extracts directly from nature

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11
Q

Secondary sector

A

manufacturing, turning raw materials into something else

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12
Q

Tertiary sector

A

provides services/intangible products

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13
Q

Quaternary sector

A

research and development

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14
Q

Opportunities of starting a business

A

earn a living
financial reward prospect
control over life
work-life balance
innovative business idea
unfilled market niche

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15
Q

Reasons for business failure

A

underfunding
neglecting marketing/sales
lack of planning
finding right people
time management
scaling up too quickly

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16
Q

Public vs private businesses

A

public - owned by government
private - owned by individuals/group of individuals

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17
Q

Main features of sole traderships

A

owners solely own everything of the company
no legal separation between company and owner
legally ‘confused’
if you want to sue, you sue the person not the company
unlimited liability

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18
Q

What is a sole trader

A

someone going into a productive activity without actually setting up a legal framework

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19
Q

Advantages sole tradership

A

ease of formation
might benefit from tax exemption if business is small
retention of control

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20
Q

Disadvantages of sole tradership

A

unlimited liability
lack of permanence
limited financial resources

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21
Q

What is a partnership

A

like a sole tradership but with various owners
may even have contract between partners but still no legal framework
each partner responds to 100% of debts with personal assets - solidarity

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22
Q

What is limited liability

A
  • owner of business can’t lose personal assets
  • can only lose what was put into company
  • even in bankruptcy, investors are safe
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23
Q

What is a public limited company

A

in the stock market
in the private sector
anyone can trade - needs to match higher standards

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24
Q

Advantages of partnership > sole tradership

A

easier to have a larger company + more money
more expertise

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25
Q

What is a private limited company

A

privately traded, not in stock market
company chooses who participates

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26
Q

Shareholders

A

owners of an incorporation

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27
Q

What is an incorporation

A

legal person of the company, separate from owners

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28
Q

IPO

A

initial public offering of shares
from private to public LTD companies

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29
Q

Directors

A

managers, may be shareholders

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30
Q

Liquidation

A

process of turning assets into cash

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31
Q

Dividends

A

profit divided among shareholders

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32
Q

Sleeping partners

A

shareholder that doesn’t want to be active in running the business

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33
Q

Advantages of private limited companies

A
  • more investors
  • shareholders invest for long term
  • you know who shareholders are - control
  • limited liability
  • financial records are private
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34
Q

Disadvantages of private limited companies

A
  • shared profits
  • lengthier decision making
  • shares can’t be traded publicly
  • more expensive and time consuming
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35
Q

Advantages public limited companies

A
  • shared risks
  • finances raised through stocks
  • separate legal identity
  • limited liability
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36
Q

Disadvantages public limited companies

A
  • shared profits between many shareholders
  • expensive and time consuming to set up
  • loss of control
  • accounts are publicly available
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37
Q

What is a cooperative

A

a business owned and operated equally by its members who share the profit equally

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38
Q

associates in cooperatives

A

equal standing, votes with same weight, shared voice and ownership and profits

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39
Q

Goals of private sector companies

A

usually profit

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40
Q

Goals of public sector companies

A

social/government goals (which can also be profit)

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41
Q

Goal of co-ops

A

associates (profit/wellbeing etc)

42
Q

Social enterprises are

A

businesses who are not only focused on profit (may be for marketing reasons)

43
Q

main features of NGOs

A

wants to improve social/environmental outcomes
by law, any surplus must be reinvested into business
run by board of directors

44
Q

advantages of non profits

A

limited liability
no tax on surplus since it is all reinvested
volunteers mean low costs
grants and donations

45
Q

challenges with non profits

A

funding difficulties may persist more
time and energy raising funds
competition for donations intense
limited employee salaries
paperwork to set up

46
Q

what are NGOs

A

sub-category of non profit social enterprises

47
Q

vision statement

A

long term goal/dream of what the future should look like with the business in it

48
Q

mission statement

A

short term statement that defines what the organisation does in order to achieve vision

49
Q

list common business objectives

A

growth
profit
protecting shareholder value
ethical objectives

50
Q

stakeholder

A

any individual or group that affects or is affected by an organisation

51
Q

strategy

A

a plan that an organisation creates in order to reach a specific coal

52
Q

business strategies

A

usually refer to significant decisions/actions
involve senior management

53
Q

benefit of successful strategies

A

help a business respond effectively to changes in external environment
more agility and resilience

54
Q

Sociocultural (STEEPLE)

A

all sociocultural characteristics of a region
demographics, lifestyle, beliefs, values
affects what people choose to buy

55
Q

tactic

A

a smaller action that a business takes in order to reach its goals
smaller scale and shorter term

56
Q

Technological (STEEPLE)

A

new technologies changes how a business operates and the products it makes
technological development
includes infrastructure

57
Q

Economic (STEEPLE)

A

changes in economic conditions, GDP
cycles of GDP - business cycle
income increase/decrease changes what people want to buy

58
Q

Environmental (STEEPLE)

A

natural disasters or conditions may affect products
businesses that rely on natural resources
climate change
increased protection of nature may be harmful to businesses

59
Q

Political (STEEPLE)

A

may change laws
unstable government
Green parties

60
Q

Legal (STEEPLE)

A

multinational companies - home country and host country laws
complying with laws

61
Q

Ethical (STEEPLE)

A

conflict between growth/profit and social/environmental responsibilities

62
Q

Internal vs external stakeholders

A

internal: individual or group that affects or is affected by an organisation + is directly involved inside the organisation
external: individual or group that affects, or is affected by, an organisation, but not directly involved inside the organisation

63
Q

Financial sustainability

A

ability of a business to sustain itself over time and survive

64
Q

Benefits of CSR

A

increased revenue
reduced energy/waste/materials expenses
increased productivity
reduced turnover
reduced risks

65
Q

Examples of internal stakeholders

A

managers, employees, shareholders

66
Q

Examples of external stakeholders

A

labour unions, banks, society

67
Q

Sociocultural sustainability

A

distributing value to a wide range of stakeholders in order to have a positive impact on people

68
Q

Environmental sustainability

A

positive impact on planet

69
Q

Root of stakeholder conflict

A

diverse interests

70
Q

Examples stakeholder conflict

A
  • managers and employees
  • shareholders and managers
  • shareholders and government
  • local community and shareholders
  • managers and unions
  • customers and suppliers
  • pressure groups and employees
71
Q

Economy of scale

A

Cost reductions experienced by a business when it expands its output

72
Q

Diseconomy of scale

A

The increase in the per-unit production cost as a business grows

73
Q

Internal vs external economies of scale

A

Internal: achieved inside company
External: external factors in region/industry that business can’t control

74
Q

Types of internal economies of scale

A
  • purchasing
  • marketing
  • managerial
  • technical
  • financial
75
Q

purchasing economies of scale

A

buying input at a lower cost by purchasing larger amounts - buying in bulk
negotiation

76
Q

marketing economies of scale

A

cost of marketing spread over larger output, lowering average campaign cost

77
Q

managerial economies of scale

A

cost of hiring a manager spread over a larger output
lower costs due to expertised and efficient employees

78
Q

technical economies of scale

A

investment in equipment
efficiency and automation

79
Q

financial economies of scale

A

large loans have lower interest rates

80
Q

what are the types of external economies of scale

A

innovation
infrastructure
specialisation

81
Q

innovation

A

research and development

82
Q

infrastructure

A

more efficient product delivery and commute

83
Q

specialisation

A

companies/supplies/workers focus on an industry + specialised workers, less costs with training

84
Q

types of internal diseconomies of scale

A

managerial issues: difficult for leader to lead + rivalries between divisions of large firms - cooperation issues lead to inefficiencies
increase in workforce size: difficult to control, hierarchy, overspecialisation leading to alienation
communication: complex hierarchy, inefficient communication

85
Q

internal vs external diseconomies of scale

A

internal: usually due to difficulty in managing internally large operations
external: expansion of business’s industry

86
Q

types of external diseconomies of scale

A

limited natural resources: industry-wide increased demand
limited infrastructure: slow down deliveries etc
increased regulation
pollution: climate change costs lives/natural resources/infrastructure

87
Q

Internal vs external growth

A

internal: company grows alone
external: company grows together with other companies

88
Q

Reasons to grow

A
  • economies of scale
  • market power
  • shareholder returns
  • lower risk from hostile takeover
  • price of stock increases
  • manager objectives
  • synergy
  • profit
  • vision
  • control
89
Q

Reasons for businesses to stay small

A
  • not wanting to take loans
  • quality not compromised
  • may lower revenue
  • loss of control
  • keeping average costs down
  • higher labour turnover if poor HR management
  • sufficient profit
  • brand identity and niche
90
Q

Mergers and acquisitions

A

merger: two companies of similar size join together to b become one
acquisition: A buys at least 50+1% of B’s shares, companies become embedded

91
Q

Takeovers

A

hostile acquisition
public limited companies only
acquisition but without approval of managers
expensive

92
Q

Joint venture

A

2 companies create a new company together

93
Q

Strategic alliances

A

two companies work together but remain separate

94
Q

Franchising

A

company sells business model to interested parties
reduces risk for both parties

95
Q

Advantages of external growth

A
  • shared risks
  • shared expertise
  • faster growth
96
Q

Disadvantages of external growth

A
  • no full control
  • shared expertise
  • shared profits
97
Q

Market penetration

A
  • least risky
  • increasing market share in existing market
  • eg acquisition
98
Q

Market development

A

different audience (maybe new country)
riskier
same product, different TA
can be finding new use for existing product

99
Q

Product development

A

new products in existing markets
same TA
eg apple pencil

100
Q

Diversification

A

riskiest but also highest chance of reward
new product to new people
can be related or unrelated - unrelated is riskier

AA IB Business HL (1 decks)

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