Introduction into business, business and stratergy Flashcards
What is an entrepreneur?
An entrepreneur can see an opportunity that others cannot.
What are the factors of production?
Enterprise, labour and land
Which of the following is not a factor of production, enterprise, labour, land, money
Money.
What is value added?
The difference between the value of input and the value of output
What are the functional areas of a business?
Finance, production and marketing, Human resource management
What of the following is not a functional area of a business, finance, production, marketing, the economy?
The economy
State two meanings of the term ‘enterprise’
Enterprise can mean another term for a business or the actions an entrepreneur takes to start up his business or hers.
Identify three likely characteristics of an entrepreneur?
Self belief and confidence, creativity, ability to work under pressure, persistence, ability to be comfortable with risk, enthusiastic and have good leadership skills
What is meant by a ‘constraint on a business’’?
A constraint is a limiting factor, or something that inhibits the business from doing something
Identify two likely constraints on a business?
Lack of finance, the law, competitors actions and the state of the market.
What are the three stages of production?
Primary, Secondary, Tertiary
What is the private sector?
Business owned and run by private individuals- usually for profit
What is the public sector?
Businesses and organisations owned and run by local or central governments, whose objective is to provide an service rather than make a profit
In the UK, the majority of the output comes from what sector?
Tertiary takes up 80%, Then Secondary, Then Primary
What is meant by deindustrialisation?
The decline in the size of the secondary sector of the economy.
What is the third sector?
The third sector is one that is neither in the public sector nor the private sector in the usual sense of the terms. They are usually charities or faith groups.
When referring to a business what would you call an individual business? E.g. They have a lot of spare finance available for expansion or It has a lot of spare finance available for expansion.
Also use it.
What type of businesses have unlimited liability?
Sole Traders and Partnerships
What type of businesses have limited liability?
Companies,
What type of business does not have continuity?
Sole traders
What is business continuity?
The ability to continue to function during and after a disaster has occurred.
A public sector business is run by whom?
The central or local government
Do shareholders have to attend an annual general meeting, in companies?
No, but they are invited to.
Identify the three sectors of economic activity?
Primary Sector, Secondary Sector, Tertiary Sector
State an example of a business in each of the sectors of economic activity?
Primary-Fishing Secondary-Cutting The Fish, Or Removing the skin in order to put in separate packets to be sold. Tertiary- Selling the fish in a supermarket such as on the deli, or frozen fish fingers
Explain the difference between the primary and private sector?
The primary sector is where businesses or organisations are run by the government to provide a service rather than make a profit, whereas the private sector is where businesses are run by private owners to operate to make a maximum profit
What is the difference between unlimited and limited liability?
Limited liability is where a business can only the lose the money they invested into the business, this is for companies. In comparison to Unlimited liability what is where the owner of the business is responsible for all the debts, even if the business goes bankrupt they will still have to pay all the debts.
State two advantages of operating a sole trader?
Your own boss
Keeps all your profits
Work your owners
Makes all the decisions of the business
State two disadvantages of operating as a sole trader?
Unlimited liability
If you go on holiday, the business cannot operate
Limited finance
No continuity
State two advantages of operating as a partnership/
More skills as there are more owners
Easier to raise finance as there is more people and capital funds
Losses are shared so reduced
Work is shared so reduced, meaning the business can operate even if one partner is ill.
State two disadvantages of operating as a partnership?
Unlimited liability
Decisions can be harder to make as all partners have to agree, resulting in slower decisions
Losses are shared, however that means profits are to.
What is a franchise?
A business with a well-known brand name (the franchiser) lets a person (the franchisee) or a group of people set up their own business using that brand for a cost.
What is a Co-operative business?
A business that is owned and run by its members. Profits are shared between the members rather than being distributed to shareholders.
What is meant by the term franchisee?
The person who buys the rights to a brand to run the business as a franchise.
Identify two likely costs a franchisee has to pay to the franchise
The initial fee, for the license of the franchise
Has to pay for the products that are sold in the franchise
Explain what is meant by “a franchise is not a separate type of legal structure”?
A franchise is not a separate type of legal structure, as you pay a free for the license of the business you then decide the legal structure e.g. partnership, sole trader, company.
State the three characteristics of a co-operative business?
It’s owned by its members, profits are shared between the members rather than distributed to shareholders, its also run by its members.
Analyse two advantages of running a business as a co-operative?
Liability for member is usually limited, meaning the members can only lose the money they invested resulting in it being easier to raise finance.
A high quality service is likely to be provided as the members run the business, a high service will result in increased repeat customers, what further results in greater profit shared between members.
Analyse two disadvantages of running a business as a co-operative?
There can be slow decision making as there is a greater involvement by members, what can result in a longer time to get results on making a decision.
Capital can be limited as potential investors may be off put as all profits are shared between all members resulting in a limited amount in return.
What are the benefits of being in a larger business for a employee?
Greater job security
A larger firm will have a specialist human resources department which will ensure all compliances with legislation
What are the disadvantages of being in a larger business for a employee?
Feeling remote from those who make decisions that affect them. Resulting in poor motivation to work.
What are the advantages for suppliers, supplying bigger businesses?
Regular orders, that are generally large resulting in the supplier feeling secure.
What are the disadvantages for suppliers, supplying bigger businesses?
Overdependence on a large customer can cause problems if the large firm decides to change supplier, or cut its costs resulting in a reduced cost from supplier and as they are you main customer you can’t refuse.
What are the advantages to shareholders of investing in a bigger business?
Larger firms can gain more from economies of scale, resulting in reducing the costs meaning they can charge a reduced price to small competitors as they can produce it quicker meaning more profit due to greater sales.
What are the advantages of shopping at larger businesses?
Lower costs that smaller businesses due to economies of scale.
The customers will receive greater customer satisfaction as they want to maintain reputation, so quality and customer treatment will be high.
What are the disadvantages of shopping at larger businesses?
Customers may feel swayed into buying products they didn’t want through exposure to marketing at the large business.
What are the factors that affect the size of a business?
Market size, Nature of the product, Person preference
What are the EU’s criteria for measuring a businesses’ size?
The number of employees, the balance sheet value and the value of turnover
If a firm is experiencing diseconomies of scales, what size is the business most likely to be?
Large.
Identify two methods of measuring a businesses size?
The number of employees, the profit the business makes
State one advantage and one disadvantage, of using the no. of employees to measure the size of the business .
One advantage of using the no. of employees is that it easy to identify, and shows basically how large the firm is, however a disadvantage is that if the co-operation is highly automated then they will have few employees even if it is a big company.
State one advantage and one disadvantage of using the profit the business makes to measure the size of the business.
Easy to obtain, for the statement of financial position highlighting how much the business makes. However, it may wrongly identify the size of a company as if it is having a bad year, making low profits it will be perceived as small, even though it could be large.
How you would you judge the size of a supermarket?
The number of stores it has open.(Any method valid)
How would you judge the size of a car manufacturer?
Any method but the no. of employees.
How would you judge the size of an online retailer
The turnover it makes per year/Or Stock market value if plc.
What according to the EU, is the no. of employees a micro business has?
Less than 10
What according to the EU, is the no. of employees a small business has?
Less than 50
What according to the EU, is the no. employees a medium business has?
Less than 250
What according to the EU, is the no. of employees a large business has?
Over 250.
Outline two reasons why small businesses continue to thrive in an economy dominated by large firms?
Some consumers prefer to shop locally to help the local community out as they know it provides jobs to the people in the local community so by supporting it they support the community.
As well as that government helps and provides support to small business in the form of government grants, or help lines to provide support when they are in need.
Give an example of an external cost?
The cleaning up of the pollution created by a car.
Give an example of an internal stakeholder in a business?
A managing director
What is a stakeholder?
A person who influences or is influenced by the business
Identify 5 likely stakeholders of a business?
The local government Employees Customers Staff Suppliers
What is the difference between ‘private costs and benefits’ and ‘social costs and benefits’?
Private costs are the costs of the business that it pays and the benefits it gets from activities, whereas social costs are the overall true costs of the business taking into account external costs and benefits
What is a SMART objective?
Specific, Measureable, Achievable, Realistic and Timed.
What is meant by ‘hierarchy of objectives’?
The it refers to the three objectives of a business, political, strategic and operational, each refers to a section of the hierarchy, e.g. political top then strategic and then operational
Explain the difference between strategic and tactical objectives
Strategic objectives are long term that concern the whole business, whereas tactical are short term referring to the day to day work of the business usually set per department
What are aims?
More specific goals for a business, e.g. survival, breakeven, share or growth % increase
What are strategic objectives?
Strategic objectives, are used to achieve the main aims of a business, e.g. if a business aims to achieve a 10% growth in sales, strategic objectives could be to increase productivity, or try sell its products in new markets.
What are tactical objectives?
These are short term objectives necessary to complete the strategic objectives of the business
Which of the following are not always regarded as stakeholders for a business? Customers Shareholders Competitors Suppliers
Competitors
What is meant by a niche market?
A market that suppliers a particular sector of the population
State three examples of stakeholders for a local garage run by a sole trader?
Customers
Staff
Bank
Local community
Explain an example of ‘stakeholder conflict’
Stakeholder conflict could be when the shareholders want to increase profits and have suggested to reduce staff wages, however staff as another stakeholder may not agree with this resulting in a conflict of interests.
What are advantages of a business plan?
It provides a sense of direction
It enables employees to better understand their role in the business
It encourages co-ordination of the different areas of the business.
Explain what is meant by strategic planning?
Strategic planning is long term planning, usually conducted by the business executives showing were the business is going.
What is meant by tactical planning?
Tactical planning is planning for the day to day work of the business, usually conducted by the manager of a section of the business.
Explain two disadvantages of a business plan?
The plan may be to rigid, this will not allow employees to be creative resulting in them becoming demotivated.
There is chance the plan could be leaked this would result in competitors knowing the secrets of the business, resulting in the business being undermined.
What is a quantifiable risk?
The likelihood of a predictable risk occurring. It is possible to put a value on this sort of risk
What is a Unquantifiable risk
The risk of an event that is unexpected. It is not possible to put a value on this kind of risk.
If a business doesn’t have update to date figures on whether its market is growing or shrinking, what kind of risk is this an example of?
Uncertainty
If there is a high degree of uncertainty there will be what in the business?
A high degree of risk
What is an example of a speculative risk?
The loss of £1million pound due to a failed advertising campaign.
What is an example of internal uncertainty?
Employee uncertainty
State the relationship between ‘risk’ and ‘reward’
If there is a high risk this will usually create a higher reward, this is the same with a low risk this will create a low reward.
State the difference between ‘risk’ and ‘uncertainty’
Risk, is the calculated costs and the benefits to making a risky decision. Whereas uncertainty is an uncalculated risk in the business with a unknown outcome.
What is meant by uncertainty?
It’s where the outcome of a result in the business is unknown or cannot be calculated.
State one effect of uncertainty in a business
A decision made may be wrong due to the uncertainty of the outcome.
Give one example of internal and external uncertainty a business may face.
Staff uncertainty
Political uncertainty
