Introduction To Business Flashcards
Evaluate the importance and impact of entrepreneurial activity for stakeholders
Entrepreneurs influence various stakeholders in different ways:
• Employees – Job creation and career development opportunities
• Customers – More product choices and improved services
• Suppliers – Increased demand for materials and services
• Government – Higher tax revenues and economic growth
• Local communities – Social and environmental impact, infrastructure development
• Investors – Potential return on investment
Evaluation:
• Positive: Job creation, economic growth, innovation
• Negative: Business failure, job losses, environmental impact
Distinguish between local, national and international / global markets
• Local market – Operates in a small geographic area (e.g., a bakery)
• National market – Operates across a whole country (e.g., Sainsbury’s)
• International/global market – Operates in multiple countries (e.g., McDonald’s)
Distinguish between a national and multinational business
• National business – Operates only in one country (e.g., Greggs in the UK)
• Multinational business – Operates in multiple countries (e.g., Coca-Cola, Amazon)
Explain the legal structure of various business forms, including sole trader, partnership, limited liability partnership, private limited company and public limited company
Sole Trader – One-person business, unlimited liability, full control, profits kept
Partnership – Owned by 2+ people, shared profits and responsibilities, unlimited liability
Limited Liability Partnership (LLP) – Hybrid of a partnership and a company, limited liability
Private Limited Company (Ltd) – Owned by shareholders, shares not publicly traded, limited liability
Public Limited Company (PLC) – Shares traded on the stock exchange, limited liability, strict regulations
Evaluate the factors affecting the choice of legal structure of a business
• Business size and growth potential
• Level of risk (liability)
• Control and decision-making preferences
• Tax implications
• Need for external finance
Evaluate the impact and importance of legal structure for the stakeholders of a business
• Investors/shareholders – Prefer limited liability for lower risk
• Employees – More job security in larger corporations
• Customers – Perceived trust in a well-established legal structure (e.g., PLCs)
• Government – Different tax rates for different structures
Evaluate the factors affecting the use of franchises to a business
For franchisors: Expansion with lower capital investment, but risk of brand damage if franchisees perform poorly
• For franchisees: Easier to start with an established brand, but limited independence and high fees
Evaluate the impact and importance of franchising to the stakeholders of a business
• Franchisor – Quick expansion, steady revenue, but less direct control
• Franchisee – Lower risk than starting a new business, but profit-sharing required
• Customers – Consistent experience across locations
• Employees – Job opportunities with structured training
Evaluate the impact and importance of a co-operative structure to the stakeholders of a business
• Employees – More democratic decision-making, profit-sharing opportunities
• Customers – Often benefit from ethical sourcing and fair pricing
• Suppliers – Fair trade policies may benefit smaller suppliers
• Local communities – Focus on ethical and sustainable practices
Evaluation:
• Positives: Fairer distribution of profits, democratic structure, ethical focus
• Negatives: Slower decision-making
Explain the functions of a business, including marketing, production, operations management, accounting and finance, as well as customer service, sales and support services
A business has several key functions that work together to achieve its objectives.
- Marketing
• Identifies customer needs and promotes products/services.
• Includes market research, branding, advertising, pricing, and distribution strategies. - Production
• Involves manufacturing or delivering services.
• Ensures products meet quality standards and are produced efficiently. - Operations Management
• Oversees processes to maximise efficiency and quality.
• Includes supply chain management, logistics, and quality control. - Accounting and Finance
• Manages financial records, budgeting, and cash flow.
• Ensures profitability, tax compliance, and funding for growth. - Customer Service
• Provides after-sales support and resolves customer complaints.
• Affects customer satisfaction and brand loyalty. - Sales
• Directly responsible for generating revenue.
• Builds relationships with customers and negotiates contracts. - Support Services
• Includes IT, HR, legal, and administrative functions.
• Ensures smooth business operations and compliance with laws.
Evaluate the impact and importance of the functions of business to the stakeholders of a business
Marketing-Customers receive products that meet their needs. Investors benefit from increased brand value.
Production-Employees rely on production efficiency for job security. Suppliers depend on production demand.
Operations management-Customers benefit from better quality products. Businesses reduce waste and improve profits.
Accounting and finance-Investors require accurate financial data. Governments rely on tax compliance.
Customer service-Affects customer satisfaction and retention. Employees receive training in problem-solving.
Sales-Generates revenue, which affects profitability and wages. Customers receive tailored product recommendations.
Support services-Ensures IT security for stakeholders. HR maintains good employee relations.
Evaluation:
• Positive: Specialised business functions improve efficiency, quality, and stakeholder relationships.
• Negative: Poor coordination between functions can lead to inefficiencies and dissatisfied stakeholders.
Distinguish between small, medium and large enterprises-
• Small Business (SME) – Fewer than 50 employees, lower revenue, often owner-managed.
• Medium Business – Between 50-250 employees, growing market share, some formal management.
• Large Business – 250+ employees, high revenue, multiple departments, international operations.
Explain how and why the size of a business is measured
• Number of employees – More staff usually means a larger business.
• Revenue/Turnover – Higher sales indicate a larger business.
• Market share – A larger share shows dominance in an industry.
• Capital employed – More assets suggest a larger scale of operations.
Evaluate the factors affecting the size of a business
- Industry Type – Some industries (e.g., tech startups) require fewer employees but generate high revenue.
- Financial Resources – Access to capital allows for expansion.
- Market Demand – High demand leads to growth.
- Legal and Regulatory Constraints – Some industries have restrictions that limit expansion.
- Entrepreneurial Goals – Some businesses choose to stay small for flexibility.
Evaluate the impact and importance of the size of business to the stakeholders of a business
EMPLOYEES
Small business-Closer relationships, but limited career progression
Large business-Job security and benefits, but less personal work environment.
CUSTOMERS
Small business-Personalised service, niche products.
Large business-Lower prices, mass production
INVESTORS
Small business-Higher risk, potential for rapid growth.
Large business- More stable investment, but slower returns.
GOVERNMENT
Small business- Encourages SMEs for innovation.
Large business-Large firms contribute more taxes and employment.
Evaluation:
• Small businesses are more flexible but struggle with competition.
• Large businesses have economies of scale but may face bureaucracy.
Explain what is meant by a joint venture
A joint venture is a business arrangement where two or more companies create a separate entity to achieve a common goal, while remaining independent (e.g., Sony Ericsson).
Explain what is meant by a strategic alliance
A strategic alliance is a less formal agreement between businesses to collaborate while remaining completely separate (e.g., Starbucks and PepsiCo).
Evaluate the impact and importance of joint ventures to a business and its stakeholders
• Businesses – Share resources and risks, but potential conflicts.
• Employees – More job opportunities but cultural clashes.
• Investors – Potential for high returns, but higher risks.
• Customers – Access to new or improved products.
Evaluate the impact and importance of a strategic alliance to a business and its stakeholders
• Businesses – Access to new markets, cost-sharing, but less control.
• Employees – More training and career opportunities.
• Investors – Potential growth with less risk than a joint venture.
• Customers – More innovative products and better service.
