Introduction To Business Flashcards
Define Enterprise
A business or company.
Define Entrepreneur
A person who takes the initiative and makes things happen.
What are the qualities of an Entrepreneur?
- leadership skills
- energy and enthusiasm
- comfortable with risk
- confidence
- persistence
- ability to work under pressure
Define Adding Value
Changing products to be worth more in the eyes of the customer.
How do you increase value?
- extra product features
- convenience
- rebranding
- aesthetically pleasing
- excellent service
Benefits of Adding Value
- charge a higher price
- USP
- focuses closely on target market
Define Private Sector
Privately owned businesses.
Define Public Sector
Government run businesses.
Define Third Sector
Social enterprises.
Define Multinational
A company that operates in several countries of several nationalities.
Define Soletrader
Someone who runs a business by themselves.
Advantages of being a Soletrader
- keep all their profits
- only pay income tax
- total control of the business
- no conflicts of interest
Disadvantages of being a Soletrader
- limited capital to start
- raising capital is an issue
- unlimited liability
- can’t carry the business on
- can only do a limited amount of work
Define Private Limited Company
A privately owned business that is incorporated .
Advantages of being a LTD
- stocks can only be brought by family and friends
- easier to raise finance (e.g. loans)
- business has continuity
- don’t have to make financial accounts public
- greater range of skills
Disadvantages of being a LTD
- owners don’t have full control
- pay corporation tax
- bigger administration costs
- higher set up costs
- owners don’t keep all profits (dividends)
Define Public Limited Company
Where a business tries to raise finance by selling shares on the stock market.
Advantages of being a PLC
- limited liability
- continuity
Disadvantages of PLC
- turnover must be very high
- cost and time to create is very high
- highly complicated to set up
Define Franchise
Where you buy the right to sell someone else’s products.
Advantages of Franchising
- wide spread recognition
- built in customer base
- on going support with advertising and managing
Disadvantages of Franchising
- must operate under strict restrictions
- must pay royalties and a percentage of profit
- damaged brand name could affect their sales
- terms of the franchise are set by the franchiser
Define Social Enterprise
A business with social aims such as job creations and provisions of local services.
Advantages of Social Enterprises
- no VAT paid on most goods
- grant funding available
- exempt from corporation tax
Disadvantages of Social Enterprises
- cannot be used to generate profit for owners
- assets of business can never be used for private use
- trustees cannot be paid unless authorised by the charity
- cannot sell shares to raise finance
- all decisions are made by trustees of the enterprise
Define Aim
Where the business sees itself in the long term.
Define Objectives
Short term measurable goals.
Define PIGS (in relation to objectives)
Profit
Increase market share
Growth
Sales/survive
Define SMART (in terms of objectives)
Specific Measurable Achievable Realistic Timed
Define Cooperative
Where a business is owned and run by the workers.
Advantages of Cooperatives
- more motivating (get paid and paid dividends)
- workers get cheaper prices
- shared ownership
Disadvantages of Cooperatives
- profits are shared but some shouldn’t get as much
- difficult to attract investors
- lack of capital
- often unfair
- inefficient managers
Define Incorporation
A process that separates the owner from the business, giving the owner limited liability.
Define Certificate of Incorporation
A legal document issued by government giving the business a licence to form a corporation.
Define Memorandum of Association
A legal document which sets out the business’ purpose, what it was created to do.
Define Articles of Association
A legal document stating the company’s files for what their directors can do and the voting rights of their shareholders.
Define Mission Statement
Overriding goal of the business and the reason for its existence.
What is the Hierarchy of Objectives?
Aim Mission Corporate objectives Functional objectives Business unit/individual targets
Define Strategic Objective
How a business plans to achieve its aims and goals, often a long term approach.
Define Tactical Objectives
The daily short term objectives needed to ensure that the strategic objectives are achieved.
How can you measure the size of a business?
- number of employees
- number of assets
- turnover and profit levels
- stock market value
- capital employed
Positive Impacts of Large Businesses on Customers
- reliability
- convenience
- choice
- reputation
- customer service
- pricing
- quality
Negative Impacts Of Large Businesses On Customers
- higher prices
- lack of choice
- customer service
- inefficient
Factors Affecting Business Size
- market size
- nature of the product they are selling
- personal preference
- resources
- finance
Define International
Where a business is based in one country but imports and exports abroad.
Define Organic Growth
Expansion within the business by increasing sales.
Advantages of Organic Growth
- less risk than external growth
- can be financed internally
- builds on business’ strengths
- allows steady rate of growth
Disadvantages of Organic Growth
- may be determined by growth of whole market
- hard to build market share if business is already leading
- growth may be slow
Define Mergers
Where 2 businesses join to form one new business.
Advantages of Mergers
- larger market share/market power
- access more customers
- use other companies assets
- removes competition
- more established brand
Disadvantages of Mergers
- customers may disagree
- causes redundancies
- low morale
- inherit negative aspects of the company
- can be time consuming
Define Acquisition
Control of another business is acquired by buying a majority (over 50%)Of their shares.
Advantages of Acquisitions
- increase market share
- acquire new skills
- access economies of scale
- intangible benefits (e.g. reputation, brand name)
- overcomes barriers to entry of a new market
- eliminates competition
Disadvantages of Acquisitions
- eliminates competition
- costs money and time
- inherit negative aspects of company
- could lose customers if they preferred previous company
- suffer from diseconomies of Scale
- upset customers and suppliers
- redundancies
Define Joint Venture
Where two businesses, usually in different countries, work together for a mutual benefit.
Advantages of Joint Ventures
- benefit from infrastructure of other business
- publicity for both businesses
- benefit from EOS
Disadvantages of Joint Venture
- clash of business cultures
- objectives of the partners may change, could cause conflict
- imbalance of expertise and skills
Define Strategic Alliance
An agreement between business to work towards common objectives.
Why do Small Businesses Survive?
- customer service can be better
- quality may be better
- personalised service
- convenience
Define STEEPLE
Social Technological Economic Environmental Legal Ethical
Define Adding Value
Where a business charges a higher price for a good than they paid in costs.
Advantages of Adding Values
- can charge higher prices
- maybe higher profits
- enhance image of product
- target the market more easily
- make product more distinctive and develop a USP.
Disadvantages of Adding Value
- not guaranteed that cost of Adding Value can be covered by an increased price
- may restrict sales (too expensive?)
- competition might make it harder to increase prices
Define Value Analysis
Looking at the 3 aspects (function, cost and aesthetics) and deciding where you can increase the value of the product; prioritising one aspect.
Ways to Add Value
- build a brand
- deliver excellent service
- add product features and benefits
- offer convenience
Define Research
Finding information about what customers want, as well as how to make production more efficient.
Define Development
Taking research ideas and improving/adapting them.
Define Innovation
Where a product becomes economic reality.
Define a Research and Development
A process that enables the creation of new and improved products to meet custom needs.
Factors influencing Research and Development
- level of competition
- nature of product
- external environment
- state of economy
- trends
Define Market Orientated
Where a company finds out what the market wants and developed the product in relation to this.
Define Product Orientated
Where a business develops an product and tries to sell it.
Define Innovation
Putting a new idea or approach into action; the commercially successful exploitation of ideas.
