introduction to business and business objectives and strategies Flashcards
enterprise definition
the actions of a risk taker starting their own business
entrepreneur definition
a person who sets up a business or businesses, taking on financial risks in the hope of profit
what are the factors of production
- land
- labour
- enterprise
- capital
factors of production definition
the inputs needed for creating a good or service which results in making profits
what are primary organisations
raw materials / natural resources
what are secondary organisations
manufacturing the raw materials into a final product
what are tertiary organisations
providing services and selling the final product
what are private sector organistations
-owned by individuals and are driven by profit
- financed by private money from stakeholders and by bank loans
- eg dental firms
what are public sector organisations
- owned by the government
- provide goods and services for the benefit of the community
- operate with money raised from taxes
- eg police and NHS
what are third sector organistations
- voluntary and community groups
- seek to help and not make a profit
- eg charities
what are local markets
when a business only tries to sell locally
what are national markets
when a business tries to sell in one country
what are international/ global markets
when a business sells all over the world
what is the difference between national and multinational businesses
national businesses sell to one country and multinational businesses sell all over the world and have factory’s in 2 or more countries
what is a sole trader
a business which is owned and ran by only one person
- can employ people
- responsible for all debts due to unlimited liability
advantages of a sole trader
- self satisfaction
- owner keeps all profits
- easy decision making
- quick and easy to start up
- no info about profits must be published
disadvatages of a sole trader
- hardwork
-stressful
-unlimited liability - not much spare time
- the business stops when owner dies
- business cannot sell shares
partnership definition
- when a business is started and owned by more than one person
advantages of parterships
- different skills
- no info of profits has to be published
- share the workload
disadvantages of partnerships
- profit is shared
- unlimited liability
- slower decision making as parteners might not agree
- cannot sell shares
public limited company definition ( plc)
able to offer its shares to the public on the stock exchange
advantages of a plc
- can raise huge finance through shares
- owners have limited liability
- business has continuity
disadvantages of a plc
- long time to set up
- anybody who buys 51% of the business can take over the business
-public can see info about the business
-
what is limited liability
the owners of a business can only lose the money they have invested if it fails
what is unlimited liability
the owner of a business is responsible for repaying all the debts of the business
what is a private limited company ( ltd)
a smaller business which can only sell shares to people invited in
advantages of a ltd
- owners benefit form limited liability
-shareholders can restrict who buys shares ( easier to control )
-business has continuity
disadvantages of an ltd
- takes a long time to set up
- ## public can see all info
what is a franchise
when a person or a group of people set up a business using a well known brand
what is the difference between a franchisor and a franchisee
- franchisee is a small business owner that handles the day-to-day management of a specific location.
- The franchisor oversees the big picture for an overall brand and all its franchisees
benefits to the franchisor
- A classic growth strategy
- Enables much quicker geographical growth for a relatively low investment
- Still have the option to open locations that are operated by the Franchisor
- Capital investment by franchisees is an important source of growth finance
benefits to the franchisee
- The franchisee is given support by the franchisor. This includes marketing and staff training. So starting a business in this way requires less expertise
- The franchisee may benefit from national advertising and being part of a well-known organisation with an established name, format and product
-Less investment is required at the start-up stage since the franchise business idea has already been developed - A franchise allows people to start and run their own business with less risk. ( chance of failure is lower )
drawbacks of a franchisee
- Cost to buy franchise – can be very expensive (hundreds of thousands of pounds).
- Have to pay a percentage of your revenue to the business you have bought the franchiser from.
- Have to follow the franchise model, so less flexible. You would probably be told what prices to set, what advertising to use and what type of staff to employ.
what is a co-operative
a business or organisation that’s owned and controlled by its members, to meet their shared needs
- run on principles of shared ownership, shared voice & shared profits.
how do you measure the size of a business
-number of employees
-market share
- profits
-sales turnover
what is a small / medium enterprise
any business with fewer than 250 employees
advantages of small /medium enterprise
- managed and controlled easily
- easily can adapt to meet cutomers needs
- cheap rent
disadvantages of small / medium enterprise
- limited access to source of finance
- owner has large responsibility
- fewer opportunity for economies of scale
what is a large enterprise
- usually international and have the most market dominance and sales in the market
advantages of large enterprise
- can afford to employ specialists and professional managers
- able to set lower prices ( economies of scale )
-different sources of finance
disadvantages of large enterprise
- difficult to control and communicate
- slow decision making
- lots of staff needed
expensive rent
explain what a joint venture is
a business arrangement in which two or more parties agree to put together their resources or capital for the purpose of accomplishing a specific task.
- This task can be a new project or any other business activity.
advantages of a joint venture
- JV partners benefit from each others expertise and resources
- reduces the risk ( especially if entering a new market )
disadvantages of a joint venture
- partners may disagree on objectives - causing conflict
-imbalanced levels of expertise
what is a strategic alliance
an agreement between 2 or more businesses which work together to achieve a common goal - it is not a legally enforceable contract
advantages of a strategic alliance
what is a stakeholder
anyone who has an intrest in a business
what are internal stakeholders
people who have an intrest from within the business
eg- employees, owners
what are external stakeholders
people who have an intrest from outside the business
- eg government, local community
objectives of the stakeholders of the business - managers
- want a good salary and opportunities for further career progression
objectives of the stakeholders of the business - customers
- want good quality products
-range of products - good customer service
objective of the stakeholders of the business - suppliers
- want to receive payments on time
- want regular orders
reasons for conflicts between different stakeholder groups
- different objectives
- misscommunication between many stakeholders
- managers want better salary
what is a mission statement
explains the purpose of the businesses existence, which provides direction to employees, customers and to other stakeholders
advantages of having a mission statement
- proves the business is ethical
- proves the business serves a purpose
-motivates staff to join and stay - encourage directors to make the correct strategic decisions
disadvantages of having a mission statement
- not many people see it
- very vague
- time consuming to put together
- sometimes used as a form of promotion
what is the purpose of a business plan
a document that defines in detail, a companies objectives and how it will achieve that
describe some of the main contents of a business plan
- business objectives and aims
- revenues and costs
- profit plan
- goods / services description
- marketing plan
- strengths
- weaknesses
advantages of having a business plan
- more likely to get a load from the bank
- shows organisation
- gives a structure to the business for employees
- monitor performance
-attracts investors
disadvantages of having a business plan
- time consuming
- can be inaccurate
- not much flexibility
- very short term
what is the ‘ plan - do - review ‘ cycle
- it is a a continuous process that involves planning what needs to be done, doing it, and then reviewing the results to see if the objectives have been achieved.
- can help organizations to improve their performance.
how can the plan-do-review cycle improve the businesses performance
- offers opportunity to evaluate methods and objectives
- cosistent improvements and corrections can be made throughout production
what is opportunity costs
the loss of one opportunity when another option has been picked
what is opportunity costs
the loss of one opportunity when another option has been picked
what is opportunity costs
the cost of missing out on the next best alternative after choosing a different option
eg - buying a machine but not being able to open a new store
examples of non finacial methods of business performance
- customer reviews
- staff retention
-market share - customer retention
- company reputation
examples of financial methods of business performance
- cash flow
- profits
- market share
-budgets
what is cash flow
the movement of net cash and cash equivalent being moved in and out of the business
what is profit
the revenue remaining after all costs paid
what is the purpose of forecasting
forecasting helps investers and business owners make informed decisions about the future
