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Business Studies 🏢💴 > Introduction To Business (Mr Gibbins) > Flashcards

Introduction To Business (Mr Gibbins) Flashcards

1
Q

Cooperatives

A

A business that is owned and run by its members. Profits are shared between members rather than shareholders.

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2
Q

Name 2 advantages of cooperatives.

A
  • Legally straight forward to establish.
  • Liability for members is usually limited.
  • A higher quality of service is likely to be provided.
  • Customers are usually loyal/supportive.
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3
Q

Name 2 disadvantages of cooperatives.

A
  • Capital can be limited.
  • Weak management.
  • Slower decision making.
  • Employees may want more.
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4
Q

Enterprise

A

Simply another word for a business.

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5
Q

Name 3 characteristics of an entrepreneur.

A

Risk taker, shows initiative, undertakes new ventures, determined, a leader.

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6
Q

Factors Of Production

A

The inputs available to supply goods/services to the economy.

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7
Q

Name 2 factors of production.

A

Land, labour, enterprise, capital.

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8
Q

Adding Value

A

Difference between the price and costs of inputs.

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9
Q

Name two ways of adding value to a product.

A

Building a brand, adding features and convenience.

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10
Q

Name two benefits of adding value to a product.

A
  • can charge higher prices.
  • can provide and focus on target markets.
  • enables differentiation from competition.
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11
Q

Name 3 constraints of a business.

A

Competition, employee skills, finance available, legislation, economy.

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12
Q

Primary Sector

A

Activities involving the extraction and use of raw materials.

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13
Q

Secondary Sector

A

Involves converting raw materials into finished goods.

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14
Q

Tertiary Sector

A

Provision of services.

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15
Q

How much of the UK Economy is each sector?

A

Tertiary - 80%
Secondary - 19%
Primary - 1%

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16
Q

Stakeholder

A

Someone who has an interest in a business’ activities and decision making.

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17
Q

Shareholder

A

Someone with a share in ownership of a business.

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18
Q

Name two interests of owners/shareholders.

A

Growth, capital gains, dividend payment and maximising profit.

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19
Q

Name two interests of managers/employees.

A

Getting paid, safe workplace, promotional opportunities, job security.

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20
Q

Name two interests of customers.

A

Cheap prices, high quality goods/service, good customer service.

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21
Q

Private Sector Organisations

A

Owned by individuals, financed by private money from shareholders/loans.

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22
Q

Public Sector Organisation

A

Owned and run on behalf of the owner, either by the government or organisations funded by government.

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23
Q

Third Sector Organisations

A

Voluntary/community group, value driven not necessarily profit.

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24
Q

Sole Trader

A

An individual owning a business on their own.

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25
Q

Name two benefits of operating as a sole trader.

A
  • Don’t have to split profit
  • Can make your own decisions.
  • Easy to set up, no extra costs.
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26
Q

Name two drawbacks of operating as a sole trader.

A
  • Have unlimited liability.
  • Don’t get holiday.
  • Harder to raise finance.
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27
Q

Partnerships

A

Owned by 2 or more people.

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28
Q

Name a benefit of operating as a partnership.

A
  • Easier to raise finance (than sole trader).

- More skills.

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29
Q

Name two drawbacks of operating as a partnership.

A
  • Arguments affect decision making (slower)
  • Unlimited liability.
  • Share profits.
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30
Q

LLPs

A

Similar to partnership, but have limited liability and a few other differences.

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31
Q

LTDs

A

Private limited company, can sell shares to friends/family.

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32
Q

Name two benefits of operating as an LTD.

A
  • Easy to raise finance.
  • Have limited liability.
  • Low risk for being taken out.
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33
Q

What’s the one drawback of operating as an LTD?

A

Have to publicise finances.

34
Q

PLC

A

Public limited company, can sell shares to the public and have limited liability.

35
Q

Name two drawbacks of operating as a PLC.

A
  • Have to publish to companies house.
  • More risk of being taken over.
  • High admin costs.
36
Q

What percentage of shares are needed for a PLC to be taken over?

A

51%

37
Q

Local Market

A

Where customers buy the products/service in the vicinity of where they are produced.

38
Q

National Market

A

Where products/services are traded within the country.

39
Q

International Market

A

Where products/services are traded in other countries.

40
Q

Multinational Companies

A

Have investment in other countries (production of products0 in at least 2 other countries.

41
Q

Name two reasons for multinational growth.

A
  • Emerging economies.
  • Protectionism (taxing imports to protect domestic markets)
  • External growth through takeovers/mergers.
  • Economies of Scale.
42
Q

Name 2 benefits of being multinational.

A
  • Adds to the host country’s GDP.
  • Increased competition and consumer choice.
  • Increased tax revenues to host country.
43
Q

Name two drawbacks of being multinational.

A
  • Domestic business may not be able to compete.
  • May not feel as socially responsible as domestic businesses.
  • Could damage domestic business.
  • Tax avoidance
44
Q

Franchiser

A

Business with a well known brand who sell to the franchisee.

45
Q

Franchisee

A

A person or group of people that set up using that brand.

46
Q

Name an advantage to the franchiser.

A
  • The firm may not have to spend large amounts of money to expand.
  • Products necessary for franchise to operate under their control.
  • Applicants can be carefully selected for suitability.
47
Q

Name a disadvantage to the franchiser.

A
  • Control issues.
  • The cost of supporting the franchisees.
  • The possibility of conflict.
48
Q

Name two advantages to the franchisee.

A
  • Lower risk.
  • Support advice and training.
  • Marketing (national)
  • May be easier to obtain finance.
49
Q

Name 3 disadvantages to the franchisee.

A
  • Profit is shared.
  • Franchise fees.
  • Supplies have to be brought from the franchiser.
  • Less control and independence.
  • The business cannot be sold without permission.
  • Franchise may be for a fix period.
50
Q

Name 3 ways of measuring business size.

A

Number of employees, amount of property, turnover and profit levels, stock market value, capital employed.

51
Q

Name two factors affecting business size.

A

Market share, nature of the product, ability to access resources for expansion, personal preference.

52
Q

Name 3 reasons a business may want to grow.

A
  • Greater challenge.
  • A higher return on investments.
  • Growth into new markets can spread risk.
  • A bigger business is better placed to fight external threats.
  • Opportunity to gain economies of scale.
53
Q

Name a reason why small businesses still survive.

A
  • They still have individual contact with customers.
  • Less vulnerable from a recession. (Less overhead costs)
  • Will not be affected by diseconomies of scale.
54
Q

GDP

A

Measures the value of all economic activity in a country.

55
Q

Recession

A

Where GDP decreases for 6 months or more.

56
Q

Organic Growth

A

Growth within the business.

57
Q

External Growth

A

Growth from outside the business.

58
Q

Name 2 advantages of organic growth.

A
  • Less risk than external growth.
  • Can be financed through internal funds.
  • Builds on a business’ strengths.
  • Allows the business to grow at a more sensible rate.
59
Q

Name 2 disadvantages of organic growth.

A
  • Growth achieved may be dependant on the growth of the overall market.
  • Hard to build market share if business already leader.
  • Slow growth
  • Franchises can be hard to manage.
60
Q

Merger

A

A new business is created.

61
Q

Takeover

A

One business takes control of another business.

62
Q

Forward Integration

A

Acquiring a business further up the supply chain.

63
Q

Horizontal Integration

A

Acquiring a business at the same stage of the supply chain.

64
Q

Backward Integration

A

Acquiring a business operating earlier in the supply chain.

65
Q

Conglomerate

A

Where the acquisition has no clear connection to the business buying it.

66
Q

Name a benefit of external growth.

A
  • Economies of scale.

- Synergy.

67
Q

Name a limitation of external growth.

A
  • Regulators.
  • Employees (motivational problems)
  • Diseconomies of scale.
68
Q

Joint Venture

A

Two or more businesses pooling their resources and expertise to achieve a particular goal.

69
Q

Name a reason for a joint venture.

A

Business expansion, moving into new markets, development of new products.

70
Q

Name a benefit of joint ventures.

A
  • JV partners benefit from each other’s expertise and resources.
  • Each JV partner might have the option to acquire in the future the JV business on agreed terms.
  • Reduces the risk of a growth strategy.
71
Q

Name 2 drawbacks of a joint venture.

A
  • Risk of a clash of organisational structures.
  • Objectives of each JV partner may change, leading to conflict.
  • Imbalance of levels of expertise, investment or assets brought into the venture.
  • JV business may fail.
72
Q

Strategic Alliance

A

An arrangement between two companies that have decided to share resources to undertake a specific, mutually beneficial project.

73
Q

What’s the difference between a joint venture and strategic alliance?

A

A SA is less involved and less permanent. In an SA the two or more companies remain separate entities, unlike JVs where a new entity is formed.

74
Q

Name a problem with strategic alliances.

A
  • Often no better off at the end than if you went alone.
  • Legal disputes over who owns what.
  • Expensive and difficult to coordinate.
75
Q

Aim

A

Overall target and broader than objectives.

76
Q

Mission Statement

A

The overriding goal of the business and the reason for it’s existance.

77
Q

Corporate Objectives

A

Objectives of the business as a whole and cover a wide range of key areas.

78
Q

Functional Objectives

A

Relate to specific functions of a business such as marketing/operations.

79
Q

Unit Targets

A

Similar to functional objectives but are more focused on individuals.

80
Q

What does SMART objectives stand for?

A 
Specific
Measurable
Achievable
Relevant
Time Bound
81
Q

Name 3 influences/constraints on objectives.

A

Finance, communication, conflicts, legislation, economy, competition.

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