Paper 1 Flashcards
What is limted liability?
when the levels of risk is limited to the amont of money that has been invested in the nusiness or promised as an investment
what is unlimted liability?
where the level of risk goes beyond the amount invested in a business, so the personel assets of the business owner can be used to pay off the business’s debts
What are the positive implications of limited liablity?
with limited liability , investors only risk losing the money they have invested. Therefore they are more likley to invest in a company knwoing they will not lose their personal assests. This may help the business in raising finance through share capital in the future.
What are the negetive implications of limited liabilty?
- they take longer to set up
- they cost more
What are the negative implications of unlimited liability
with unlimited liability , investors risk losing more than the money they have invested. Therefore they less likely to invest in a company knwoing they will lose their personal assests. This means it may be harder for the business to raising finance through share capital in the future.
Or lack of confidence in business decisions
What is a sole trader?
A type of unincorporated business that is owned by one person who has unlimited liability
What is a partnership?
A business that is owned by a group of two or more people who share the financial risk, the decision-making and the profits.
What are the disadvantages and advantages of a sole trader?
❌unlimited liability (difficult to raise finance /expand business slower and harder)
✅financial information kept private, this means that no longer disadvantaged by competitors having access to their private information, allowing theme to keep a competitive edge
✅control/ independance over the business
✅all rewards / profits retained
✅quick to set up, more convenient for busy lifestyle
❌a lot of pressure on one person, business decisions
❌difficult for holidays / being ill
What is a franchisee?
An entrepreneur who pays a grew to trade using the name and products of an established business
What is a franchise?
When a business gives another business permission to trade using it’s names and products in return for a feee and a share of it’s products
What is a franchisor?
An established business that gives permission to an entrepreneur to trade using its name and products
Pros and cons of franchising (for franchisee)
✅lower risk , business model already successful
✅support and training provided by franchisor
✅business benefits from marketing campaigns
❌have to pay initially fee , as well as a percentage of the profits
❌cannot make independent decisions (products already selling )
What is meant by the dynamic nature of a business?
This means the business is in a dynamic market, dynamic means that it’s rapidly changing. This means they have to constantly adapt to respond to consumer’s wants and needs
How do changes in technology allow new businesses to come about?
3 points
🟣make expensive technology affordable, reducing manufacturing costs
🟣e- commerce , bring ideas straight to market place, do not have to rent a physical premises, decreasing the risk that entrepreneurs have to take
🟣social media, inexpensive promotional method, can interact with current and potential customers, encouraging them to make more sales
How can business identity changes in consumer demands?
data, analyse this data to to make their customers’s shopping experinece ebtter, rethink the way that they design produce and market their products.
Why should a business keep up to date with consumer wants?
As customer tastes change regularly, a business may require to adapt existing products to prevent them from coming obsolete. These adaptations can also allow businesses to keep up with trends, retaining current customers and attracting new ones
Why might a business fail
🟣drop in revenue , eg: increase in competition reducing the amount of sales , negative cash flow
What are the types of risks that can lead to financial loss?
🟣competitive risks: in fear of competition, may spend more on marketing, increasing costs
🟣financial risk: not enough investment to attract customers attention
How is lack of security a risk in starting up a business?
Lack of regular wage, job security, this may negatively impact the entrepreneur’s health , causing a lot of stress. This may result in bad decisions for the business
What is a reward of starting up a business?
Profit, reinvested into the business
Independence : making their own decisions, flexibility, satisfaction
Business success :
What is the purpose of business activity?
🟢provide a good/ service
🟢adding value
🟢meeting customer needs
What is the difference between a goods and service ?
A good is a tangible item that can be used /stored.
Services are intangible actions , that cannot be stored . Use set only have access to them for a small period of time
Why do businesses need to meet customer needs?
Meeting customer needs , develops a positive relationship with them. They are more likely to be satisfied, and loyal . Buying the product again
How could a business add value to it’s products?
Branding
Convenience
Quality and design
USP
What is the importance of branding?
🟢Can create an emotional connection with brand that they share same views & beliefs , more likely to buy those products
🟢increases customer loyalty protect businesses from competitors.
🟢helping the business increase it’s market share
What are the pros/cons of primary market research?
✅tailored to business needs specifically, analyse their current market, improvements to products/ promotional strategies, future products
✅up to date info
❌expensive
❌ time consuming
What are the pros/ cons of secondary market research ?
❌could be inaccurate, biased
❌not tailored to business specifically
❌outdated
✅quick and easy
✅cheap
What is the purpose of market research ?
Identity and understand customer needs
&
identifies gaps in the market, allowing one to make informed businesss decisions ,reduces risk of business failure/ product more likley to suceed
Quantities and qualities data :
Quantity: quick , easy to analysis
Quality: more depth and detail
What are the pros and cons of social media market research?
Importance of reliable market research ?
✅well informed decisions
✅reduces risk
✅higher chance of businesses successful
❌unwise decision
❌cost the business money
❌products that do not sell
❌failure
What is market segmentation?
And types
Easier to develop products aimed at certain people to help them target their marketing
🟣income segmentation (disposable)
🟣lifestyle segmentation (hobbies )
🟣behaviour segmentation (time of year they buy)🟣demographic segmentation (age, gender, race)
How does market mapping help a business?
identifying a gap in the market, analysing competitors , adapt their product or promotional stategy to give them a competitive edge.
Describe one way in which a business could adapt existing products
( 3 marker)
They could adapt the promotional strategy for of a particular service or brand. This could make the product more suitable to different customers or markets. As a result , the small business would perhaps make more sales , leading to larger profit.
Describe business failure (risk of a business)
🟢cash flow, customers slow in paying bills, (negative cash flow) , cannot buy supplies or pay employees , business having to borrow money
🟢drop in sales revenue, recession , lack of disposable income , less sales of non - essential items🟢
Describe financial loss
Describe the risk of the lack of security
No regular wage , financial insecurity, stress, affect business decisions negatively
Describe the reward of independence
Working for themselves, more likely to take risks and think of something new rather than conventional ideas, this may lead to future exciting products
Describe the reward of business success
Provides jobs for employees
Industry entrepreneur awards
What is the purpose of business activity (meeting peoples’s needs)
Eg: fast delivery
Things such as response to feedback ,Allows them to develop a positive relationship , satisfied customers are more likely to repeat their purchases and recommend to others , increasing sales
What is the point on feedback from consumers?
Gaining understanding of the consumer’d needs , Allows business to learn from consumer , use this information to improve existing products or develop new
How can branding add value ?
The branding of a product defines the aims and values of a business, when consumers shares these values and beliefs they are more likely to connect emotionally, more likely to buy the brand’s products.
- Could also induce customer loyalty , as the consumer’s emotional connection between the brand could protect a business from other competitors, This could potentially lead to an increase in market share
Convenience adding value
Eg: allowing them an easier method to pay or great customer experience
Great customer experience, encourages customers to be brand loyal , protects the business from competitors, allowing them to maintain their market share
Design adding value
More aesthetically pleasing, attracts more customers, more sales
Good entrepreneur
Minimises risk, knowledge ,data (market research)
Makes good business decisions , long term viability, short term stage
Organising resources (finance ), managing people effectively
What are consumer needs ?
🟢price
🟢convenience
🟢choice (a range of products)
🟢quality
How does choice (a range of products ) supply consumer needs
How does convenience supply consumer needs?
How does price supply consumer needs?
How does quality supply consumer needs ?
what is the importance of identifying and meeting customer needs?
if a product/service doesn’t meet customer neeeds it will not have much demand. This means that it is likley to generate sales. As a result of this, the product/service ay be withdrawn and the business may fail completley.
1,2.1
(not done)
What is the purpose of market research?
markrt research gathers accurate information regarding influences on a possible business idea (competitors/ potential consumers)
As a result of this the entreprenur is able to determine whether a business idea is viable , before investing money and time. This therefore reduces the likleyhood of business failure, as the business can make informed business decisions.
What is the purpose of market research?
markrt research gathers accurate information regarding influences on a possible business idea (competitors/ potential consumers)
As a result of this the entreprenur is able to determine whether a business idea is viable , before investing money and time. This therefore reduces the likleyhood of business failure.
The purpose of market research regarding customer needs
Market research allows a business to identify and understand consumer needs. This means that the business is able to adapt a product or evaluate as to whether it is viable for the entrepreneur. As a result of this , the business can make informed business decisions. As a result the risk of business failure reduce.
What are are pros and cons of qualitative data ?
Describe a use of quantitative data:
What are some uses of quantitative data ?
Can be used to find out about and compare different groups of a business’s customers. This data can then be used to help the business to direct their marketing at each group. As a result of this , the business will be able to target and advertise to their target market more effectively.
What are some advantages of using social media in market research?
🟣deepen their understanding of their market
🟣improve popular trends
🟣improve their products and marketing
🟣save time conducting market research (more samples, easy to scenes , promoting more honest and reliable feedback
Describe an advantage of using social media to gather market research
(3 marks)
Social media can be used to improve marketing. This is because social media platforms allow a business to observe how customers talk and understand it’s products . As a result of this the business can then use this language to make it’s marketing more effective.
What are the different types of market segmentation?
🟢geographic segmentation
🟢demographic segmentation (gender )
🟢income segmentation
🟢behavioural segmentation
🟢
What is the importance of market segmentation to a small business?
Market segmentation groups together consumers with similar needs/interests.
Once have identified it’s target market.
Can adapt / change products to increase the attraction/supply the demand
How does market mapping help a business?
Can help spot gaps in the market.
This is because small businesses can analyse all the products within their chosen market.
As a result of this a small business can change / adapt their product to differentiate themselves from the competition.
What factors determine the competitive environment?
More saturated markets : lower start up costs
This leads to more businesses with
What is a SWOT analysis ?
analysing competitors strengths , weaknesses, opportunities and threats. Allows them to compete properly. TIBs they can adapt /change products / promotional strategies to give a competitive advantage (offer something to consumers that others don’t have),
Larger market share
What is the importance of competition on business making?
🟢price
🟢 new product ideas , competitive advantage ….
What are some financial aims and objectives?
🟣survival
🟣profit (sales)
🟣financial security
🟣 market share
What are some non - financial aims ?
🟣social concerns (environmentally friendly)
🟣personal satisfaction
🟣independence
🟣control
🟣challenge
What is the difference between aims and objectives?
Objectives are set to achieve the ultimate aim
Explain one social objective of a business
A business may aspire to be environmentally friendly. This means that business would run sustainably, leading to the business owner having less guilt when selling their product . As a result of this the business owner may feel more confident and passionate.
Explain one financial aim to a business
Breaking even. This is because, at this point the business would be making enough revenue to cover costs. As a result of this , the business are less likely to have negative cash flow. This increases the likelihood of the business’s successfulness
Difference between fixed and variable costs
FC: do not change , no matter how many sales a made. Can be pre determined
eg: insurance, rent, tax, salaries
VC: opposite
eg: electricity, raw materials
Why are businesses in early stages more likely to have more costs than revenue?
Start up costs expenses (cost of premises , equipment, raw material)
Which all must be pre paid before the customers start placing their orders
What is cash ?
The amount of money in a bank’s business account
* comes in from customers
*goes out to suppliers
Why is cash important
🟢to pay bills
🟢relationships with suppliers / employees (may withdraw their services or take to court)
Leading to business failure (insolvency )
Why might a good cash flow be hard ?
Credit arrangements (Klarna )
*Customers not paying the second that they have purchased the product
How do make sure cash flow is good ?
🟣suitable credit agreements with suppliers (maybe to pay them after customer has)
🟣limit the number of customers to whom it gives credit , (instant pay)
What are some short term sources of finance ?
🟣trade credit (paying suppliers latter )
🟣overdraft -high intrest rates 🟣
what conditions are in a credit agreement ?
- credit limit
- credit period
- frequency of payment
- method of payment
- retosecpective discount (bulk buying discount)
what is long term and short term finance ?
long term- used for large one off costs (purchasing new equipment, )
Short term - designed to help maintain a positive cash flow
What are some souces of long term finance ?
- loans
- share capiral
- personal savings (no intrest)
- venture capital
- crowdfunding
- retained profit
what is venture capitalism?
pros +cons
sucessful entreprenurs lending (investors )
✓ may offer an investment when bank doesn’t as they are willing to take the risk
🗴 want a return on investment (pressure), can withdraw at any time
🗴 ✓ have input regarding business decisions , not 100% freedom, some experience and help
What is share capitaism ?
pros + cons
share capital , is raised by shareholders , by selling shares
🗴have a vote in business decisons , slows down the decision making process
loans pros and cons
🗴credit checks- liklehood /chnaces may be harder
🗴security : in the form of assets or guarantor
🗴intrest rates
retained profit
great if you have , but may be difficut as if ther are shareholders then they many need to be payed dividends
Pros and cons of private limited company “ltd”
✅limited liability
✅easier to raise finance , establish the business
✅having “ltd” makes the business sound more established
❌more harder to set up
❌disagreements between shareholders
❌publicises info , competitors
Pros and cons of franchising (for franchisor)
❌brand reputation may be damaged
What factors influence business location ?
🟣proximity to labour
🟣proximity to market
🟣proximity to competition
🟣proximity to materials
How does proximity to market affect a business?
(Footfall , demographic of people to match it’s target market )
Providing convenience to customer
Proximity regarding business location
Benefits of e- commerce
🔵lower operating costs
🔵reaching a wider audience
🔵trading 24/7
🔵response t changing consumer buying habits , by moving to m commerce
How do changing consumer needs impact the marketing mix ?
Eg : launching new products in response to consumer trends such as veganism
Reducing pricing in response to recession
Opening more local cafes to make products more convenient
What is the impact of technology on marketing mix ?
🟣introducing E/ M Commerce to meet customer needs
🟣using more digital communication such as social media to promote products and keep customers interested in the brand
🟣changing the product design by incorporating new technologies in the product
🟣lowering prices due to savings made by efficient technologies in the production process
🟣changing prices due to competition
What is the importance of a business plan?
🟢Minimises risk
🟢Obtaining finance
Why should a business have satisfied employees?
What are the main aims of employees?
💙get the best possible pay and rewards
💙keep jobs secure
What are the impact of technology on a business ?
🟣dynamic nature of business , things become obsolete and outdated more quicker
🟣🟣
What are the advantages and disadvantages of E - Commerce ?
Importance of social media
✅allows a business to communicate with customers
✅read customer comments (feedback) regarding business
✅business can collaborate with one another
❌❌❌
Advantages of digital communication
Digitally communicate with consumers in real time
24/7 updates and possible communication to customers or employees
Virtual communication (Skype & teams):
Quicker and cheaper than travelling long distancing
*more cost effective and quick , employees time used as efficiently as possible
Reduced overhead costs for physical premise: rent , lighting , electrical bills.
Larger audience: globally
What are the advantages and disadvantages of payment systems ?
What influences do technology have on sales ?
Can increase sales , as sales can be made 24/7 and are not just restricted to a certain period.
Makes customer aware of stock , so that they won’t be disappointed later on down the line, and informed when a product is no longer available.
What influence does technology have on cost
Technology can keep the costs low through
🟣reducing travel costs (online meetings)
🟣not needing physical premises
🟣no need to print documents out
🟣email rather than sending letters
🟣cost for production may decrease, with less Manual /human inputs and more machinery
What influence does technology have the marketing mix
Why does legislation exist for consumers ?
Consumer rights
A business must provide a products/ service reasonable of quality.
30 day right to return , replace or refund
Retailer responsible for safe delivery of goods
Service conducted with “reasonable care”
Why does legislation exists for employees?
No discrimination
Decent pay (minimum wage)
Health and safety of them
What are the impacts of legislation on a business?
Costs for training the employees, hotel costs , travelling costs all included
Cost for equipment that may have to be regularly updated
Cost for pay
Pros and cons on a business tie meeting legislation
What sort of factors occur due to the changing economic climate on businesses .
🔵unemployment
🔵changing levels of consumer disposable income
🔵inflation
🔵changes in interest rate
🔵government taxation
🔵changes in exchange rates
How do low unemployment rates effect a business?
- however due to globalisation the employ rate of a specific country may nit affect then at all
How does consumer level of disposable income affect a business ?
How does low inflation affect a business ?
- low inflation is when the wages rate and the cost of everyday items are roughly the same
✅less to pay to suppliers , as the costs of everyday items and raw materials would have not risen
✅employees won’t ask for large pay rises
✅
How do changes in interest rates affect savers and borrowers ?
How do changing interest rates affect consumers and the business ?
*low interest rates
Consumer disposable income higher , as more money left over (for consumers who borrow money )
Businessare bale to borrow money for growth and future investments, as will get a cheaper rate
How does government taxation affect a business ?
Low tax = consumers with high disposable income
What are the different types of taxes ?
How do changes in exchange rates impact a business?
SPICED
string pound imports cheap , export dearer
❌May have to reduced prices. Consumers may not be as attracted to the products
✅
How do interest rates impact exchange interest rates ?
If interest rates high , investors from overseas may wish to put their money into the UK , to get paid a high interest rate on their money. If the demand to put money into UK increased then the value of th expound increases and becomes more stronger
What is the result of a business not responding to increasing interest rates?
If a business has further expansion in mind and they continue with this and borrow money , the cost of borrowing may have a negative consequence on the business’s finance.
What is the result of a business not responding to consumer income levels decreasing
A result of lower consumer incomes, will be that they are looking for cheaper prices and more budget friendly products.
In response to this the business should move to an overseas market or lower prices . If it does not do this then it may fail to make enough sales , leading to cash flow problems within the business and potential business failure
What should a business do in the fall of taxation ?
A business could respond by hiring more staff , as they can now afford this. This would make the business more effective , perhaps increasing sales . This move would put them ahead of any competitors who have not responded to the change in economic climate.
