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business > paper 1 -2022 > Flashcards

paper 1 -2022 Flashcards

1
Q

define mass market

A

a mass market is a large market of customers which is undifferentiated and that sells product and services to suit a large number of potential customers.

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2
Q

define a niche market

A

a niche market is a smaller part of a large market with products tailored to specific customer needs

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3
Q

characteristics of a mass market

A 
huge number of potential customers 
lower prices
high sale 
high competition 
low fixed costs - economies of scale
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4
Q

characteristic of a niche market

A 
small but focused 
high / premium price
low sales
less competition 
high fixed costs
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5
Q

advantage of a mass market

A

unit costs can be minimized

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6
Q

disadvantage of mass market

A

highly competitive and marketed similarly

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7
Q

advantage of niche market

A

fewer competition and high prices

build brand loyalty easier

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8
Q

disadvantage of a niche market

A

trends can change quickly

fewer potential customers

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9
Q

define market share

A

amount of the market controlled by one business

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10
Q

market share formula

A

sale of one business / total market sales x100 = market shares

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11
Q

define = market size

A

total amount bought or spent by customers

brought = volume 
spent = value
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12
Q

market size formula

A

sale of business A / market share A x100 = market size

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13
Q

how does having a brand influence the position of a business within its market?

A

allow the business to differentiate itself from other products to build loyalty and market share

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14
Q

define dynamic market

A

a market that is subject to continuous change

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15
Q

evaluate a dynamic market

A

positive = forces innovation - motivation for businesses to be market leaders

negative = uncertainty due to constant change - difficult to plan ahead

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16
Q

define online retailing

A

selling products through an internet website

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17
Q

evaluate online retailing for consumers

A

positive = cheaper prices / cable of comparing prices easily

negative = cant physically touch, feel, smell the product

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18
Q

evaluation of online retailing for the business

A

benefit = cheaper fixed costs

drawback = lots of competition

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19
Q

ways a market can change

A

PESTLE

  1. economic - recession or boom
  2. environmental - global warming/ pollution
  3. legal - new legislation that increase costs
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20
Q

3 reasons why markets grow over time

A
  1. innovation - new products or processes
  2. economic growth - increased living standards, more disposable income
  3. demographic - aging population or baby boom
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21
Q

3 ways a business can adapt to change in the market

A
  1. flexibility - multiskilled staff, mix capital and labor
  2. develop a niche market
  3. investment - into a new product or training
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22
Q

define competition

A

where rival businesses in the same market try to win customers from each other

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23
Q

what is direct competition

A

products / services that are close substitutes

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24
Q

indirect competition

A

where businesses compete for the same income = less similar products

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25
Q

1 impact on a business of competition in a market

A

less market share and sales

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26
Q

1 impact on a consumer of competition in the market

A

more choice and variety

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27
Q

the difference between risk and uncertainty

A

risk = can be planned for and measured - using savings

uncertainty = potentially unpredictable + uncontrolled outcome

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28
Q

define product orientation

A

a business develops products based on what it is good at doing, rather than what the customer wants

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29
Q

define market orientation

A

a business reacts to what customers want through extensive market research

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30
Q

advantage of product orientation

A

do not have to wait for customer reactions or responses to products

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31
Q

disadvantage of product orientation

A

without an established reputation, this is a risky strategy

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32
Q

positive of market orientation

A

able to anticipate market changes and provide what customers want

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33
Q

negative of market orientation

A

continued consultation is costly and time consuming

lose first mover advantage

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34
Q

why doesn’t market orientation guarantee success

A

just because extensive research has been conducted doesn’t mean that customers will like the product or prefer it to rivals

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35
Q

3 factors that may affect if a business uses product or market orientation

A
  1. type of market - dynamic - time of research
  2. type of product - innovation or unique
  3. reputation - age of business
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36
Q

define market research

A

collection and analysis of market information

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37
Q

2 reasons why businesses may conduct market research

A
  1. identify and anticipate customer needs and wants

2. quantify likely demand

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38
Q

2 limitations of market research

A
  1. can be out of date quickly

2. prone to bias / sample size.

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39
Q

define primary research

A

research data that has been collected first hand for a specific purpose

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40
Q

define secondary research

A

research data that already exists that has been collected by someone else for a different purpose

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41
Q

methods of primary research

A

questionnaire / surrey
focus group
observation
interview

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42
Q

secondary research - methods

A

government reports
market reports
internet
internal data

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43
Q

advantage of primary research

A

specific

up to date

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44
Q

disadvantage of primary research

A

expensive and time consuming

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45
Q

advantage of secondary research

A

fast accessibility info

valuable industry info

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46
Q

disadvantage of secondary research

A

time spent to find the right info could be out of date

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47
Q

quantitative data

A

numerical data - easy to analyse
speedier to analysis - easier to spot patterns
black and white data

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48
Q

qualitative data

A

words and options - hard to analysis

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49
Q

3 uses of ICT to support market research

A
  1. website - competitor research/ cookie data
  2. social networking - polls on Instagram
  3. data-bases - Tesco loyalty card and emails sign up
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50
Q

define market segmentation

A

dividing the market into smaller parts to allow identification of different customer groups

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51
Q

2 benefits of market segmentation

A
  1. targeted advertising to the segment

2. product and services can be designed to suit specific customers

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52
Q

ways of segmenting the market

A
  1. age
  2. income
  3. lifestyle
  4. location
  5. demographic
  6. behavior
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53
Q

define supply

A

refers to the total amount of a good or service that suppliers are willing and are able to supply to a market at a given price at a particular time.

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54
Q

five factors affecting supply

A
  1. government subsidies
  2. new technology
  3. indirect taxes
  4. costs of production
  5. external shocks
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55
Q

define equilibrium price

A

the price where supply and demand are equal

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56
Q

how the price of goods and services determined

A

the market force and the interaction of supply and demand

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57
Q

an equilibrium diagram

A 
y = price 
x= quantity 
supply to the sky 
decease move up 
increase move down
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58
Q

define distribution

A

distribution is how you get the product to the right place for customers to make their purchase - physical or online

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59
Q

define distribution channels

A

the route taken by a product from a producer to the consumer

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60
Q

name the different channels of distribution

A

zero level = producer, consumer
one level = producer, retailer, consumer
two level = producer, agent/wholesaler, retailer consumer
three level = producer, agent, wholesaler, retailer, consumer

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61
Q

what are retailers, agents and wholesalers

A

intermediaries

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62
Q

2 reasons why a business may choose to distribute its products via a retailer

A

costs - as the more intermediates the less profit the producer makes as the costs will be higher

control - more control over reputation at a 0 level, as a customer has to report back to the retailer if there is an issue

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63
Q

name 3 factors that will influence the choice of distribution channel

A

type of product
type of market
the cost

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64
Q

define online distribution

A

is the power of websites to offer a wider and more varied range of products, that offer small firms a chance to reach a global audience

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65
Q

what is meant by changing a product to a service

A

when a product becomes obsolete due to a change in technology

e.g. music streaming apps

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66
Q

benefit to consumer of online distribution

A
  1. more efficient - time

2. compare alternative brands products

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67
Q

benefits of online distribution to the business

A
  1. reach a wider customer base

2. lower costs - no store

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68
Q

drawbacks of online distrubution to businesses

A

less foot traffic - less sales

less able to communicate with the customer or build a relationship or show alternative products

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69
Q

define import

A

products and service produced abroad and consumed domestically

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70
Q

define export

A

products and services that are produced domestically and consumed abroad

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71
Q

name one reason why firms export

A

to reach new markets and increase customers

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72
Q

name one drawback to a business of exporting

A

increased costs - shipping and possible tariffs

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73
Q

name one benefit of importing goods

A

creates more choice for businesses and consumers

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74
Q

define specialization

A

a production strategy where a business focuses on a limited scope of products or services

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75
Q

why would a country specialize in trade, according to its comparative advantage

A

this results in greater efficiency, allowing goods and services to be produced at a lower cost per unit

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76
Q

name 2 benefits of specialization

A

lower costs per unit - need less specialist machinery, training - fewer mistakes and more efficient
improvement of quality - through repetitions

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77
Q

name two drawback of specialization

A

boredom - due to repetition

cost of initial training

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78
Q

define FDI

A

foreign direct investment

when a business purchases non-current assets in another country

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79
Q

name 2 methods of FDI

A

merger or takeover

open new stores or branches - franchising

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80
Q

name 3 benefits of FDI for a business

A

access new markets
avoid tariffs and transportation costs
to be closer to main markets

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81
Q

name 2 benefits of FDI for the country

A

provides job opportunities

raises living standards

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82
Q

name 2 reasons why a country may not want FDI

A

competition to small domestic businesses

negative externalities e.g. harmful product sold in that country

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83
Q

define entrepreneur

A

is an individual who takes a risk to organize resources to produce a product or service

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84
Q

define skills

A

an ability to do an activity or job well, especially because you practice

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85
Q

define characteristics

A

a special quality or trait that makes a person, thing or group different from others

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86
Q

name 3 characteristics of an entrepreneur

A

creativity
hardworking
self confidence

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87
Q

name 3 skills required by an entrepreneur

A

communication
resilience
problem solving

88
Q

name 2 financial motives for setting up a business

A

profit maximizing - entrepreneur aims to make profit in a period of time
profit satisfaction - entrepreneur aims to make profit to maintain their interest in the business

89
Q

name 4 non-financial motives for setting up a business

A
  1. ethical stance - entrepreneur support to moral belief
  2. independence - own boss or freedom to make decisions
  3. social entrepreneurship - aim to improve human/environmental wellbeing
  4. homeworking - reduce travel costs
90
Q

define a sole trader

A

a sole trader when one person sets up a business on their own.

91
Q

2 advantages of being a sole trader

A

keep all the profit

maintain control of all the business ideas

92
Q

2 disadvantages of being a sole trader

A

unlimited liability

stressful

93
Q

define a partnership

A

is a business that is owned by two or more people

94
Q

2 advantages of a partnership

A

shared ideas

shared responsibility

95
Q

3 disadvantages of a partnership

A

shared profits
unlimited liability
conflict

96
Q

define a private limited company

A

a business that is owned by shareholders. these shareholders must be family or friends.

97
Q

2 advantages of a private limited company (ltd)

A

limited liability

easier to raise finance

98
Q

2 disadvantages of a private limited business

A

less control

pay dividends to shareholders

99
Q

define franchising

A

is a legal agreement allowing an individual to trade under an established brand name

100
Q

define franchisee

A

is a business or entrepreneur that buys the rights to use the name and business model of another business

101
Q

2 advantages of being a franchisee

A

less risk - name well know and loyalty

training and support - inexperienced entrepreneurs

102
Q

2 disadvantages of a franchisee

A

less control and less independence

initial payment and loss of % of profit

103
Q

define franchisor

A

is a business that sells the rights a franchisee to use its name, logo and business model of the business

104
Q

2 advantages of being a franchisor

A

expand quickly - ahead of competition

receive payment regularly - without work

105
Q

2 disadvantages of being a franchisor

A

can harm reputation

regular control and monitoring needed

106
Q

name 2 features of a social enterprise

A
  1. help charities through donations to their cause from profits
  2. improve human and environmental well-being
107
Q

define a lifestyle business

A

is a business set up to make enough money to survive whilst allowing owner flexibility over work

108
Q

name 2 features of a lifestyle business

A

likely to be a hobby or interest of the owner

small and local

109
Q

what is the difference between a lifestyle business and a normal start up business

A

a lifestyle has more flexibility and is not focused on profits

110
Q

name 2 features of an online business

A

lower costs

location is not important

111
Q

define a public limited company

A

a business owned by shareholders and is listed on the stock market

112
Q

2 advantages of a public limited company

A

limited liability

easy to raise finance

113
Q

2 disadvantages of a public limited company

A

costs/expenses to set up and make to a PLC

poor press and reputation

114
Q

what is meant by a stock market flotation

A

listing a company on the stock market so allowing the general public to purchase shares

115
Q

give 2 reasons why a business may decide to return to Private limited status

A

take back control of the business (buy back shares )

reduce diseconomies of scale ( as the business has grown to big)

116
Q

percentage change

A

new figure - old figure / old figure x100

117
Q

market growth formula

A

change / original x100

118
Q

market size formula

A

value = £
volume = units
business A sales / business A market share x100

119
Q

market share %

A

firms sales/ total industry sales x100

120
Q

demand and supply diagram

A 
remember to tie your LACES 
L = label 
A = axes 
C= curves 
E = equilibrium point 
S = shifts
121
Q

supply curve - demand and supply diagram

A

supply curve will shift left if less is supplied

supply curve will shift right if more is supplied

122
Q

name 2 reasons why a country may prefer to trade within their geographical region

A

cheaper to transport good

culture and familiarity

123
Q

define trading bloc

A

a group of countries that have signed an agreement to reduce or eliminate barriers to trade e.g. tariffs

124
Q

name 6 forms of trading blocs

A 
preferential trading area 
free trade area 
custom union 
common market 
single market 
economic union
125
Q

preferential trading area

A

certain products receive a reduced tariffs rate

ASEAN has a PTA with china

126
Q

free trade area

A

member states remove all trade barriers between themselves

NAFTA

127
Q

custom union

A

similar to FTA but member states adopt a similar common set of barriers with non-members

128
Q

common market

A

more integrated than FTA or custom union as goods, labor and capital is freely flows
ASEAN

129
Q

single market

A

further than a common market - common laws and policies for freely flows
EU

130
Q

economic union

A

customs union and common markets as well as close economic, political and cultural ties as well as a common currency
EU

131
Q

how does an economic union differ from a trade area or customs union

A

free movement of goods, labor and capital

132
Q

define EU and how many member states are there

A

a single market with free movement of goods, labor and capital
total population = half a billion people
27 states

133
Q

name 3 member of countries of the EU

A

france
germany
greece

134
Q

what form of trading bloc is the EU

A

economic union

135
Q

what is ASEAN and how many member states are there

A

association of south east Asian nations
population = 625mil
10 member states

136
Q

name 3 member countries of ASEAN

A

Indonesia
Malaysia
Philippines

137
Q

what form of trading bloc is ASEAN

A

free trade but looking to become a common market

138
Q

why was ASEAN establishes

A

promote growth, social progress and socio-cultural evolution amongst members as well as regional peace and stability

139
Q

what is NAFTA

A

north American free trade association

140
Q

name 3 member countries of NAFTA

A

USA
Canada
Mexico

141
Q

what form of trading bloc is NAFTA

A

FTA

142
Q

why has NAFTA been beneficial for US/Canadian consumers but not so for Mexico

A

agricultural products - decreased prices for us and Canadian consumers
heavily subsidized corn from the USA - great for Mexican consumers but not for the farmers who were driven out of business

143
Q

name 2 benefits for business located within a trading bloc member country

A
  1. external tariffs will protect members from competition from other parts of the world
  2. produces can benefit from economies of scale so lower unit costs due to increases in trade between the member countries
144
Q

2 drawbacks for a business located within a trading bloc member country

A
  1. expensive to import products from countries not in the bloc so costs increase
  2. can protect complacent or inefficient industries from competitors
145
Q

name 2 benefits for a business aiming to sell into a trading bloc from a country that is not a member

A
  1. business outside the bloc can just sell their product into the countries without having to adjust to the culture
  2. access to a large market with the same common tariff - negotiations easier
146
Q

name 2 drawbacks for a business aiming to sell into a trading bloc from a country that is not a member

A
  1. tariffs will add to the costs of products being exported to the bloc, making them less competitive
  2. they may hold a competitive advantage in a particular product but are closed out of the market
147
Q

why do manufacturing business tend to benefit more from membership of a trading bloc

A

they can produce their products in countries where their markets are, benefiting from economies of scale as well as cheaper labor and reduced shipping times and costs

148
Q

define global competitiveness

A

the extent to which a business or country can compete successfully with its rivals

149
Q

name 3 types of companies who would be affected by movements in exchange rates

A
  1. those who reply on export markets
  2. those whose domestic market is subject to competition from imports
  3. those that need to import large quantities of raw materials/components
150
Q

what is meant by appreciation of the pound

A

when the pond raises in value againist other currencies

151
Q

what is the SPICEE acronym

A 
S= strong 
P = pound 
I = imports 
C = cheap 
E = export 
E = expensive
152
Q

what effect would appreciation have on - a business exporting its goods abroad

A

harder to sell abroad due to increased prices.
foreign customers will need to pay more of their currency to buy the product so demand will fall for the exporting business

153
Q

what effect would appreciation have on - a uk business with competition from imports

A

imports become cheaper to uk consumers as each pound can buy more of another currency making the imported products cheaper

154
Q

what effect would appreciation have on - a UK business importing materials from abroad

A

will reduce the cost of production because the stronger pound can buy more of another currency making the imported product cheaper

155
Q

what is meant by depreciation of the pound

A

when the pound falls in value compared to other currencies

156
Q

what effect would depreciation have on - a business exporting its goods abroad

A

product will be cheaper in foreign markets because customers need less of their currency to pay for products, increasing sales

157
Q

what effect would depreciation have on - a UK business with competition from imports

A

will become more expensive as £1 now buys less of the currency so increases purchases of home produced goods as more price competitive.

158
Q

what effect would depreciation have on - a UK business importing materials from abroad

A

will cost more to buy from abroad, pushing up costs of production

159
Q

the significance of fluctuations in exchange rates is likely to depend on what

A
  1. elasticity of demand - some products are less responsive to changes in price as a result of changes in exchange rate
  2. fixed contracts - which will lesson the risk of currency fluctuations
  3. economic growth in other countries - an appreciation in the pound for example might be offset if there is economic growth
160
Q

what is meant by a fixed contract and how does this help exporters

A

setting the price of raw materials 12/18 month into the future which reduces uncertainty

161
Q

define competitive advantage

A

a distinctive strength that a business has and its competitors do not

162
Q

name 2 sources of competitive advantage

A

(porters strategic matrix)

  1. cost competitiveness
  2. differentiation
163
Q

name 3 ways a business can be more cost competitive

A
  1. raise productivity - train or motivate employees
  2. offshore - take advantage of low cost labor
  3. outsource - use another business to preform a function more efficiently (payroll)
164
Q

define differentiation

A

the extent to which a consumer believe that brand is unique or superior to other brands

165
Q

what is the model that links to sustained competitive advantage

A

Kay’s distinctive capabilities (AIR - architecture, innovation, reputation)

166
Q

3 methods of actual differentiation

A

design
function
performance

167
Q

3 methods of perceived differentiation

A

sponsorship
advertising
branding

168
Q

what is meant by a skills shortage

A

where potential employees do not possess the skills demanded by employers

169
Q

why would a skill shortage be a concern to a government

A

UK lagging behind international rivals threatening future competitiveness

170
Q

why would a skills shortage be of concern to a business

A

pay and benefits need to be competitive which increases costs

171
Q

why would a skills shortage damage a business’s international competitiveness

A

reduces the effectiveness and productivity of workforce thus decreasing competitiveness with other countries

172
Q

define MNC

A

a business that has branches in more than one country

173
Q

name 4 impacts of MNC’S on the local economy

A
  1. local labor
  2. wages
  3. job creation
  4. working conditions
174
Q

local labor - positive impact (MNC)

A

makes local workforce more productive and employable if investment mad in training

175
Q

local labor - negative impact

A

own labor from other countries may be brought over rather than employing locally

176
Q

wages - positive impact

A

usually pay higher wages than local firms, improving standards of living

177
Q

wages - negative impact

A

locals may resent that they are being paid less

178
Q

job creation - positive impact

A

regular income and financial security for workers

179
Q

job creation - negative impact

A

may be at the expense of the local firms who may go bust

180
Q

working conditions - positive impact

A

have to keep reputation intact so should provide above average working conditions

181
Q

working conditions - negative impact

A

children may be exploited

182
Q

2 positive impacts of MNC’s on local businesses

A
  1. may be used for the construction and/or supply of material, increases revenue and profit
  2. growth within the local economy - increased income, more spending
183
Q

2 negative impact of MNC’s on local businesses

A
  1. fewer workers available as locals attracted to gain employment with the MNC’s
  2. tough to compete as MNC’s benefit from economies of scale
184
Q

2 positive impacts of MNC’s on local communities and environment

A
  1. improvements to infrastructure

2. may be more environmentally friendly as have their reputation to uphold

185
Q

2 negative impacts of MNC’s on local communities and environment

A
  1. may take advantage of less strict environmental protection
  2. may just extract resources and then leave
186
Q

name 6 impacts of MNC’s on the national economy

A
  1. FDI flows
  2. Tax revenue and transfer pricing
  3. consumers
  4. business culture
  5. balance of payment
  6. technology and skill transfer
187
Q

FDI flows - positive impact (MNC)

A

money invested into the country boosting economic activity, creating income and jobs

188
Q

FDI flows - negative impact (MNC)

A

profit can be diverted back to the home country rather than being reinvested

189
Q

tax revenues and transfer pricing - positive impacts (MNC)

A

increased tax receipts allowing government to spend more

190
Q

tax revenue and transfer pricing - negative impact (MNC)

A

MNC’s can minimize their tax bill for e.g. by using transfer pricing to avoid taxes by moving profits to countries with lower tax rates

191
Q

consumers - positive impact (MNC)

A

cheaper products

192
Q

consumers - negative impact (MNC)

A

May drive local rivals out of business, reducing consumer choice

193
Q

business culture - positive impact (MNC)

A

may help to foster a culture of enterprise

194
Q

business culture - negative impact (MNC)

A

Change in business culture could lead to loss of national culture

195
Q

technology and skills transfer - positive impact (MNC)

A

train and develop local workforce improving skills

196
Q

technology and skill transfer - negative impact (MNC)

A

reverse engineering - which is a risk to the MNC

197
Q

define globalisation

A

interconnectivity between countries operating internationally or a global scale

198
Q

5 features of globalization

A
  1. reduction of international trade barriers
  2. reduction cost of transport and communication
  3. increased investment flows
  4. growth of global labor force
  5. structure change
199
Q

what is meant by trade liberalisation

A

the removal of trade barriers to allow freely moving international trade (tariffs, quotas and regulation)

200
Q

name 2 opportunities of liberalization

A
  1. increased consumer choice

2. imports become cheaper

201
Q

name 2 threats of liberalisation

A
  1. reduce imports means domestic firms suffer

2. removes national cultures

202
Q

name 2 political changes that have helped to increase or decrease globalisation

A
  1. Brexit - decreased globalisation - increased trade barriers
  2. china moving away from hardline communism
203
Q

2 ways that reduced cost of transport and communication has increased globalisation

A
  1. technological development make engines fuel efficient

2. stable / falling oil prices

204
Q

define global (transnational) companies

A

companies that own or control production/ service facilities outside the country in which they are based

205
Q
  1. ways that the increase in TNCs has led to an increase in globalisation
A
  1. represent 2/3 of global exports
  2. boost the economies of countries they locate in and increase employment
  3. higher demand for product
206
Q

name 2 problems with the increase of TNC’s

A
  1. domestic firms suffer from transnational companies

2. consumer choice declines

207
Q

2 ways in which increased investment flows has helped increase globalisation

A
  1. communication flow have improved, cross border financial transactions have become easier
  2. increased sales - shareholders happy
208
Q

a problem with increased investment flows

A

financial crisis can stem from banks preparedness to lend foreign customers

209
Q

define migration

A

temporary or permanent movement of people around the globe

210
Q

4 ways that migration has helped to increase globalisation

A
  1. well educated and highly skilled migrants
  2. low cost labor
  3. income (sent back to place of work benefits multinationals )
  4. culture importation (polish shop)
211
Q

2 problems linked to migration

A
  1. overcrowding

2. unemployment

212
Q

2 ways that the growth of the labor force has contributed to globalisation

A
  1. drive global demand

2. lifts people out of poverty

213
Q

name a problem for UK businesses of growth in the global labor force

A

shortage of skilled staff, recruitment from abroad

214
Q

name 2 ways that structural changes have contributed to globalisation

A
  1. western economies rely less on income from primary and secondary sectors
  2. improve international competitiveness
215
Q

what is the world trade organisation (WTO)

A

organisation that promotes free trade by persuading countries to abolish tariffs and other barriers
produce free trade agreements

business (7 decks)

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