paper 1 flashcards-1st topic-Business activity
what is an enterprise
Seeing an opportunity to provide a product or service that people are willing to buy.
what is an entrepreneur
r: Someone who takes the risk of starting and running a business.
3 purposes of an enterprise
1.spotting a business opportunity
2.developing a business idea
3.satisfying customers needs
characteristics of an Entrepreneur
1.risk taker
2.creative
3.determined
4.confident
what is a risk
these are the possible losses an entrepreneur may face from opening a business
what are the rewards
this is the benefit of having a business
what is a business plan
A plan that set out details on the product or service being sold it includes finance and marketing as well as the market research
what are some of the business aims
broad,general statement of what an organisational,project or individual hopes to achieve in the long run,providing overall direction and vision
what is the business objectives
specific,measurable steps that need to be taken to achieve detailing the exact outcomes and action required
what is a market
The group of people who you want to sell to or where businesses sell their products/services
what is a target market
A group of customers which the business has decided to sell to
resources
Things businesses need to make it work including finance (money), staff and materials
what is the purpose of planning and why do we do these
reducing risk-(much as possible and to identify early on any problem areas that the business might face) and helping a business succeed-(Allows for reflection on idea, to give owners some direction once plan is written down its more likely to be followed,attracts investors and funding)
how does a business plan help an owner identify a market
1.helps them plan possible markets to sell to or places to sell (k)
2.sets out plans to research if customers in that market would purchase the product (k)
3.will give the owner an indication of whether it will be successful or not (k)
what are the limitations of a business plan(EV-EVALUATION)
benefits: -limit risk by
1.offering strategic guidance
2.risk identification
3.resource management
-increased change of success by
1.clear vision
2.investor confidence
3.progress tracking
DRAWBACK/LIMITATIONS
1.time consuming
2.inaccuracy
3.rigdity
what is liability
what a business owns and who is responsible for paying for it
what is UNlimited liability
responsibility for the debts of a business rests with the owner of the business
what is limited liability
the responsibility or the debts of a business is limited to the amount invested by a shareholder.
what is a sole trader
A sole trader is a business that is owned by one person. It may have one or more employees.
what are the main Aims for a business
1.Increase Profitability: Profit is total revenue (money into a business) minus total costs (money out of a business). This is maximised by increasing revenue and reducing costs.
2.Survival: To break-even, this means not making a loss or a profit. Just keeping afloat to pay for all expenses.
3.Business Growth: To increase number of stores or develop new products and services.
4.Providing a good customer service: To deliver a positive and memorable experience for customers so that they feel satisfied and return again.
5.Increase Market Share: To increase the % of sales in the market compared to other rivals.
what are the objectives for a business
Increase revenue by 20% into the business by investing into a social media advertising campaign for 5 weeks.
Reduce costs out of the business by 10% by negotiating with suppliers for a 10% discount on raw materials.
To sell enough products in order to cover all costs by the end of the day.
To open another five stores in one year
To achieve 5 star reviews on google from at least 10 customers per day.
To increase sales by 10% more than the rival next door on a weekly basis.
what is a start up business
A startup is a business that has just started up and is including itself in the market
what is an established business
Mature businesses with proven market presence, stable revenue streams, and established organisational structures.
what is a stakeholder
A stakeholder is anyone that is interested or affected by a business’ decision
how does a stakeholder influence business activity
- Employees
can influence the success of an organisation by their productivity and efficiency in the tasks they do everyday. They can also resort to industrial action (strike) if they disagree with working conditions, pay or company policies
2.Suppliers
can decide whether to raise prices for orders which can obviously affect a firm’s profits. Also a supplier’s reliability could affect production.
3.Government
can influence a firm by introducing new laws that can affect operations such as the National Minimum Wage, or they can raise Corporation Tax which would eat into a firm’s profits
4.Customers
can influence a business by deciding to continue to purchase goods and services from the organisation. They can choose to take their custom elsewhere.
5.Local community
can influence a business by protesting against the building of premises
what are methods of growth
Internal (organic) Growth: New products (innovation, research and development), new markets (through changing the marketing mix or taking advantage of technology and/or expanding overseas)
External (inorganic) Growth: merging with or taking over another business. There are 3 types.
Vertical Growth
Horizontal Growth
Diversify
examples of business growth
1.Apple develops a new smart watch using finance obtained from a loan.
McDonald’s increases its level of marketing activity to grow its Sales across the UK.
Amazon extended their warehouse space.
Vertical growth - Tesco taking over their own food manufacturing supplier.
Horizontal Growth - Asda merging with Sainsburys (They have tried but failed)
Diversify - Sainsbury taking over Argus and Habitat to include selling furniture and toys, not just groceries.
what is external growth
external growth occurs when two or more companies merge or acquire each other.
what are problems for rapid growth
Morale may drop if staff cannot cope with the extra work. Productivity can decrease.
There may be a shortage of cash to meet expansion costs.
Management may be under pressure, operating reactively rather than proactively.
Difficulty to supervise standards - The quality of your products and services could drop, causing an increase in customer complaints. You may even lose customers to your competitors.
what are the problems of mergers/takeover
Clash of cultures
Possible move away from core competencies of the original business may cause issues of control when it gets too big.
Unreliable merger partners
75% of all mergers fail (worse than divorce rates)
