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Business paper 3 > Paper 3 Knowledge > Flashcards

Paper 3 Knowledge Flashcards

1
Q

3 factors affecting demand

A
  • Price of Substitutes / complementary goods
  • Seasonality
  • External shocks (Legislation, new competition, natural disasters)
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2
Q

Describe a Supply and demand graph with directions of shifts

A

Y Axis = Price
X Axis = Quantity

Demand = Negative Gradient
Supply = Positive gradient

Left = decrease
Right = Increase

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3
Q

3 Factors affecting Supply

A
  • Change in cost of production (Left or right)
  • New Technology (Right)
  • Gov Subsidies (Right)
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4
Q

What are the 3 areas of the design mix and describe

A

Function
- Benefits that a product/service provides

Aesthetics
- Design, style and appearance of product

Cost
- All production costs

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5
Q

3 ways to design products to meet social trends

A
  • Waste minimisation
  • Products designed to be recycled
  • materials sources ethically
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6
Q

Above the line vs Below the line promotion

A

Above the line
- Promotion involving any type of advertising through the media (TV, radio, billboards etc)

Below the line
- forms of promotion that dont involve advertising
(Sales promotions, PR (sponsorships),)

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7
Q

What is the purpose of promotion?

A

Method a business uses to communicate with its customers / potential customers/.

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8
Q

What are 3 influences on promotion?

A

Target Audience
- This changes which methods will be effective

Technology
- Can be used to only reach the target audience

Promotion budget
- Determine which methods can be used

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9
Q

What is a brand

A

represents the personality and characteristics of a business.

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10
Q

3 ways to build a brand

A
  • Exploiting a USP
  • Advetisinng
  • Social Media
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11
Q

3 benefits of a brand

A
  • Adds value to product
  • builds trust
  • recognisable product
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12
Q

types of brand

A

Manufactures brand
- Kellogg’s

Own-label brands
- retailer brands (Sainsbury’s crisps)

Generic brands
- Products with no brand association (carrots)

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13
Q

What is viral marketing

A

A method of promotion that relies on an audience sharing and pushing the message of a product or service.

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14
Q

What are 3 influences on price (price the business set)

(Marketing mix)

A

Costs
- What profit margins is the business looking for

PED
- Potential for a business to change the price

Product Life Cycle
- the stage of the life cycle that the product is in

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15
Q

What are the 6 pricing strategies?

A
  • Skimming
    High then lower with demand
  • Penetration
    Low to enter then raise once market share high
  • Cost Plus
    Add percentage to unit costs
  • Predatory
    So low that rivals cant afford to compete
  • psychological
    price to make it look cheaper than it is
  • Competitive
    setting price based on nearest competitor
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16
Q

What is personalised pricing?

A

Technology used to collect customer information and then target them with a personal price.

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17
Q

Who are the 5 potential parties in a distribution network?

A

Manufacturer
- Factory that creates the product

Agents & Brokers
- Link buyers and sellers

Wholesalers
- Take bulk qualities from suppliers and distribute to retailers

Retailers
- Provide customers with specialised service and sell

Consumer
- Using the product

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18
Q

2 influences on distribution

A

Scope/scale
- Product sold internationally may require more parties in the network

Control over Pricing & Promotion
- A business may use its own network if this is important

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19
Q

What is Direct selling

A

Direct sale from manufacturer to consumer
- eg Ecommerce (Coca cola)

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20
Q

What is an entrepreneur and what do they do

A

Someone who takes a financial risk to set up and grow a business

  • Innovate and Invent
  • Take risks
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21
Q

What are 3 barriers to an entrepreneurs success?

A

Red Tape
- Legal barriers

Lack of Finance

Lack of entrepreneurial skills

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22
Q

What are the 4 forms of business ownership +/-

A

Sole Trader
-> Self employed person that owns 100% of the business
+ Easy and free to start
- Unlimited liability
- Long hours

Partnerships
-> Multiple owners of a business
+ Serve a larger audience
- Unlimited liability
- shared profits

LTD
-> owned by private shareholders
- Long incorporation process
+ Limited liability

PLC
-> large business, shares owned by the public
+ Easy to raise finance
- Lots of legal parameters
- £50,000

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23
Q

What is franchising? +/-

A

Limited company that licences the right for individuals or groups to use their branding and supply chain.

+ Up front payment and royalty payments
- Risk of damaged brand

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24
Q

What are 3 other forms of business

A

Social Enterprises
- not-for-profit organisations (charities)

Lifestyle business
- A business run to sustain a particular lifestyle for the owners

Online Business
- ecommerce

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25
What is stock market floatation?
Money generated from selling shares when a company goes public
26
How much does it cost to go public?
£50,000
27
Effects of share price rises and falls. 2 for each
+ Employees could receive bonuses + Easier to raise capital - Vulnerable to takeover - Harder to raise capital
28
What is opportunity cost?
Benefit lost from not selecting the next best alternative
29
What is a trade off?
Giving up one thing in order to have another
30
3 methods to help business decisions
Investment Appraisal - Determining wether an investment is worthwhile Comparing advantages and disadvantages Risk vs reward - is the risk worth the reward
31
3 difficulties to an entrepreneur becoming a leader
Sharing Control Increased stress Different skillset (compassion and personal skills)
32
3 reasons to stay small
Flexibility - faster decisions and changes Costs - Lower running costs Personal service Easier to provide a personal service to customers
33
What is Sales Forecasting? 2 approaches
Using a range of techniques and information to predict future sales - Market research (surveys and reports) - Backdata (time series analysis) -> predating further sales based on past sales figures
34
3 drawbacks to sales forecasting
Volatile consumer tastes and preferences Quality of the data - accuracy could vary dramatically External shocks - changing commodity prices, wars / political stability
35
Fixed costs vs variable costs
Fixed costs - Dont change with level of output Variable costs - Change directly with level of output
36
What is contribution? 2 formulas (contribution and total contribution)
Returns a business makes from each unit sold. Contribution = selling price - variable cost per unit Total contribution = total output x contribution per unit
36
Short run vs Long run
Short Run - Immediate future - Variable costs are variable and fixed costs are fixed Long Run - Long Term - All costs are variable as fixed costs will change over time (even fixed costs such as Mortgage & salaries)
37
Break even definition and formula
Point where costs = revenue B-E point = Fixed Costs / Contribution per unit
38
What is the margin of safety?
Difference between break even and current output
39
2+ and 2- of break even analysis
+ Simple and easy + Break even point is helpful when making decisions - Oversimplifies - Costs are rarely constant so inaccurate
40
Historical vs zero based budgeting
Historical - time series analysis (Backdating) Zero based budgeting - opportunity costs of all decisions is deciding factor - all spending must be justified
41
What is variance?
Difference between budgeted and actual figure
42
Gross, net (profit for year) and operating How do you do the margins?
Gross -> Revenue - COGS Net -> Revenue - total costs Operating -> Gross - Operating expenses (Type of profit / Revenue) x 100%
43
What is a statement of comprehensive income>
Document stating businesses income and expenditures over time
44
What is profitability?
A measure of business profit relative to expenses
45
Cash vs Profit
Cash - Liquid money available within the business Profit - Money a business makes after all expenses are paid
46
What is a statement of financial position? (balance sheet)
Financial document recording all assets and liabilities of a business
47
What is liquidity?
Ability of a business to pay short term financial obligations with cash
48
Current ratio, acid test ratio & Working capital formula
Current Current assets / Current liabilities Acid (Current assets - Inventory) / Current liabilities Working Current Assets - Current liabilities
49
3 ways to improve liquidity
- Delay payments - Encourage cash sales - Short term loans
50
Types of economies of scale 4 internal 2 external
Internal (Business) - Purchasing (Bulk Buying) - Technological (Better tech) - Financial (better interest rates) - Managerial (Employ specialists) External (Industry) - Labour (Build up win skilled labour force - Cooperation (Firms work together and collaborate)
51
3 Impacts of diseconomies of scale
Communication Problems - harder to communicate clear messages Flexibility - Harder to adapt to business environment as longer decision making Motivation - Such a larch business employees struggle to see their impact
52
What is Overtrading?
When a business grows so quickly that they have to overstretch their financial resources.
53
Takeover vs merger
Takeover When a business gains majority share of another business and therefore, control Merger When 2 business come together under one board of directors
54
Types of growth (vertical and horizontal)
Backwards Vertical - taking over a supplier Forwards Vertical - Taking over a customer (retailer) Horizontal - Merging with a business in the same level of the supply chain Conglomerate - Acquiring a business in another industry
55
+ / - of organic growth
+ Less risk + Diseconomies of scale minimised - Slow Pace - Competition may be growing faster
56
What are ethics
moral principles that guide business decisions
57
3 ethical business practices
Treating workers and suppliers fairly (Fair trade) Ethical sourcing of materials Sustainability
58
What is CSR (Corporate Social Responsibility)
The responsibility a business has to itself to maintain a positive social impact.
59
What are the 4 sections of the CSR pyramid (Top to bottom) Similar to Maslow as bottom ones are essential first
Philanthropic responsibility - be a good corporate citizen (contribute to community) Ethical responsibility - Do what it right & avoid harm Legal responsibility - obey the law Economic responsibility - Be profitable - can be expensive and take time to do this
60
8 Assessors of a country as a production location
- Cost Of Production - Position in trading bloc - Skilled Labour - Ease Of Doing Business - Government Incentives (Low tax, subsidies, low rates) - Infrastructure - Politcal Stability - Natural Resources
61
4 Local impacts of an MNC
Job Creation Increase in local businesses (Supply chain & people earning more) Infrastructure (If not in place, business has to install) Community & Environment (pollution, parks, support schools)
62
4 National Impacts of an MNC
FDI flows (Investments from other countries) Balance of Payments Consumer benefit (lower prices, more choice) Transfer pricing (MNC selling in other country to avoid tax in manufacturing country)
63
What are 3 stakeholder conflicts
Shareholders seek greatest ROI Customers look for the lowest prices Governments seek taxes
64
4 influences (ways to control) MNCs
Political influences (lobbying) Social media pressure groups Legal controls (tariffs and quotas)

Business paper 3 (1 decks)

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