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business studies > REVISION > Flashcards

REVISION Flashcards

1
Q

What is PED?

A

Price Elasticity of Demand: How responsive demand is to price changes

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2
Q

PED Calculation?

A

PED = % change in quantity of demand divided by % change in the price

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3
Q

How do you interpret PED result?

A

1 = Unitary Elasticity - change price -> proportional change in demand
Less than 1 = Inelastic
More than 1 = Elastic

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4
Q

What are factors influencing PED?

A

More Inelastic if:

  • heavily branded so less sensitive to price change
  • only a few substitutes
  • low proportion of customer income spent on item
  • luxury goods
  • necessities
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5
Q

When can you use PED in business?

A

To consider business impacts of a price change in terms of quantity demanded (output, inventory, staff), revenue and profit

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6
Q

What are the indicators of Economic Growth?

A

GDP - Gross Domestic Product (per capita) - measure of size of economy and sum of everything it produces
Literacy
Health
HDI - life expectancy, education, income

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7
Q

What is GDP?

A

Gross Domestic Product is measure of the size of an economy and total value of good produced and service provided in a country in a year

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8
Q

What is Protectionism?

A

Attempts by a country to impose restrictions on trade of goods / services - aim to help domestic market against Multi-National Companies (MNCs)

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9
Q

What are the reasons for Protectionism?

A
  • Protect domestic markets from competition especially new industries and emerging economies
  • Protect jobs
  • Income for government help increase GDP
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10
Q

What are reasons against Protectionism?

A
  • Tariffs on imported goods may decrease demand as will increase prices for consumers - impacting individual businesses
  • Could be ineffective if aimed at niche markets
  • Market distortion
  • Extra costs for exporters
  • Adverse impact on poverty
  • Retaliation and Trade Wars (effect on growth)
  • Reduction in Market Access for Producers
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11
Q

What is a Business Plan?

A

A document that sets out the strengths, aims and strategies of a business

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12
Q

What are the positives of Business and Financial Planning?

A
  • test feasibility of a business idea
  • help secure funding eg. loan
  • Attracts investors by showing direction
  • Provides structure
  • Gives a Marketing Roadmap/ measure success
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13
Q

What are the contents of a Business Plan?

A 
overview
description of product/service
strategy
marketing
management
financial info
evaluation
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14
Q

What are the downsides of a Business Plan?

A
  • Can be inaccurate / only prediction
  • time consuming Analysis
  • can be interpreted wrong
  • Might restrict freedom company used to have
  • pay specialists/ costly
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15
Q

What is a Cash Flow forecast

A

Forecast of the inflows and outflows in a business over a period of time

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16
Q

What are the main components of Cash Flow Forecast?

A
  • Cash Inflow- coming in
  • Cash Outflow- coming out
  • Opening Balance- start of month
  • Closing Balance- end of month
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17
Q

How can you improve Cash Flow?

A
  • Increase pricing
  • Chase debtors
  • Expand Product Portfolio
  • Change suppliers
  • Lease Equipment
  • Trade Credit
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18
Q

What are limitations of Cash Flow Forecast?

A
  • Can be impacted by external factors (uncertainty)
  • sales revenue might be optimistic
  • based on retrospective data
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19
Q

What is the purpose of sales forecasting?

A
  • Set sales targets
  • aids decision making eg.marketing/ops/HR/finance
  • motivate staff
  • Measure Success
  • show when SOF is required
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20
Q

Factors affecting sales forecasts?

A
  • Consumer Trends - Demand, fashion, tastes
  • Economic Variables - Exchange rates, interest rates, taxation
  • Competition changes
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21
Q

Sales Forecasting techniques?

A
  • Moving Average - Calculates overall trend in a data set
  • Extrapolation - Assumes that the patterns in the past with continue in the future ‘continuing the line’
  • Correlation - relationships between variables
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22
Q

Difficulties of sales forecasting?

A
  • may be optimistic
  • damaging if inaccurate eg.stock levels
  • Using the right method
  • retrospective data based
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23
Q

What is Profit?

A

revenue - costs

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24
Q

How do you calculate Gross Profit?

A

Revenue- cost of Sales

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25
Q

How do you calculate Operating Profit?

A

Gross Profit - Fixed Overheads

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26
Q

How do you calculate Profit for the Year (Net Profit)?

A

Operating Profit- Finance and Tax

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27
Q

What is Statement of Comprehensive Income / Profit & Loss?

A

Sets out Revenue for the year with cost breakdown

Financial document that shows sales revenue and expenses of a business to see if made a profit or loss

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28
Q

What are the measures of Profitability?

A
  • Gross Profit Margin (GPM) - (Gross Profit / Revenue) x 100
  • Operating Profit Margin (OPM) - (Op Profit / Revenue) x 100
  • Net Profit Margin (NPM) - (Net Profit/ Revenue) x 100
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29
Q

How to improve Profitability?

A
  • Increase Revenue - Promotions / increase Price / increase distribution
  • Decrease costs - staff efficiency / change suppliers / reduce waste
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30
Q

Distinction between Profit and Cash?

A
  • Not all cash into a business is profit i.e. have to pay costs from the cash that comes in
  • When all costs deducted from all revenue - amount left is PROFIT (overall indicator of success)

Cash is needed to operate the business on a daily basis(flows throughout business)
- Company can be profitable but lack adequate cash

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31
Q

Calculation for percentage change?

A

(New - Old / Old) x 100

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32
Q

What is Stock Control?

A

Raw Materials, Work in Progress and Finished Goods held by a firm in order to meet customer demand.

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33
Q

Interpret a Stock Control Diagram?

A
  • Shows how much stock you have at point in time and how you keep track of it
  • Maximum Stock that is held
  • Point need to re-order
  • Minimum Stock required
  • Buffer Stock
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34
Q

What is Buffer Stock?

A

Contingency / Reserve stock in case of unexpected demand or issues with supply.

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35
Q

Impact of poor Stock Control?

A

Too much:

  • Tied up capital impacting cash flow - Opportunity cost i.e. could have spent on something else.
  • Storage Costs and Increased Waste

Too Little:

  • Shortfall vs Demand impacting sales / turnover
  • Decreased Productivity
  • Reputation damage
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36
Q

What is Just In Time Stock Management?

A

attempt to operate with no buffer stock

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37
Q

Benefits of JIT stock managemnt?

A
  • Minimises Waste/ lean production (competitive advantage)

- money isn’t stuck in stock/ helps with CF

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38
Q

How do you minimise Waste?

A

Lean Production:

  • Producing more for less
  • Assuring quality
  • Making sure all staff are productive
39
Q

Methods of Production?

A
  • Job- one off products
  • Batch - similar items produced together
  • Flow / Mass - continuous movement of products
  • Cell -each team(cell) is responsible for specific part
40
Q

Job Production benefits?

A

Meet specific requirements from customer - increased:

  • Quality
  • Flexibility
  • Satisfaction

can charge higher price

41
Q

Job Production challenges?

A
  • Unit cost is high
  • Labour Intensive
  • Specialised staff required/ specialised equipment
  • Investment in Training
42
Q

Batch Production benefits?

A
  • Reduced unit costs
  • Increased output / productivity
  • Fulfil flexible orders
43
Q

Batch Production challenges?

A
  • Lose time when switch batches

- Low motivation for staff - low skilled / repetitive

44
Q

Flow / Mass Production benefits?

A
  • Continual movement of products through production process
  • Economies of Scale - lower unit cost
  • Less staff training
  • Capital intensive (more machinery)
45
Q

Flow / Mass Production challenges?

A
  • Inflexible to make changes
  • Little differentiation
  • Usually cheap products
46
Q

Cell Production benefits?

A
  • Team working and ensures worker commitment as each cell(team) is responsible for specific part of production
  • Increased quality as staff become specialised
  • Better motivation for staff
  • Better communication
  • increased job enrichment
47
Q

Cell Production challenges?

A
  • Costly materials
  • Labour intensive
  • More training required
48
Q

What is Productivity?

A

how many outputs can be produced from a given number of inputs over period of time

total output/ total input

Output / No of Workers - Labour Productivity
Output / Time
Output / Capital Invested

49
Q

Factors affecting Productivity?

A
  • Business Environment
  • Labour - training, rewards, incentives -> motivation
  • More/ better machinery
  • Lean Production - less waste
  • Good stock management
  • number of employees
50
Q

Relationship between Productivity and Competitiveness?

A
  • Low production impacts sales and market share
  • Increased cost lead to PRICE increase(impact demand)
  • Customers might choose cheaper alternative
51
Q

What is Efficiency?

A

Production at lowest unit cost

Average cost per unit = total product cost / total output in a period

52
Q

Improve Efficiency

A
  • More / Better machinery

- Motivating and Training workforce

53
Q

Distinction between Labour and Capital Intensive production?

A

Capital Intensive:

  • Requires more equipment and larger financial investment
  • Mostly automated and mass production

Labour Intensive:

  • Requires higher labour input to carry out production vs the financial investment required
  • Lower output
  • Lower costs - training staff mainly
  • Can increase productivity without major investment
54
Q

What is Business Ethics?

A

Implementing appropriate policies and principles in decision making about controversial subjects. Acting morally

55
Q

Stakeholder Conflict?

A

Needs of a group conflict with the needs of another

56
Q

Behaving Ethically - benefits?

A
  • Use in Marketing
  • Positive brand image / PR
  • Employee motivation
  • can charge higher price
57
Q

Behaving Ethically - negatives?

A
  • Expensive
  • Make some products not viable
  • Customers see through fake ethics - brand damage
  • Financial gain not guarenteed- Some customers don’t care
58
Q

Ethics - Pay and Working Conditions?

A
  • Safe environment
  • Ensure not under age
  • Worker exploitation
59
Q

Ethics - Environmental?

A
  • Manage Waste properly
  • Ethical sourcing
  • Minimise pollution / emissions
60
Q

Ethics - Supply Chain Management?

A
  • Check full supply chain
  • Suppliers labour practices - no exploitation of child labour
  • Sustainable raw materials
61
Q

Ethics - Marketing?

A
  • No false advertising

- Avoid promoting unhealthy products to children

62
Q

Business Ethics - Profit vs Ethics?

A

Trade off between making a profit an trading in an ethical way

63
Q

Business Ethics - Pay and Rewards?

A
  • Gender pay gap
  • CEO vs lower level employees
  • Sick and Maternity Pay
  • Tax brackets
64
Q

Should CEO be paid more?

A
  • In demand - high paid
  • High Business experience
  • Motivator
  • Strategic Direction setter
  • Paid for responsibility / risk if goes wrong
  • Unethical?
  • Impact on Profit?
65
Q

What is Corporate and Social Responsibility?

A

Business pays attention to needs of all stakeholders not just shareholders

66
Q

Corporate social responsibility Positives?

A
  • Staff recruitment / retention
  • Attracts customers - PR
  • Reduce costs / waste
  • Improve access to capital
67
Q

Corporate social responsibility Negatives?

A
  • Can increase costs
  • high expectations of business
  • Can increase price and reduce competitiveness
  • have to consider ethics of the supply chain also
68
Q

what is Corporate Culture?

A

Norms and Values of a business - Identity of business

69
Q

how do you create corporate culture?

A
  • Business Environment
  • Type of employees and working environment
  • Management Style
  • Training
  • PR
  • Hero / Founders
  • uniform
70
Q

Strong Culture?

A

Values an beliefs widely shared and significantly influences peoples behaviour

  • Good internal communication
  • Clear mission and goals
  • Traditional
  • Loyal staff
  • Not easily copied
71
Q

Weak Culture?

A

Values and beliefs either don’t exist or not widely shared so don’t significantly influence people’s behaviours

  • Demotivated workforce
  • Business failures
  • Inconsistent behaviours
  • Poor management and bureaucratic
72
Q

Power Culture?

A

One person has control over everything that goes on within the organisation

73
Q

Task Culture?

A

Focus on specific tasks and projects

74
Q

Role Culture?

A

Every employee is delegated roles and responsibilities according to specialisation, experience etc to get the best out of them

75
Q

Person Culture?

A

Focus for each member is on the individual where there is no collective identity or goal

76
Q

Difficulties in Changing Culture?

A
  • Convincing Staff
  • Staff training
  • Fear of reaction from customers
  • Expensive
77
Q

what is sales forecasting

A

technique used to predict future sales for a business

78
Q

what is a moving average

A

used to identify trends by flattering fluctuations in data

79
Q

how do you calculate a 4 period moving average

A

1/2 month 1 + month 2 + month 3 + month 4+ 1/2 month 5 /4

80
Q

how do you calculate a 3 period moving average

A

add first 3 months /3

81
Q

what is extrapolation

A

‘continuing the line’- continuing the trend from historical data

82
Q

what is correlation

A

looks at relation ship between 2 variables

83
Q

what are advantages of moving averages?

A
  • easy to interpret

- good tool for static markets (not dynamic)

84
Q

what are advantages of extrapolation?

A
  • simplistic to do
  • doesn’t require much skill
  • easy to interpret as visual
85
Q

what are advantages of correlation?

A

can identify trends

86
Q

what are the disadvantages of moving average?

A
  • not suitable for dynamic markets
  • retrospective
  • doesn’t account for external factors
  • discards anomalies
87
Q

what are the disadvantages of extrapolation?

A
  • very retrospective
  • no qualitative data
  • can be drawn differently by each person
88
Q

what are the disadvantages of correlation?

A
  • only considering one factor against sales

- hard to choose IV

89
Q

what is a tariff?

A

a tariff is a tax placed on imports into a country

90
Q

what is a quota?

A

a quota is a physical limit on amount of goods allowed to be imported into a country

91
Q

what is a subsidy?

A

a subsidy is financial support given by government to domestic producers

92
Q

what is dumping?

A

when foreign producers sell goods below cost price in domestic market

93
Q

what is import licensing?

A

government grants importers the right to import goods

94
Q

what is the design mix?

A

function - does it do what it says?
economic manufacture- costs involved
aesthetics -how it looks and feels

business studies (6 decks)

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