Theme 1 Flashcards
Dynamic nature of business
A business must understand how dynamic the market is that it is entering.
Obsolete
out of date/ not in use
E-commerce
Using the internet to carry out business transactions
M-commerce
using mobile technology to carry out business transactions
Types of reward
Profit, personal development, self-esteem, independent satisfaction
Ways to reduce risk
Plan, research, finance with care, calculated risks, keep costs down
Customer needs
A business needs to understand the needs and wants of customers in their target market segment.
Adding value
Adding value is the transformation process that describes what happens inside the business.
What is an enterprise ?
A business
Market research
The purpose is to gather information which will enable a business to be informed in its decisions and identify gaps in the market.
Primary research
Data collected first hand for a specific purpose.
Secondary research
Data that already exists and has been collected for a different purpose.
Qualitative data
expresses peoples opinions and cannot be shown on a graph
Quantitative data
Numerical data that can be expressed on a graph
Market segmentation
Involves dividing a market into parts that reflects different customer needs and wants.
Market mapping
Is the process to identify a gap in the market by looking at what competitors offer
Competitive environment
where a business operates in a market where there are other businesses producing the same or similar goods and services.
Revenue formula
Price x quantity
Total costs formula
Fixed costs + variable costs
Profit formula
Total revenue - total costs
Break even formula
(selling price per unit- variable costs)
Interest rates
Affect both the business and the consumers. They can represent a reward for savings or a cost for borrowing.
Unlimited liability
The owner is responsible for all debt.
Limited liability
The owner is only reliable for debt up to the amount they invested into the business.
Sole trader
An individual owning the business on their own
Partnership
Formed where a business is started and owned by more than one person.
A company
Formed when a business is set up to have a different legal identity from its owner.
Marketing mix
How a business combines its products and its price and uses promotion and the place of sale in order to succeed.
Legislation
Where the government makes laws in order to control business action and protect the needs of stakeholders.
Technology
The application of knowledge, skills and techniques to improving business performance.
Stakeholders
Any individual or organisation who has a vested interest in the activities and decision making of a business. (managers, employees, customers ,pressure groups)
Business plan
provides a focus on the business idea and helps the financial viability of the idea and encourages the business to set appropriate objectives.
Economic climate
The general situation in a country affecting the wellbeing of individuals and the government in areas such as output, prices and employment
Business location (factors)
Cost, labour, competition, raw materials, technology, government assistance, nature of business activity
Sources of finance
Bank overdraft, trade credit, personal savings, share capital, venture capital (professional investor), loan
Cash flow
the process of cash flowing in and out of a business
customer wants
Goods and services that we would like but don’t need to live
Useful insight provided by market research
- Demand
- Competition
- Customers
- Market segments
Why use market segmentation ?
- Choosing market mix
- Choosing promotion
- Market mapping
Advantages of market mapping
helps spot gaps, analyses competitors
Disadvantages of market mapping
‘Gap’ doesn’t mean demand, reliable ?
Examples of primary research
Questionnaires
Surveys
Interviews
Likert scale
Example of secondary research
Government report
Business aims
Is the ultimate purpose
Business objectives
Is a goal that is sought in order to achieve an aim
What do objectives depend on ?
Size of business
Competition
Type of business
Main business aims
Profit maximisation
Survival
Customer satisfaction
different aspects of the economic climate
> Interest rate changes > Inflation > Consumer income > level of unemployment > taxation > exchange rates
Why is cashflow forecasting important ?
Can forecast cashflow problems
Can find a solution to a potential problem before it becomes a problem
