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GCSE Business > Theme 1 > Flashcards

Theme 1 Flashcards

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1
Q

What is the difference between a good and a service?

A
  • a good is a tangible product

- a service is an experience that is intangible

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2
Q

What is the difference between a consumer and a customer?

A

A customer purchases the product and the consumer uses the product.

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3
Q

What 3 reasons do new business ideas come about?

A
  • changes in technology
  • changes in consumer needs
  • a product becoming obsolete
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4
Q

What does it mean if a product is obsolete?

A

Outdated and no longer in use.

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5
Q

What are payment platforms?

A
  • enable businesses to take online payments
  • usually free for customer to use, take a small amount of commission from the seller and provide the customer with peace of mind
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6
Q

What is an entrepreneur?

A

Someone who creates a business, takes on financial risks with aim of making profit.

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7
Q

What 2 ways do new business ideas come about?

A
  • original ideas

- adapting existing concepts

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8
Q

What are 3 risks that start-ups face?

A
  • business failure
  • lack of financial security
  • financial loss
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9
Q

What is the difference between variable and fixed cost?

A
  • variable costs depend on the amount of products you manufacture e.g. raw materials
  • fixed costs remain the same no matter your production rate e.g. rent
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10
Q

How do you work out variable cost?

A

Cost per unit x sales volume

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11
Q

What are financial rewards for a start-up?

A
  • survival
  • profit
  • wealth
  • income
  • financial security
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12
Q

What are non-financial rewards for a start-up?

A
  • personal satisfaction
  • challenge
  • independence
  • control
  • helping others
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13
Q

What is a stakeholder?

A

Someone with interest in the business

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14
Q

What are the 3 purposes of business enterprise?

A
  • meet customer needs
  • add value
  • provide goods and services
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15
Q

How can a business add value?

A
  • convenience
  • quality
  • branding
  • design
  • USP
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16
Q

What are the roles of an entrepreneur?

A
  • organise resources
  • make business decisions
  • take risks
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17
Q

4 main customer needs

A
  • choice: different customers have different tastes and needs
  • quality: customer assess quality as a products sustainability and their opinion will depend on expectations
  • price: customers influenced by price, low
  • convenience: how easy it is to purchase desired products
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18
Q

Why is it crucial for businesses to meet customer needs?

A

Generate sales:

  • customers will continue to buy products
  • repeat customers ensures business will grow

Business survival:

  • as reputation grows, increased likelihood of customers buying your products
  • increased profits, more likely for business to continue to operate
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19
Q

What are the reasons for market research?

A
  • identify and understand customer needs
  • identify gap in the market
  • reduce risk
  • inform business decisions
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20
Q

What is primary research and how many businesses do this?

A

Market research carried out for first time

  • survey/ questionnaire
  • focus group
  • interviews
  • observations
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21
Q

What is secondary research and how many businesses carry this out?

A

Market research where information is already gathered:

  • internet
  • government statistics
  • company reports
  • newspaper
  • trade associations
  • books
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22
Q

Difference between quantitative and qualitative data?

A

Quantitative is measurable numbers and statistics, qualitative is non-measurable opinions and judgements

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23
Q

Why is social media crucial to market research?

A
  • cheap way
  • understanding market
  • improve products and marketing
  • saves time
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24
Q

Why is validity and reliability of research data important?

A

All business decisions are based off it. Invalid and unreliable information will lead to making harmful mistakes which limits profit and growth.

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25
Q

What are market segments?

A
  • location
  • demographic
  • age
  • income
  • lifestyle
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26
Q

What is a market map and its use?

A

4 quadrant map based on 2 features of a product, allows business to identity a gap in the market.

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27
Q

What features of competitors products may businesses monitor?

A
  • price
  • product range
  • quality
  • customer service
  • location
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28
Q

What might a business conduct to analyse its competitors and how it affects their decisions?

A

SWOT analysis

  • strengths
  • weaknesses
  • opportunities
  • threats
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29
Q

What are financial objectives and examples?

A

Financial targets

  • survival
  • profit
  • wealth
  • income
  • financial security
  • market share
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30
Q

Non-financial objectives and examples?

A

Targets that don’t involve money

  • personal satisfaction
  • challenge
  • independence
  • control
  • helping others
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31
Q

What is the formula for profit?

A

Sales revenue - total cost

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32
Q

What is the formula for sales revenue?

A

Selling price x sales volume

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33
Q

What is the formula for total costs

A

Fixed cost + variable costs

34
Q

What is the formula for variable cost?

A

Cost per unit x sales volume

35
Q

How do you calculate interest?

A

(Total repayment - borrowed amount) / (borrowed amount) x 100

36
Q

What is the break-even point and how do you calculate it?

A

Level of output where total revenue = total costs, neither a profit or loss is being made.
Fixed costs/ (sales price - variable cost per unit)

37
Q

What is the margin of safety?

A

Amount of output between the actual level of output where profit is being made and the break even level of output.

38
Q

What happens to the break even point if costs go up?

A

Becomes larger, further along a chart

39
Q

What happens to the break even point if your sale price goes up?

A

Becomes smaller, closer on a chart

40
Q

What is cash flow?

A
  • movement of money into and out of the business

- used to pay day-to-day expenses of a business

41
Q

Why is cash flow important to a business?

A
  • pay its expenses ( suppliers overheads employees)

- prevent business failure (insolvency)

42
Q

How is net cash flow calculated?

A

Total cash flow in - total cash flow out

43
Q

What is the difference between long and short- term sources of finance?

A

LT is money for businesses that are borrowed or invested for over a year. ST needs to be paid back immediately or fairly quickly (like an overdraft)

44
Q

What is overdraft facility?

A
  • borrowing money from a bank by drawing more money thats in your account
  • interest charged on the amount overdrawn
45
Q

What is trade credit?

A
  • negotiating with suppliers before goods and services have been purchased to be paid for
  • usually 30 days credit
46
Q

What is factoring?

A
  • factor (financial company) buys a debt from a business and pays the business normally 90% of the debts value
  • business gets paid immediately
  • factor charges a fee for this
47
Q

Long term sources of finance?

A
  • personal savings
  • venture capital
  • share capital
  • loans
  • retained profit
  • crowdfunding
  • leasing (renting out)
48
Q

What is venture and share capital?

A

VC is an individual or company that buys shares in hope of a fast growing company with long-term view of selling shares at a profit. SC is monetary value of a company which belongs to shareholders.

49
Q

What is crowdfunding?

A

Obtaining external finance from individual, small investment, usually through web-based appeal.

50
Q

Difference between limited and unlimited liability?

A

LL: business and shareholders which own it are distinct, any debts can only be taken from business.
UL: no distinction between business and owner, any debts business owes is payed off by owners assets.

51
Q

What is a sole trader and a partnership, pros and cons?

A

ST: only owner, unlimited liability. Accounts don’t need to be publicly published.
P: 2 or more individuals run a continuing business for profit
ST has more privacy control and profit, P can share responsibility and risk

52
Q

What it means for a business if owned by shareholder?

A

Will be PLC/LTD, limited liability and have to publish accounts publicly
Pros:
- limited liability
- less risk
- more capital
- better stats, more likely to be approved for loans
Cons:
- limited decisions as its owned by multiple people
- profit may be only goal
- other people can buy more shares and take over

53
Q

What is franchising?

A

Right given by business to another to sell goods or services using its name.

54
Q

What is a franchisor, pros and cons?

A 
Business that gives franchisees the right to sell its products in return for a fixed sum of money 
Pros:
- growth 
- profit 
- customer awareness 
- long term income 
Cons: 
- changing demands 
- brand image 
- poor performance
55
Q

What is a franchisee, pros and cons?

A 
Person licensed to do business under franchisors trademark, franchisee purchases a franchise from franchisor 
Pros:
- training 
- equipment/materials
- back up services
- brand name 
- exclusive area 
Cons:
- royalty fee
- franchise fee
- lack of flexibility
56
Q

4 factors that affect business location?

A
  • target market & demographics: sufficient people interested in your business
  • labour: workers able commute and won’t lose out on your workforce
  • materials: product needs to be easily manufacturable
  • competitors: want to be close as a similar target market will nearby or far away so they can’t steal customers
57
Q

Why might the nature of a business’ activity effect its location?

A

Tertiary sector: required to be in city centres as their services are required to be in locations easily accessible.
Primary sector: location may be in a rural area as land is cheap, don’t need to be near customers.

58
Q

Benefits and limitations of e-commerce over fixed premises?

A

Pros:
- reach a larger market of customers
- less overhead fees (electricity rents)
- less workers to pay
Cons:
- customers may be wary of paying online
- technological failures can limit businesses
- technology may not always be user friendly

59
Q

What marketing mix consist?

A
  • product
  • price
  • place
  • promotion
60
Q

How technology affects marketing mix?

A
  • e-commerce: able to use internet to sell items

- digital communication: promoting product to potential customers

61
Q

What’s a business plan?

A

Development of a business

  • business idea
  • aims/objectives
  • market research
  • forecast revenue
  • costs & profits
  • cash flow forecast
  • sources of finance
  • marketing mix
62
Q

Purposes of a business plan?

A
  • think about all aspects of the business
  • reduce risk of failure
  • interest potential investors and bank loans
63
Q

What’s a business stakeholder, examples

A

Person that has interest in a business, how it operates and whether it is successful

  • owner
  • managers
  • employees
  • suppliers
  • pressure groups
  • the government
  • customers/ consumers
  • shareholders
64
Q

3 main internal stakeholders and their interests

A
  • owners: making profit
  • employees: job security and promotions
  • managers: extra manager promotion
65
Q

6 main external stakeholders and their interests

A
  • suppliers: receive payment from the business
  • customers: product to be cheap and available
  • shareholders: receive dividends from their shares
  • local community: no pollution from the business
  • the government: receive taxes from the business
  • pressure groups: business to be ethical
66
Q

Why there’s conflict between suppliers and owners of a business?

A
  • different interests
  • owner wants high profits, requires low cost
  • supplier wants more money, wants to charge more
67
Q

4 main ways business uses technology

A
  • e-commerce: selling online
  • digital commutation: attract potential customers
  • social media: social accounts online
  • payment systems: guarantee security for customer, PayPal
68
Q

How technology affects costs and sales of a business?

A

Costs:

  • may be higher during legislation, usage of technology in place of employees will reduce
  • payment systems take a small % of sales price as a fee for business

Sales:

  • increase as social media means more promotion
  • payment systems means customer have more trust
  • digital communication means better reputation
  • e-commerce allows more potential customers
69
Q

3 principles of consumer law, legislation

A
  • as described: good supplies must match descriptions / samples shown at time of purchase
  • fit for purpose: fit for specific purpose you made known to the retailer at time of purchase
  • of satisfactory quality: shouldn’t be faulty or damaged, durable
70
Q

Pros and cons of e-commerce

A

Pros:

  • reach more customers
  • traffic data for market research

Cons:

  • costs to produce websites
  • Customers can compare prices, could pick another business
71
Q

3 principles of employment law, legislation

A
  • recruitment: no discrimination against age/race/gender/religion
  • National minimal wage: minimum amount required to be payed (£7.20/h)
  • health and safety: right to work in places where risks to their health and safety are controlled properly and employers who are responsible
72
Q

Costs business faces due to legislation

A
  • training staff
  • protection equipment for staff e.g. goggles
  • paying NMW, high amounts which reduces profit
73
Q

Consequences a business can face for not meeting regulation

A
  • fines
  • imprisonment
  • disqualification
74
Q

How a change in unemployment affects a business

A
  • less disposable money for general public
  • business has to provide more cheap products to meet customer needs
  • wider range of people to recruit
  • luxury good retailers will suffer
75
Q

How a change in consumer income affects a business

A

Lower consumer income means less purchases of luxury products. Businesses have to adapt to provide products that meet lower costs, could reduce quality and lower one is demanded.

76
Q

How a change in inflation rate affects a business

A

If inflation goes up, consumers will feel poorer and reduce spending which reduces their revenue. Around 2% in the UK.

77
Q

How a change in exchange rates affect a business?

A
  • weaker pound means a business pays more for suppliers from foreign countries (high exports and low imports)
  • pound being stronger means it has more worth.
78
Q

How a change in government taxation affects a business

A

If a business earns more than £83,00 a year they have to register for tax. Higher costs for a business which reduces profits.

79
Q

How a change in interest rates affects a business?

A

Cost of borrowing will rise, cost of supplies will be higher, customer spending will be lower. Business will lose out on profit.

80
Q

Difference between being proactive and reactive, what businesses should aim to be

A
  • reactive is responding to a situation
  • proactive is being prepared for situations
  • should aim to be proactive

GCSE Business (2 decks)

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