Theme 1 Flashcards
why do new business ideas come about?
- *changes in technology (making expensive technology affordable, reducing manufacturing costs, more affordable),(e commerce platforms, larger target audience)
- *changes in consumer wants and needs (demand)
- *products and services becoming obsolete(change in demand/trend)
How do new business ideas come about?
- adapting existing ideas (less risky,new markets,quicker, cheaper development costs)
- original ideas (more risky, longer, more development costs, but USP and new market with no competitors)
What is the impact of risk on business activity?
- business failure- negative cash flow, drop in revenue/ demand
- financial failure
- lack of security
- health:stress, bad business decisions
plan ahead
What is the impact of reward on business activity:
- independence (flexible working hours-being your won boss)
*profit (motivation) - business success (satisfaction, being an employer)
What is the role of business enterprise and the purpose of business activity?
- produce goods/services
- meet customer needs(happy customers,repeated purchases, sales of the business)
- add value(branding, convenience, quality and design, USP)
The impact of adding value
- branding- emotional connnection, brand loyalty , more likley to buy/stand out
- convenirnce- saves them time, more happier custoomers, compettive advantage
- USP/competive advanatge
- design and quality- more satisfied/likley to buy, reputation
What is the role of entrepreneurship
- take risks
- make business decisions
- organise resouces(manage/lead people effectivley)
What are customer needs?
- price (for product, competive advantage, accesibility )
- quality(product+customer service)
- convenience
- choice(product portfolio, customer loyalty, repeated purchases)
what happens when you meet customer needs?
more happy, encorages reapeated purchases, generating customer loyalty , increased sales. Also will recoomend the product to thers
What is the purpose of market research ?
- to identify and understand customer needs
- to identify gaps in the market
*to reduce risk
*to make informed business decisions
What are ins methods of primary market research ?
- survey
- questionnaire
- focus group
- observation
✅accurate and easy to implement
❌time consuming , expensive
What are some methods of secondary research?
- internt
- market reports
- government reports
✅cheaper
❌not that relevant
Qualitative market research
✅provides depth and detail
✅helps business listen to customers rather than jumping to conclusions
❌small sample = bias
❌responses are subjunctive
❌can be biased/lead by bad interviewer
The role of social media in collecting market research
✅cheaper
✅identify popular maker trends
✅saves time collecting market research
✅improve products /marketing
Why do you need reliable market research?
Business decisions
What are the different market segments?
- Location(more demand )
- Demographics (sex/family)
- Lifestyle (promotional /marketing strategies)
- Income (quality and price of the product)
- Age (promotional strategies)
Market mapping
Helps identify gaps in market and competitors, can adapt products/services
❌subjunctive and doesn’t consider demand
What are the strengths and weaknesses of competitors?
Price
Quality
Location
Product range
Customer service
Impact of competition on business decions
Having Lower costs , innovation for new product ideas
what are some financial aims and objectives of a business?
- survival
- profit
- sales
- market share
- financial security
what are some non-financial aims and objectives of a business?
- personal satisfaction
- social concerns
- challenge
- independance and control
why do businesses have different aims and objectives?
- differnt industries
- different ways of operating
what is revenue ?
=price X quanity
income that the business revieves through sales
what is the difference between fixed and variable costs?
fixed costs do not chnage egardless the number of sales of the business
what is the formula for total costs?
= fixed costs + variable costs
what is the formula for gross profit?
=sales revenue- costs of sales
the amount of profit that a busines makes on a product before the cost of producind and selling the product
what is net profit?
=gross profit- other operating expenses and intrest
what is the formula for intrest (%)?
(total repayment-borrowed amount)/borrowed amount
*100
how do you calculate the break even formula in units?
fixed costs/
(sales price-variable)
what is the break even point in revenue/price?
=break even point in units * sales price
formula for the margin of saftey?
=actual sales-break even sales
what is the importance of cash to a business?
- paying supliers/employees/overheads(realtionships, being taken to court, services withdraw)
- preventing business failure (unable to pay bills, becoming insolvent): reduce customers with credit
- the difference between cash and profit- profit is cash before deduction of costs
why do businesses interpret cash flow calculations?
indicate the future
* taking on more staff
* opening a new branch
* identifying a risk (running out of money)
* taking money out of business to invest in a new business or to reward the owner
what are some sort term sources of finance?
- overdraft (high intrest rates, quick and convenient)
- trade credit (do not need to have cash available to purchase goods)
what are some long term sources of finance?
- bank loans (assets, intrest)
- crowdfunding (time consuming, may have to give discount ect)
- venture capitalist (source of finance if no one else gives, want a return and control)
- share capital (no ore quick decions, dividends)
- personal savings (no intrests, nut lose any itrest on additional savings in account)
- retained profit (
what is the difference between limited and unlimited liability?
- limited liability(personal assets can be used to pay off debts, incorperated )
- unlimited liability (unincorperated)
what are the different types of business start ups?
- soletrader
- parternship
- private limted company
pros and cons of having a sole trader ownership
✓makes all the decions by themselves, less room for disagreement, fast implemenation
✓sole trader keeps all of the profits
✓financial information is private
✗unlimted liability, unincorperated ,diffiult to raise finance delayed growth
✗pressure on one person, may not be able to take time off or holidays, making stress, health problems
pros and cons of having a partnership
✓wider expertise, sharing ideas, better business decisons
✓finanicla information kept private
✓easier to raise sources of finace (limited liability)
✗profits shared
✗disagreements between partners
pros and cons of being a private limited company
✓limited liabiity
✓easier to raise finance and grow the business
✓business can trade even if the shareholders change
✗more complex to set up
✗disagreements between shareholders
✗finanical information is published, and have to report to HMRC
what are the advantages and disadvantages of franchising ?
✓lower risk as business model is sucessful
✓support and training provided by the franchisor
✓franchisees benefit from national marketing campaigns
✗francisees have to pay an initila fee as well as a percentage of their profits
✗franchisees cannot make independant decisions
✗brand reputation of frnachisor may be damaged if franchisees do not maintain standards
How does proximity to market affect business location?
- market (close to footfall/demographics, convenience)
- labour(dpending on skill/ high unemployment rate)
- materials (less transport costs)
- competitors( if convenience good then not good but if shopping good then is good)
How does the nature of the business affcet the location ?
- footfall
- importing/exporting goods, so near an airport or port
*
How does the internet impact business decions?
- do not need a retailing premise or staff more cost effective)
- ability to reach a wider audience
- able to respond to conumer buying habits
what is the marketing mix?
- price (determined by comptettion or consumers’ thoughts on the product)
- product
- promotion
- place
all to consumer appeal
How do elements of the marketing mix work together?
- balancing on basis of competitive enviroment (cheaper, product with USP /better design, place more conveninet , increased prmotion)
- chaning consumer needs on business (launching new products in response to trends, hanging prices and recession,)
- technology, ecommerce and digital communication ( cheaper manafacturing prices, place may change, more affective promotion with targeted ads )
What is the role of a business plan?
identifies:
* business idea
* aims and objectives
* target market
* forecast revenue (cash and profit)
* sources of finance
* location
* marketing mix
what is the purpose of planning business activity?
- minimising risk (a clear sense of direction for business decisons, allows to adress and come up with potential problems that may arise, can set budgets and monitor spending)
- obtaining finance (from bank loans/investor)
who are business stakeholders and what are their seperate intrests?
- goverment (more jobs means more taxes and less benefits to pay)
- pressure groups(implementing change and business acting ethically)
- employees/managers (job secuirty, progression, salary)
- customers(price, quality, range)
- local community (potential jobs)
- suppliers (increased orders =profit)
- shareholders(profits/ divindends)
how do the stakeholders affect the business?
- goverment (taxes laws, promoting business activity
- local community (support by buying can object)
- employees/manager (good service/reputation of business)
- shareholders (provide funding )
- suppliers (provide material, depending on reliability determine quality and business reputation)
- pressure groups(changing products, customers opionion)
- customers (purchase, make recommendations)
What are the different types of technology used by the business?
E-Commerce
Social media
Digital communication
Payment system
what are the pros and cons of E- commerce?
✓can trade 24/7 all around the world
✓can give real time updates to customers
✓more convenient for customers
✓avoid the overhead costs for a physical premises
✗expensive to keep up with technology
✗harder to build relationships with customers, customers make purchases becuase of price and not loyalty
✗customer may have security concerns regarding fraud
✗business may not be easily fndable due to high levls of competition
what are the pros and cons of social media?
✓can communicate with customers
✓respond to online feedback
what are the pros and cons of payment systems?
✓easy and more convenient for customer
✓open 24/7
✓allow people to order immediatly, good for customer service
✓trends in sales can be identified
✓can work in many currenccies
✓customers may expect it and may be put off from business if not availaible
✗vunerable to fraud
✗may have to pay an additional fee
what are the pros and cons of digital communication?
✓emplyess can communicate any time of the day, quivker and cheaper than travelling long distances, employess time is used efficently
✓customers can recieve real time updates
✓may not need an office-saving in overhead costs for rent
✓quick cheap communication within branches
How does technology influence a business in terms of sales and costs?
- cost (communication means that costs are low , technology and manufacturing mean thatstart up costs can be low)
- sales (can be made any time , so more sales, helps a business manage sales, tabs on stock and making customer aware if product is unavailiable or not, customer satisfaction)
How does technology influence a business in terms of the marketing mix?
- price (increases competition online means my have to reduce prices, because can reduce costs, business can lower their selling price)
- product (technology can help offer new products and services,latest methods and robots to produce goods, customers can customise products)
- promotion (cheap digital promotion materialstarget ads through cookies)
- place (reliable easy to use E commerce, however may put off customers )
what is the purpose of legislation?
- consumer law
- employment law
What are the principles of consumer law?
- quality (reasonable and fit for intended purpose)
- consumer rights(can rejet goods, safe delivery)
what are the principles of employment law?
- recruitment (fair)
- pay (minimum wage)
- discrimination
- health and saftey (safe workspace)
What is the impact of legislation on the business?
- cost (training equipment, pay, liscense/services)
- consequences of not obliging (bad repuation, tempriory closure, taken to court and given fines
what are the positive consequences of meeting legal obligations?
- positive reputation, more attracted customers and emplyloyees , more sales and better candidates for the job
- customers and emplyess feel like they are being treated clearly
what is the impact of the economic climate on the business?
6 points
- unemployment
- changing levels of consumer income
- inflation
- changes in exchange rates
- goverment taxation
- changes in intrest rates
How does unemployment affect a business?
low unemployment:
* fewer people to hire, may have to increase wages to attract
* employees are more hapy because jobs are secure
* consumer higher income, higher disposable income, more sales
How do changing levels of consumers income affect a business?
low levels:
* less disposable income,lower prices products
* less sales
* consumer confidence is low and so less likley to buy shopping goods
high levels (opposite)
how does inflation affect a business?
low inflation: will not have to pay suppliers as much, employees are less likley to ask for a raise
high inflation: consumers may not buy but would rather wait for prices to further go down
how do changes in intrest rates affect a business?
- high: savers will have more to pay, borrowers have less to spend- generally consumer income levels are lower. Businesses may not be confident to take bank loans and invest
- if countries have a high intrest rate then investors may be more likley to invest in UK, increasing the value of the pound
How does goverment taxation impact a business?
- busniess make less net profit
- conusme income levels are low
how do changes in exhange rates impact a business
?
- if a business exports or imports goods may be cheaper than local
- SPICED
- more/less profits, having to change selling price, increase/decrease in sales
*
what are some responses of a business to chnages in the economic changes?
- technology (do not want to be obslete and face a decline in repuation
- legislation (fines/ brand reputation)
- the economic climate (dependant on consumer income, stopping plans of growth , if intrest rates are high- not taking a loan, if taxation falls business can hire more people , making it more effective , ahead of competitiors who have not responded to the economic climate)
