Theme 1 Collection Flashcards
Theme 1. 1 - 5 Theme 2. 1 - 3
1
Q
1.1.1 - What is the difference between a good and a serivice?
A
- A good is a physical tanglible product (you can touch it)
- A service is an experince that is intagible (can’t touch it)
2
Q
1.1.1 - What is the difference between a consumer and a customer?
A
A customer purchases the product and the consumer uses the product
3
Q
1.1.1 - For what three reasons do new business ideas come about?
A
- Changes in technology
- Changes in consumer needs
- A product becoming obsolete
4
Q
1.1.1 - What does it mean if a product is obsolete?
A
It is outdated and no longer in use
5
Q
1.1.1 - What are payment platforms?
A
- Enable businesses to take online payments from customers.
- They are usually free for the customer to use, but take a small amount of commission from the seller and provide the customer with peace of mind.
6
Q
1.1.1 - What is an entrepreneur?
A
Someone who creates a business, taking on financial risks with the aim of making a profit from the business.
7
Q
1.1.1 - In what two ways do new business ideas come about?
A
- Original ideas
- Adapting existing concepts
8
Q
1.1.2 - What are three risks that start-ups face?
A
- Business failure
- Lack of (financial) security
- Finacial loss
9
Q
1.1.2 - What is the difference between variable and fixed cost?
A
- Variable costs are costs that depend on the amount of products you manufacture (e.g. Raw materials)
- Fixed costs (overheads) are costs that remain no matter your production rate (e.g. Rent)
10
Q
1.1.2 - How do you work out variable cost?
A
Cost per unit x sales volume
11
Q
1.1.2 - What are financial rewards for a start-up?
A
- Survival
- Profit
- Wealth
- Income
- Financial Security
12
Q
1.1.2 - What are non-financial rewards for a start-up?
A
- Personal Satisfaction
- Challenge
- Independence
- Control
- Helping Others
13
Q
1.1.3 - What is a stakeholder?
A
Any person with interest in the business
14
Q
1.1.3 - What are the thee purposes of business enterprise?
A
- To meet customer needs
- To add value
- To provide goods and services
15
Q
1.1.3 - How may a business add value?
A
- Convenience
- Quality
- Branding
- Design
- USP
16
Q
1.1.3 - What are the roles of an entrepreneur?
A
- Organise resources
- Make business desicions
- Take risks
17
Q
1.2.1 - What are the four main customer needs?
A
- Choice: When buying products, customers like to have a choice because different customers have different tastes and needs.
- Quality: Customers assess quality as a product’s suitability and their opinion will depend on expectations.
- Price: Customers will be influenced by price, especially by low prices.
- Convenience: Convenience refers to how easy it is for customers to purchase desired products.
18
Q
1.2.1 - Why is it crucial for businesses to meet customer needs?
A
Generate sales:
- Customers will continue to buy products
- Repeat custom ensures that the business generates cash flow.
Business survival:
- As the reputation of the business grows, more and more consumers are likely to buy its products.
- This should lead to increased profits making it likely that the business will continue to operate
19
Q
1.2.2 - What are the reasons for market research?
A
- To identify and understand customer needs
- To identify gaps in the market
- To reduce risk
- To inform business decisions.
20
Q
1.2.2 - What is primary research and how may businesses do this?
A
Market research carried out for the first time:
- Survey/ Questionnaire
- Observation
- Interviews
- Focus Group (small group of people discussing a product)
21
Q
1.2.2 - What is secondary research and how may businesses carry this out?
A
Market research which is information that has already been gathered:
- Internet
- Government Statistics
- Company Reports
- Newspapers
- Trade Associations
- Books
22
Q
1.2.2 - What is the difference between quantatative and qualitative data?
A
- QuaLitavtive: Data is non-measurable opinions and judgements
- QuaNtitavtive: Data is measurable numbers and statistics
23
Q
1.2.2 - Why is social media crucial to market research?
A
Social media is a cheap way of understanding customers. It allows a business to:
- Deepen their understanding of the market
- Identify popular trends
- Improve their products and marketing
- Save time conducting market research
24
Q
1.2.2 - Why is validity and reliability of research data important?
A
All your buriness desicions are based off it and so invalid and unreliable information will lead to a business making harmful mistakes that will limit their chance of profit and growth.
25
1.2.3 - What are market segments?
Part of a market that groups buyers with similar buying habits, such as:
* Location
* Demographic
* Age
* Income
* Lifestyle
26
1.2.3 - What is a market map and what is it used for?
A market map is a four quadrant map based on two features of a product (e.g. high/low price and high/low quality) to allow a business to identify a gap in the market
27
1.2.4 - What features of competitors products may businesses monitor?
* Price (Are their prices in a similar competitive range)
* Product range
* Quality (Are they delivering quality similar/ better)
* Customer service
* Location (Are they closer to their target market)
28
1.2.4 - What may a business conduct to analyse its competitors and how they should effect their desicions?
A SWOT analysis (Strengths, Weaknessess, Opportunites, Threats)
29
1.3.1 - What are financial objectives and some examples of this?
Targets expressed in money terms such as making a profit, earning income or building wealth:
* Survival
* Profit
* Wealth
* Income
* Financial Security
* Market Share
30
1.3.1 - What are non-financial (social) objectives and some examples of this?
Targets that are not expressed in money terms:
* Personal Satisfaction
* Challenge
* Independence
* Control
* Helping Others
31
1.3.2 - What is the formula for profit?
Sales Revenue – Total Cost
32
1.3.2 - What is the formula for sales revenue?
Selling Price x Sales Volume
33
1.3.2 - What is the formula for total costs
Fixed Cost + Variable Cost
34
1.3.2 - What is the formula for variable cost?
Cost per Unit x Sales Volume
35
1.3.2 - How do you calculate interest?
Interest
=
(Total Repayment – Borrowed Amount)
÷
(Borrowed Amount)
x 100
36
1.3.2 - What is the break-even point and how do you calculate it?
The level of output where total revenues are equal to total costs; this is where neither a profit or loss is being made:
Fixed costs
÷
Sales price - Variable cost per unit
37
1.3.2 - What is a margin of safety?
The amount of output between the actual level of output where profit is being made and the break even level of output.
38
1.3.2 - What happens to the break even point if:
1. Costs go up
2. Your sale price goes up
1. It becomes larger (further along on a chart)
2. It becomes smaller (Closer on a chart)
39
1.3.3 - What is cash flow?
* The movement of money into and out of the business.
* Cash is used to pay the day-to-day expenses of a business.
40
1.3.3 - Why is cash flow important to a business?
* To pay its expenses (Suppliers overheads employess etc.)
* The prevent business failure (insolvency)
41
1.3.3 - How is net cash flow calculated?
Total cash flow in - Total cash flow out
42
1.3.4 - What is the difference between long and short-term sources of finance?
* LT: Sources of money for businesses that are borrowed or invested typically for more than a year.
* ST: Sources of money for businesses that may have to be repaid either immediately or fairly quickly, such as an overdraft, usually within a year.
43
1.3.4 - What is Overdraft Facility?
* Borrowing money from a bank by drawing more money than is actually in your account.
* Interest is charged on the amount overdrawn.
44
1.3.4 - What is Trade credit?
* Negotiating with suppliers a period of time before goods and services that have been purchased have to be paid for.
* This is usually 30 days credit.
45
1.3.4 - What is Factoring?
* A factor (financial company) buys a debt from a business and pays the business typically 90% of the value of this debt.
* Therefore the business gets paid immediately.
* The factor charges a fee for this.
46
1.3.4 - What are some Long term sources of finance?
* Personal savings
* Venture capital
* Share capital
* Loans
* Retained profit
* Crowdfunding
* Leasing (renting out)
47
1.3.4 - What is venture and share capital?
* SC: The monetary value of a company which belongs to its shareholders.
* VC: An individual or company which buys shares in what they hope will be a fast growing company with a long-term view of selling the shares at a profit.
48
1.3.4 - What is crowdfunding?
Obtaining external finance from many individual, small investments, usually through a web-based appeal.
49
1.4.1 - What is the difference bewteen limited and unlimited liability?
* In unlimited liability, there is no distinction between the business and the owner and so any debts that the business owes have to be payed off by the owner's personal assets.
* In limited liability, the business and the shareholders that own it are distinct and so any debts cna only only be taken form the business.
50
1.4.1 - What is a sole trader and a partenership and what are their pros and cons?
* ST: The only owner of a business which has unlimited liability. Their accounts do not have to be published publicly.
* P: Where two or more individuals run a continuing business for profit.
ST have more privacy control and profit but P can share responsibility and risk
51
1.4.1 - What does it mean for a business if it is owned by its shareholders?
It is either a PLC or LTD, has limited liability and have to publish their accounts publicly.
**Pros**:
* They have limited liability
* Reduced risk
* Increased capital
* Increased status means they're more likely to be approved for loans etc.
**Cons**:
* Desicions can be limited as company ia owned by many people
* Profit may be the only goal
* Other people can buy more shares and take over
52
1.4.1 - What is franchising?
The right given by one business to another to sell goods or services using its name.
53
1.4.1 - What is a franchisor and what are their pros and cons?
The business that gives franchisees the right to sell its product, in return for a fixed sum of money or a royalty payment:
**Pros**:
* Growth
* Profit
* Customer Awareness
* Long Term Income
**Cons**:
* Changing Demands
* Brand Image
* Poor Performance
54
1.4.1 - What is a franchisee and what are their pros and cons
A person or company that is granted a license to do business under the franchisor's trademark. The franchisee purchases a franchise from the franchisor:
**Pros**:
* Training
* Equipment
* Materials
* Back Up Services
* Brand Name
* Exclusive Area
**Cons**:
* Royalty Fee
* Franchise Fee
* Lack of Flexibility
* Long Term Costs
55
1.4.2 - The proximity to what four factors affect business location and why?
* Target market and demographics ( so that there will be sufficient people interested in your business)
* Labour (So that you have workers who are able to commute and won't loose out on your workforce)
* Materials (Your product needs be easily manufacturable)
* Competitors (You may want to be close as it means a similar target market will be nearby. You may want to be far away as they can steal your customers)
56
1.4.2 - Why might the nature of a business' activity effect its location?
Businesses in the tertiary sector will require to be in city centres as they provide services that may require to be in locations convenient for customers. In the primary sector, you location may be in rural area as land is cheap and you don't need to be close to your customers.
57
1.4.2 - What are the benefits and limitations of e-commerce over fixed premises?
**Pros**:
* Reach a larger market of customers
* Less overhead fees (electricity rent etc.)
* Less workers to pay
**Cons**:
* Customers may be wary of paying online
* Tecnological failures can limit businesses
* Technology may not always be user friendly
58
1.4.3 - What does the marketing mix consist of?
* Price
* Place
* Product
* Promotion
59
1.4.3 - How does technology affect the marketing mix? (What does it introduce)
* E-commerce: Being able to use the internet as a place for selling items
* Digital communication: Promoting you product to potential customers online
60
1.4.4 - What is a business plan?
A plan for the development of a business identifying things such as:
* Business idea
* Business aims/objectives
* Market research
* Forecast revenue
* Costs and profits
* Cash flow forcast
* Sources of finance
* The marketing mix
61
1.4.4 - What are the purposes of a business plan?
* To think about all aspects of the business.
* To reduce risk of failure
* To interest potential investors and bank loans
62
1.5.1 - What is a business stakeholder? Give examples.
A business stakeholder is a person or organisation that has an interest in a business. Stakeholders have an interest in how the business operates and whether or not it is successful. These can include:
* Owner
* Managers
* Employees
* Suppliers
* Pressure groups
* The government
* Customers/consumers
* Shareholders
63
1.5.1 - Name the three main internal stakeholders explaining their main interest(s)
* Owners: Main goal is profit
* Employees: Main goal is job security and promotions
* Managers: Main goal is extra manager promotions
64
1.5.1 - Name six main external stakeholders explaining their main interest(s)
* Suppliers: To receive payment from the business
* Customers: For the product to be cheap and available
* Shareholders: To receive dividends from their shares
* Local community: No pollution from the business
* The government: To receive taxes from the business
* Pressure groups: For the business to be ethical
65
1.5.1 - Why may there be conflict between suppliers and owners of a business?
* They have differing interests
* The owner wants high profits and so requires a low cost
* The supplier wants more money and so wants to charge more
66
1.5.2 - What are the four main ways businesses use technology?
* E-commerce: Selling online
* Digital communication: Communicating digitally I guess?
* Social media: Social accounts online
* Payment systems: Systems such as paypal that guarantee security for the customer
67
1.5.2 - How does technology affect the cost and sales of a business?
Sales:
* Will increase as social media means more promotion,
* Payment systems means customers trust the business more,
* Digital communication means better reputation,
* E-commerce allows the business to reach more potential customers
Costs:
* May originally be higher during installation, however usage of technology in place of employees reduces this cost.
* Payment systems take a small percentage of the slaes price as a fee for the business
68
1.5.3 - When it comes to legislation, what are the three principles of consumer law?
* As described: The goods supplied must match any description or samples shown to you at the time of purchase.
* Fit for purpose: The goods should be fit for the purpose they are supplied for/specific purpose you made known to the retailer at time of purchase
* Of satisfactory quality: Goods shouldn't be faulty or damaged when you receive them, and should last for a reasonable amount of time
69
1.5.2 - What are the pros and cons of e-commerce?
**Pros**:
* Reach more customers as you are online
* Use traffic data for market research
**Cons**:
* Costs to produce website
* Customers can easily compare prices meaning they may choose other businesses over you
70
1.5.3 - When it comes to legislation, what are the three principles of employment law?
* Recruitment: no discrimination in this process on age, race, gender, religion etc.
* The national minimum wage: The minimum amount workers are required to be payed. (£7.20/h 25+ on 4/18)
* Health and safety: A right to work in places where risks to their health and safety are controlled properly and employers who are responsible.
71
1.5.3 - What costs do a business face due to legislation?
Legislation requires businesses to:
* Training staff
* Protection equipment for staff e.g. hairnets or googles
* Cost of paying NMW These cost higher amounts reducing their profit
72
1.5.3 - What consequences can a business/individual face for not meeting regulation?
* Fines
* Imprisonment
* Disqualification
73
1.5.4 - How does a change in unemployment affect a business?
* An increase in unemployment would lead to less disposable money for the general public
* This means businesses will have to provide more cheap products to meet the customer needs
* There will be a wider-range of people to recruit
* Luxury good retailers will suffer
74
1.5.4 - How does a change in consumer income affect a business?
* Lower consumer income will mean there are less purchases of luxury products (More needs rather than wants)
* Businesses will have to adapt to provide products that meet lower costs and may reduce quality as a lower one is demanded
75
1.5.4 - How does a change in inflation rate affect a business?
* If inflation goes up, consumers will feel poorer and reduce their spending, reducing business revenue.
* Inflation aims to be around 2% in the uk
76
1.5.4 - How does a change in exchange rates affect a business?
* A weaker pound will mean that a businesses pay more for supplies from foreign countries (Higher exports lower imports)
* A stronger pound means businesses will pay less for supplies from foreign countries (HIgher imports lower exports)
* The pound being stronger means it has more worth. For example a the pound is stronger when £1 = €2 than when £1 = €1.50
77
1.5.4 - How does a change in government taxation affect a business?
* If a business earns more than £83,000 a year they must register for tax
* An increase in government tax, will lead to higher costs for the business, reducing profits
78
1.5.4 - How does a change in interest rates affect a business?
* A rise in interest rates would mean that the cost of borrowing will rise and cost of supplies will be higher and customer spending will be lower.
* Businesses will loose out on profit
79
1.5.5 - What is the difference between being proactive and reactive and which should a business aim to be?
* Reactive is responding to a situation
* Proactive is being preapred for possible situations
* Businesses should aim to be proactive
