Theme 1 Rev Cards Flashcards
Bread and butter topics:
Why new business ideas come about
Change in technology
Changes in consumer taste
Product becoming obselete
How new business ideas come about
Original idea
Adapted existing product/ service
Impact of risk on a business
Business failure
Financial loss
Lack of security
Impact of reward on a business
Business success
Profit
Independence
Purpose of business
Produce goods or service
Meet customer needs
Add value
Role of an entrepreneur
Organise resources
Take risks
Business decisions
What are customer needs
Price
Quality
Choice
Convenience
Market research
Whats point of market research
Identify gaps in the market, reduce risk and inform business decision
What is primary research?
The collection of original data and info for a specific purpose
Types of primary research
Surveys, questionnaires, focus groups
What is secondary research
Second hand research
Types of secondary research
Internet
Market report
Government report
What is qualitative & quantitative data
Qualitive not numerical data or info. Looking for quality and observations
Quantitative data measured in numbers
Segmentation
What are the various segments the business may target
Location, demographics, lifestyle, income and age
How do u find market research in a business
Market mapping
Competitive environement
Factors businesses will compete on
Price, quality, product range, location, customer service
Aims and objectives
Financial aims and objectives
Financial:
Survival, Profit, grow sales, grow market share, financial security
Non financial aims and objectives
Social objectives, personal satisfaction, challenge, independence, control
Formula for profit
Profit= revenue - total costs
Total costs= total variable costs + fixed costs
Total variable costs= variable costs per unit x amount of units
Break even point in £= BEP x Price
Margin of safety= actual sales - budgeted sales
Break even analysis
If fixed costs go up ➡️ break even output goes higher= bad
If Fixed costs go down➡️ break even output lower= good
Break even point analysis
Cons: only an estimate
Pros: make production and pricing decision
If FC goes up➡️ break even output higher= Bad
If FC goes down➡️ break even output lowers= good
Break even point analysis
Cons: only an estimate
Pros: make production and pricing decision
If FC goes up➡️ break even output higher= Bad
If FC goes down➡️ break even output lowers= good
Cash flow
Why is cash flow important
Important to pay suppliers- employees , reduce risk of business failure
Cash flow formulas
Net cash flow= inflows - outflows
Opening balance= closing balance of previous period
Closing balance= opening balance + net cash flow
Sources of finance
Short term sources of finance
Overdraft & trade credit
Long term source of finance
Personal savings, venture capital, share capital, loans, retained profits, crowdfunding
Limited liability
Limits the losses of a company’s owners to the amount of their investment
Pros of running a franchise
Proven business model, already has brand recognition, support from franchisor- expertise, less risk
Cons of running a franchise
High start up fees, have to pay royalties, lack of flexibility
Marketing mix
Price- what do you charge
Promotion- where/ how you promote
Product- what is unique about your product?
Place- how does the customer purchase it?
Legislation
Point of consumer law?
Ensure quality is there and consumer rights are up held
What is the point of the employment law?
To ensure employees are protected in terms of pay, recruitment, no discrimination And the workplace is safe
Economy
What is the impact of increase interest rates?
If businesses have debts- higher interest repayments- higher costs- less profit
Impact of increase exchange rate
Spice
Strong pound imports cheap exports dear
Good for businesses that import for businesses that export
