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Business Edexcel Gcse > Theme 2 up until 2.2.4 > Flashcards

Theme 2 up until 2.2.4 Flashcards

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1
Q

2.1.1 - What is internal (organic growth) and what are the examples of this?

A

Internal growth is when a business grows by expanding on its own without mergers or takeovers from other businesses.

New products
Innovation
Research
Development
New markets
Through changing the marketing mix
Taking advantage of technology
Expanding overseas

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2
Q

2.1.1 - What is external (inorganic growth) and what are the examples of this?

A

When a business combines with another to grow.

Takeover: When one business joins another
Merger: When two ore more businesses join together

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3
Q

2.1.1 - What are the advantages and disadvantages of a business going through organic (rather than inorganic) growth?

A

PROS:

A business that grows from within can retain their own company culture
Higher production means the business can benefit from economies of scale and lower average costs
More influence comes with more market share, the business can start setting prices for the industry
CONS:

This is a very high risk strategy, opening lots of stores or taking on new staff is very risky
Long period between investment and return on investment
Growth may be limited and is dependent on reliability of sales forecasts

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4
Q

2.1.1 - Describe how economies of scale work.

A

When your costs decrease due to larger levels of production:

More products being produced means more materials being ordered more regulalry
Bulk orders reduce price
Variable cost per unit reduced

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5
Q

2.1.1 - What are the advantages and disadvantages of a business mergers?

A

PROS:

Economies of scale. Better deals because of increased order size, bulk-buying discounts etc.
Increased revenue and market share.
Buying technology
International Expansion. Buying a business in another country helps with culture issues, foreign laws etc.
CONS:

Clash of cultures
Possible communication problems
Unreliable merger partners
Diseconomies of scale. As a business gets larger costs will go up with problems of motivation, communication and co-ordination

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6
Q

2.1.1 - What is an internal source of finance and what are examples of this?

A

Capital gained within a business.

Retained Profit
Selling Assets
Personal Savings

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7
Q

2.1.1 - What is an external source of finance and what are examples of this?

A

Capital gained outside a business.

Loan capital
Share capital
Stock market floatation

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8
Q

2.1.1 - What are the pros and cons of loan capital?

A

PROS:
Improve cash flow
Financial advice

CONS:
Time for approval
Interest
Expensive
Collateral

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9
Q

2.1.1 - What are the pros and cons of share capital?

A

PROS:

Large amounts of capital
No interest
Does not need to be repaid
CONS:

Loss of control

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10
Q

2.1.1 - What is a public limited company?

A

when a private limited company (a business owned by its shareholders) makes shares available to the public to purchase. This process is stock market floatation

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11
Q

2.1.1 - What are the pros and cons of stock market floatation?

A

PROS:

Large amounts of capital
No interest
Does not need to be repaid
CONS:

Loss of control (As all the shareholders vote on desicions)

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12
Q

2.1.2 - What might business aims and objectives change in response to?

A

Market conditions
Technology
Legislation
Growth
Consumer taste

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13
Q

2.1.2 - As a business evolves, how would its focus on survival or growth alter?

A

It would be less focused on survival as it starts to pass the break even point. Once it starts to make a profit, growth will be the preferred choice.

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14
Q

2.1.2 - As a business evolves, how would its focus on entering or exiting markets alter?

A

It will change the markets it is in. For example it may:

Enter new markets so that the business is growing by venturing in new areas
Exit markets if they see that they aren’t making enough sales in that area

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15
Q

2.1.2 - As a business evolves, would it be growing or reducing the workforce?

A

It may decide to:

Grow the workforce so that the business can have a higher production rate
Reduce the workforce if it has become more reliant on technology that they’ve aquired through growth

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16
Q

2.1.2 - As a business evolves, would it be increasing or decreasing its product range?

A

Just like with entering and exiting markets, a business may:

Increase its product range so that the business is growing by venturing in new areas
Decrease their product range if they see that they aren’t making enough sales in an area

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17
Q

2.1.2 - How would market conditions effect business objectives?

A

There may be lots of new competitors entering the market, this will mean the business has to change their aims.

E.g. there may be increased unemployment in a country which is affecting the demand for the business’s goods or services

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18
Q

2.1.2 - How would growth effect business objectives?

A

A business may change its aims and objectives in response to its own performance.

For example if it has done well in the year and made lots of profit it may decide to grow and expand and take on more staff.

However if a business has had a bad year it may decide to reduce the number of staff and focus on core business instead.

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19
Q

2.1.2 - How would legislation effect business objectives?

A

For example now in the UK there is a Minimum wage law a business may have to change its aims, as growth may be slower because they have to pay the new higher wages.

They may also decide to use workers abroad as their minimum wage may be lower/non-existent and so their costs will be less.

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20
Q

2.1.3 - What is Globalisation?

A

The ever-increasing integration of the world’s local, regional and national economies into a single international market.

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21
Q

2.1.3 - What are the advantages and disadvantages of globalisation?

A

PROS:

Impact on productivity and competition
Specialisation
Impact on growth rates, inflation, balance of payments and unemployment
Economies of scale
Impact on inflation
CONS:

Impact on unemployment
Impact on balance of payments
Dominance of US corporate culture ‘McDonaldisation‘

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22
Q

2.1.3 - What are imports and exports?

A

An import is the purchase of a good or service from a foreign business that leads to a flow of money out of the UK.
The UK buyer will have to change pounds into the seller’s currency to make the transaction.
An export is the sale of a good or service to a foreign buyer that leads to a flow of money into the UK.
The foreign buyer will have to change their currency into pounds to complete the purchase.

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23
Q

2.1.3 - What is a multinational company?

A

Companies that own or control production or service facilities outside the country in which they are based.

24
Q

2.1.3 - What are tarrifs?

A

A tariff is a tax placed on an import to increase its price and decrease its demand (goods that cost too much don’t sell well).
Tariffs can be imposed by governments to raise revenue and to restrict imports.
Tariffs help to persuade consumers will switch and buy UK made goods.

25
Q

2.1.3 - Why are tarrifs important for the UK’s economy in terms of exports and imports?

A

Tarrifs encourage less imports meaning there will be relatively more exports.

As exports are incoming money and exports are outgoing money, a decrease in imports means the UK will make more money

26
Q

2.1.3 - What are the advantages and disadvantages of tarrifs?

A

PROS:

UK produced goods do not have to pay the tariff and so are likely to be cheaper allowing UK businesses to gain a price advantage compared to imports
It can protect new businesses from being swamped by international competition from MNEs
It can raise important tax revenue for government which can be spent possibly on infrastructure (bridges and roads)
​CONS:

High import price won’t put many customers off
Tariff may just increase prices for consumers
Other countries may impose their tariffs in response to this on their imports, (e.g. when the UK exports to China they make our goods more expensive)

27
Q

2.1.3 - What are Trade Blocs and some common examples?

A

A trade bloc is a group of countries who make a trade agreement not to place tariffs on imports from each other.

EU
NAFTA
ASEAN

28
Q

2.1.3 - How may businesses compete internationally through the internet, e-commerce, and changing their marketing mix?

A

Place: selling online through e-commerce and having international shipping for products means businesses can reach more places internationally. Alternatively they may do this by becoming a multinational company (expensive)
Promotion: Social media is a better way to promote through the internet as it has an international range at a low cost. Promotion techniques (e.g. targeted advertising) may aslo be used with this
Price: lowering their prices so that despite any tarrifs that are placed on them they still have competetive pricing
Product: Making their product more adaptable to foreign countries

29
Q

2.1.3 - What are the advantages and disadvantages of trade blocs?

A

PROS:

A larger target market
Cheaper imports from EU countries
Economies of scale
Easier to recruit labour
CONS:

More competition for UK businesses
Imports may be more expensive from non-EU members.
Tariffs on UK exports from non-EU members

30
Q

2.1.4 - What are ethics in terms of business?

A

The understanding of morals and right and wrong.

In a business context to be ethical is to pay workers a fair wage, to not pollute and to conduct business in way which does not harm or exploit people or the planet.

31
Q

2.1.4 - What is a trade-off?

A

A trade-off is a compromise between one thing and another
There has to be a trade-off or compromise between making a profit and being ethical so everyone is happy

32
Q

2.1.4 - What is a pressure group and what actions do they take?

A

Pressure groups are organisations set up to try to influence what consumers think about the business and its environment.

The write letters to MPS
They write to the press
They organise marches
They run campaigns

33
Q

2.1.4 Why is it important for a business to be ethical?

A

So that they produce an ethical brand image. An unethical brand image can lead to bad publicity which may cause people to boycott their business leading to a deacrease in revenue

34
Q

2.1.4 - How may businesses create sustainable products?

A

By manufacturing products in ways that don’t harm the environment.

E.g. using renewable energy sources and not wasting raw materials

35
Q

2.2.1 - What is the design mix?

A

The three aspects that make up the design of a product:

Aesthetic (How does the product look, feel or taste?)
Function (What problem the product solves?)
Price (Can it be manufactured and sold or prices that make a profit?)

36
Q

2.2.1 - What is the first stage of the product life cycle?

A

Introduction:

Will involve high costs in research and development
The product may have been test marketed before launching, so profits may be negative.
Sales will be low as customers may to yet be aware of the products
Little-to-no cash flow

37
Q

2.2.1 - What is the second stage of the product life cycle?

A

Growth:

Enjoying rapid growth in sales and profits
The customers are aware of the product and demand is high
High cash flow

38
Q

2.2.1 - What is the third stage of the product life cycle?

A

Maturity:

Face intense competition now all the producers have joined the market.
Sales are high but profits are starting to fall.
Products have to be discounted to keep sales high
Highest cash flow

38
Q

2.2.1 - What is the fourth and final stage of the product life cycle?

A

Decline:

May be limited in production.
Profits and sales have fallen.
The product may be withdrawn from sale.
Low cash flow

38
Q

2.2.1 - What are examples of extensions strategies and why may they be used?

A

Extension strategies extend the life of a product (usually through the maturity phase) to increase shelf-time and opportunity for sales.

Advertising
New packaging
Explore new markets
Price reduction
Add new value

39
Q

2.2.1 - What are examples of differentiation and why is it important?

A

Differentiation creates a unique brand image and promotes customer loyalty as a product stands out from its competitors This can be achieved through:

Branding
USP
Location
Design
Customer Service
Quality
Product mix

40
Q

2.2.2 - What is skimming pricing?

A

A product is priced high to begin with as it has a desirability factor (novelty) that will mean customers will want it when it is new.
The price can be lowered later on, but is high to start with to skim the profit while the product is trending.

41
Q

2.2.2 - What is penetration pricing?

A

Setting an initial low price for a new product so that it is attractive to customers.
The price is likely to be raised later as the product gains market share.

42
Q

2.2.2 - What is cost plus pricing?

A

Cost-plus pricing is worked out by calculating the total cost to produce the product or service and then profit is added on top
Most often used in the food industry where it is easy to calculate the exact cost of ingredients

43
Q

2.2.2 - How does the way that technology affects the costs of a business, effect their pricing?

A

while the inital cost of machinery is high, technological advancements means that production processes have become more efficient giving a business economies of scale.

As the average costs of production fall then this can be passed on to the consumer as lower prices.

44
Q

2.2.2 - What is the difference between niche and mass market?

A

Niche:

Unique differentiated products are more likely to be sold for higher or premium prices.

Mass:

Similar products which are sold to the mass market will have low prices to encourage sales.

45
Q

2.2.2 - How may pricing change throughout the product life cycle?

A

Introduction: Low prices to encourage customers to try the product.
Growth: Small discounts to encourage purchase.
Maturity: Prices will be at their highest as the business harvests profit.
Decline: Heavy discounts to get last sales before withdrawal.

45
Q

2.2.3 - What is advertising used for?

A

Promote the brand
Raise awareness of a product
Remind customers how great the product is
Persuade customers to switch

45
Q

2.2.3 - What is sponsorship and how is it used in promotion?

A

When a business sponsors something, they are establishing an association with another organisation or event.
That connection must make sense to the customers and enhance the reputation of the business.

46
Q

2.2.3 - What are product trials and what strategies might be used alongside it?

A

When consumers buy a good for the first time and assess whether or not they want to buy it again.

Public Relations
Viral Marketing
Free Samples
User Testing
Penetration Pricing

47
Q

2.2.3 - What is targeted advertising?

A

A customer is shopping online for video games, they then click on a news site and see an advert for video games.

This is targeted advertising. Businesses can choose the audience for adverts on Facebook.

48
Q

2.2.3 - What are methods of viral marketing?

A

Advertising
Social media
Internet
Word of mouth
Interactive games
Video clips

49
Q

2.2.3 - What are e-newsletters?

A

Advertising by sending out an e-newsletter to acustomer (means via e-mail). This campaign has then gone viral. The business needs to ask their e-mail customers to share the newsletter.

50
Q

2.2.4 - What are retailers?

A

A retailer sells goods direct to a consumer. The owner of the retail shop may have bought the goods from a wholesaler or manufacturer to sell on to the consumer
The retailer will mark-up the price of the goods, so they will be more than they paid for them.

51
Q

2.2.4 - What are the advantages and disadvantages of retailers?

A

PROS:

Going shopping is an enjoyable experience that customers can do with their friends or family
Trying on clothes helps when buying
Customers can have the product as soon as they have bought it (instant satisfaction)
Retailers win when a customer needs to see, touch, try or test a product first
CONS:

Retailers are only open during the day and customers may be too busy with work or family
Customers may have to wait in a queue or carry heavy bags of shopping
Customers may find it embarrassing to buy some personal items
May charge higher prices than the e-tailers

52
Q

2.2.4 - What are e-tailers and ‘clicks and mortar’ stores?

A

E-tailers are online e-commerce stores (e.g Amazon)
Clicks and mortar stores have both online and physicla presence (e.g. Argos, Sainsburys)

53
Q

2.2.4 - What are the advantages and disadvantages of e-tailers?

A

PROS:

Can be started with a smaller investment as no premises and less staff needed
Can sell a much larger range than a physical shop
Can undercut competitors prices by being cheaper (no shops, less staff)
Lots of potential to grow rapidly and reach an global marketplace
Lower fixed costs as no shops to pay rent on
CONS:

Hard to establish trust with the customer as no face-to-face interaction
Website costs can be high
Security and fraud for online transactions are an issue
Only as strong as your distribution / delivery if this is late then it may damage your reputation

Business Edexcel Gcse (2 decks)

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