Topic 1 : Business Activity Flashcards
What are the 4 characteristics of an entrepreneur?
Risk-taking
Determined
Creative
Confident
What are the main facts about Internal / organic growth?
Cheaper but slower
How can a business organically grow?
Sell new products
Enter new markets
What is an advantage of selling new products?
Increase sales/ revenue by better meeting customer wants and needs
What are disadvantages of selling new products to grow organically?
Expensive to research and develop
Can take a long time
What is an advantage of entering new markets?
Wider demographic and more sales
What is a disadvantage of entering a new market?
Exchange rates could mean business loses money
Tariffs in different countries can result in higher prices
Most effective in decline
What is an advantage of diversification?
Reduces risk because if one industry isn’t doing well , the business can still have a consistent revenue in the other
What are the main facts about external growth / integration?
Faster
Expensive
Why would a business merge or takeover?
To increase market share which means less competition
To secure supplier and deny competitors of using the same one.
To have an economy of scale, decrease average cost per unit
What are the 5 stakeholders?
Owners,employees,customers,suppliers,government and local community
3 internal stakeholders
Owners
Employees
Shareholders
4 external stakeholders
Suppliers
Government
Local community
Customer
What is a stakeholder?
Someone who has an interest in the business
What is it called if Walkers takes over Tesco?
Forward Vertical
What is forwards vertical takeover?
When a business takes over a retailer
What is diversification?
When a business takes over another in a completely different iinudstry
What is it called if Walkers takes over a potato farm?
Backwards vertical
What is horizontal growth?
When a business takeover a very similar one in the same industry
E.g walkers and kettle
What are ways of growing organically?
-Gaining new customers
-Releasing new products
-increase market share
Disadvantages of sole trader
Long work hours
Not enough skills
Unlimited Liability
Advantages of sole trader
Keep all profit
East set up
Private finance information
What is a sleeping partner?
Investor of the business who receives profit but doesn’t take part in management
Disadvantages of PLC
Risk of takeover if another business buys lots of shares
Public finance information
What is in a business plan?
1.Who runs it
2.Market research
3.Financial forecasts
4.Aims + Objectives
5.Target market
6.Competitors
Rewards of starting a business
1.Financial gain
2.Self satisfaction
3. Independence
Risks of starting a business
Finial loss and restrained relationships
What is the role of a business?
Spot opportunities or gaps in market
Develop Idea
Satisfy customer wants and needs
4 characteristics of entrepreneurs
Creative
Confident
Risk-taking
Determined
Advantages of LTD
Limited liability
Easy to raise finance
Control who buys shares
Disadvantages of LTD
Shares family and friends are willing to buy are limited
Admin and costly set up
Finance information is public
Dividend payments
Dividend payments
a reward paid to the shareholders for their investment in a company
Disadvantageous of partnership
Profit sharing
Slow descison making
