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GCSE Business > Topic 1: Business in the Real World > Flashcards

Topic 1: Business in the Real World Flashcards

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1
Q

What is a need?

A

A good or service that satisfies the basic requirements for living

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2
Q

What is a want?

A

A service or good that people desire beyond our needs

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3
Q

What is a primary industry?

A

Extracting raw materials from the land or sea

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4
Q

What is a secondary industry?

A

Processing raw material into finished goods

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5
Q

What is a tertiary industry?

A

Selling finished goods to the customer

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6
Q

What are examples of primary industries?

A

Farming
Fishing

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7
Q

What are examples of secondary industries?

A

Construction
Factories

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8
Q

What are examples of tertiary industries?

A

Supermarkets
Restaurants

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9
Q

What is a chain of production?

A

The stages that a product goes through to be ready to be sold to customers

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10
Q

What is interdependency?

A

Businesses in a chain of production that rely on one another

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11
Q

What is deindustrialisation?

A

Where there is a decline in manufacturing in a country and an increase in tertiary businesses

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12
Q

What are the 4 functions of a business?

A

Marketing
Human Resources
Finance
Operations

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13
Q

What is a partnership?

A

Between 2 and 20 partners joint owning a business

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14
Q

Advantages of partnership?

A

Shared workload
Generate more finance
More ideas and skills can be brought in

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15
Q

Disadvantages of a partnership?

A

Unlimited liability
Decision making is longer and there may be conflicts
Shared profits

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16
Q

What is a private limited company?

A

A company that doesn’t publicly trade shares and is limited to a maximum of 50 shareholders if they are invited

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17
Q

What is a private limited company shortened to?

A

Ltd.

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18
Q

Advantages of a private limited company?

A

Owners have limited liability
Easier to raise finance
Shares in a business can be sold to chosen people

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19
Q

Disadvantages of a private limited company?

A

Time consuming to set up and more expensive
They must publish accounts publicly every year

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20
Q

What is a public limited company?

A

A company who’s shares are sold to the public on a stock market, the people who buy these shares are called shareholders

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21
Q

What can a public limited company be shortened to?

A

PLC

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22
Q

Advantages of a public limited company?

A

The shareholders have limited liability
Increased negotiation opportunities with suppliers in terms of prices - larger business can achieve economies of scale
The business has the ability to raise additional finance through share capital

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23
Q

Disadvantages of a public limited company?

A

It’s expensive to set up - requires a minimum set up cost of £50,000
Shareholders may clash when making decisions and will expect to receive profits as dividends
There is a risk of a hostile takeover - the company can’t control who buys shares

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24
Q

What affect the share price of shares?

A

Brand image
Competitors
Profits and sales

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25
Q

What is a not for profit business?

A

A business set up to achieve other objectives than make a profit - they often use profit made for a good cause

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26
Q

What are not for profit organisations also known as?

A

Social enterprises

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27
Q

What is an aim?

A

An overall goal or target a business hopes to reach

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28
Q

What are 5 examples of business aims?

A
  1. Survival - where the business aims to exist and cover its costs
  2. Break even - make revenue equal to costs
  3. Expand internationally - take the product into a target market abroad
  4. Increase market share - control more of the market
  5. Profit maximisation - ensure the best output and price levels are achieved to maximise profits
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29
Q

What is an objective?

A

A target a business wants to reach to achieve an aim

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30
Q

What is a stakeholder?

A

Those with an interest in the way that a business operates

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31
Q

What are 5 examples of stakeholders? What are they interested in?

A
  1. Customers - interested in the services the business provides, the products, quality and prices
  2. Owners - interested in the profits the business has
  3. Competitors - interested in how well the business is doing and products they released
  4. Community - interested in the pollution being produced and also the jobs the business offers
  5. Government - interested if the business is in line with the law
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32
Q

What is location?

A

Where a business is geographically situated

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33
Q

What are the 4 main factors to consider when deciding on location?

A
  1. Closeness to supplier
  2. Closeness to competitors
  3. Wealth of area
  4. Costs of having a store there
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34
Q

What is a franchisor?

A

A business who sells the rights to another business to operate a franchise

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35
Q

What is a franchisee?

A

Someone who rents the brand name

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36
Q

Why do business want to grow?

A

To access more customers
To improve brand recognition and expand their audience
To increase share value

37
Q

What are the 2 types of growth?

A
  1. Organic growth
  2. Inorganic growth
38
Q

What is organic growth?

A

When a business decides to expand its own activities by launching new products and/or entering new markets

39
Q

What is inorganic growth?

A

When a business grows with the help of other businesses by joining with or buying another business

40
Q

What are 3 examples of organic growth?

A
  1. New stores and franchises
  2. E-commerce
  3. Outsourcing
41
Q

What are 2 examples of inorganic growth?

A
  1. Merger
  2. Takeover
42
Q

What is a merger?

A

When 2 businesses join together to create one bigger business

43
Q

What is a takeover?

A

When one business takes ownership over another e.g. through buying it

44
Q

What are the advantages to a business opening new stores as a method of expansion?

A

They can make more profit and revenue
They can increase their customer base but also brand recognition

45
Q

What are the disadvantages to a business opening new stores as a method of expansion?

A

Harder to control and manage the stores but also manage staff too
Expensive - more costs, more money spent on training etc.

46
Q

What are the advantages to a business using e commerce as a method of expansion?

A

Websites are cheaper to manage and generally save costs e.g. costs for staff and locations
Global access and customers have access for them 24/7
Easier to set up

47
Q

What are the disadvantages to a business using e commerce as a method of expansion?

A

There are security issues - websites can crash or be hacked
There are costs to maintain websites and protect them from security risks
Not everyone has phones

48
Q

What are the advantages to a business using outsourcing as a method of expansion?

A

Cheaper to produce - less staff needed so costs are cut
Increases productivity

49
Q

What are the disadvantages to a business using outsourcing as a method of expansion?

A

The business has less control
Quality may not be up to standard and they may have a bad reputation if the other company does

50
Q

What is outsourcing?

A

When a company hires someone else to perform tasks, handle operations or provide services for the company

51
Q

What is a sole trader?

A

When an individual runs a business

52
Q

What is an entrepreneur?

A

An individual who takes a risk to start a business

53
Q

What are the 4 factors of production?

A
  1. Land
  2. Labour
  3. Capital
  4. Enterprise
54
Q

What are qualities an entrepreneur needs?

A

Hard working
Organised
Innovative

55
Q

Advantages to being a sole trader?

A

They’re easy to set up - good for start up businesses
You get to be your own boss
As a sole trader, you decide what happens to profit made

56
Q

Disadvantages to being a sole trader?

A

Long hours may have to be worked - no holidays
They have unlimited liability
It can be hard to raise any finance
The business won’t have a legal identity - unincorporated

57
Q

What can impact the objectives a business has?

A

The size of the business
The level of competition the business faces
The type of business

58
Q

Why may a businesses objectives change over time?

A

New legislation
Changes in the economy
If the business grows or achieves another objective

59
Q

What is the land factor of production?

A

It includes the earths natural resources in production

60
Q

Examples of land production?

A

Non renewable resources e.g. natural gas
Water
Animals

61
Q

What is the labour factor of production?

A

The work done by people who won’t contribute to the production process

62
Q

What is the capital factor of production?

A

The equipment, factories and schools that help to produce goods and services

63
Q

What is the enterprise factor of production?

A

The people (entrepreneurs) who take risks and create things with the other three factors of production

64
Q

What is an enterprise?

A

A business or an organisation or the personal qualities that mean someone takes advantage of new business opportunities

65
Q

What are the reasons why someone may become an entrepreneur?

A

To make more money than they may be making currently
When they identify a gap in the market, to fill this gap
To be their own boss, follow their interests if they they’re unsatisfied with their current job

66
Q

Advantages of not for profit organisations?

A

They get some tax relief and are helped by the government

67
Q

Disadvantages of not for profit organisations?

A

They don’t have sable income
They don’t make a profit - or if they do, they reinvest into the business
Can be hard to manage

68
Q

What can objectives help do? Why?

A

Measure success - if it meets its objectives, it’s on track to achieving their aim and is successful
E.g. if their aim is to make a profit and they achieve it, they can see they’re making enough sales etc.

OR

Can help identify weaker areas of the business

69
Q

What is revenue?

A

All the money the business earns

70
Q

How can revenue be calculated?

A

Revenue = units sold x selling price per unit

71
Q

What are fixed costs? Example?

A

Costs that don’t vary with output and have to be paid even if the business produces nothing e.g. rent, insurance etc.

72
Q

What are variable costs? Example?

A

Costs that increase as the firm expands its output e.g. cost of supplies, cost of running machinery etc.

73
Q

How can total costs be calculated?

A

Total costs = fixed costs + variable costs

74
Q

What is average unit cost?

A

How much each product costs to make

75
Q

How to calculate average unit cost?

A

Average unit costs = total cost/output

76
Q

What is profit?

A

The money that the business keeps after paying all of its expenses/costs

77
Q

How is profit calculated?

A

Profit = total revenue - total costs

78
Q

If a business’s total costs are higher than their total revenue, how does this affect their profit?

A

They don’t make a profit, they make a loss - the profit calculation will thus be in the negatives

79
Q

What is a business plan?

A

An outline of what a business will do and how it aims to do so

80
Q

Advantages of business plans?

A

It allows to calculate how much finance will be necessary to start the business
Can be used to convince financial bankers to invest
It can stop the business from investing time and money into a business or product that may fail
Can help set aims and objectives

81
Q

What are 3 of the 7 sections of a business plan?

A
  1. Personal details of the owner like their CVs
  2. Product description and details of market and competitors
  3. Finance - how much money needed to start the business including a cash flow forecast and a projected statement of financial position
82
Q

Disadvantages of business plans?

A

They are time consuming and costly to make
They are only prediction and some people may get to optimistic and not meet their expectations

83
Q

What is an economy of scale?

A

When the average unit cost of products falls

84
Q

Who can achieve an economy of scale?

A

Large businesses

85
Q

What are the 2 reasons an economy of scale can happen?

A
  1. Purchasing economies of scale - when a large firms buy its supplies in bulk so gets them at a cheaper unit price
  2. Technical economies of scale - when a business can afford to buy and operate more advanced machinery
86
Q

What are the advantages of economies of scale?

A

The businesses can make more profit on each item they sell
The business can also charge less for their products or services - making customers more likely to buy their products - outcompete competitors
Profits can reinvested - allows to expand more

87
Q

What is a diseconomy of scale?

A

Areas where growth can lead to increases in average unit costs

88
Q

In what situations can a business have a diseconomy of scale?

A

The bigger the business - the harder it is to manage and more expensive
Bigger business have more people - harder to communicate, people lower in the hierarchy are less involved (demotivated) (productivity decreases)

GCSE Business (6 decks)

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