Understanding Business Flashcards
What is a business?
An organisation that makes, buys, sells goods or provides a service.
What are all businesses’ aims?
To satisfy consumer wants and needs.
Why does an individual set up a business?
- They have identified a gap in the market
- Earn money/make a profit
- Be their own boss
- Provide a service
- Turning a hobby into a passion
- They were made redundant
- See demand for something
What are wants?
Things we would like to have but don’t need to survive.
Examples of wants?
- Phone
- Holiday
- TV
- Car
- Computer
What are needs?
Basic requirements essential for survival.
Example of needs?
- Food
- Water
- Clothing
- Shelter
- Warmth
What are goods?
Products you can see and touch (tangible).
Examples of goods?
- Clothes
- Food
- Laptop
What is a service?
Products you cannot hold or touch (intangible).
Examples of services?
- Haircut
- Public transport
- Cinema
Factors of production?
- Capital
- Enterprise
- Land
- Labour
What is wealth creation?
At each stage of production, value is added to the product.
Additional value that is added at each stage of production is wealth creation.
What is capital?
Man-made resources used to create products or provide a service.
Examples of capital?
- Machinery
- Tools
- Money
What is enterprise?
The idea that the owner had to create the business.
How the land, labour and capital is used to make a good product or service.
What is an entrepreneur?
An individual who develops a business idea and combines the factors of production land, labour and capital to produce a good or service with the aim of making a profit.
What is land?
The natural resources used to provide a good or service.
Examples of land?
- Water
- Land
- Fields
- Fish
- Coal
What is labour?
The workforce employed to produce or provide a good or service.
Examples of labour?
- Teachers
- Plumbers
- Builders
What are the sectors of industry?
- Primary
- Secondary
- Tertiary
What is the primary sector?
The primary sector is involved with the extraction of raw materials.
A business that grows goods or extracts materials from the land are classes as a primary sector business.
Examples of primary sector businesses?
- Farming
- Mining
- Fishing
- Oil production
What is the secondary sector?
The secondary sector is concerned with manufacturing. This involves taking raw materials from the primary sector and converting them into new products.
Examples of secondary sector businesses?
- Car manufacturers
- Food production
- Building companies
What is the tertiary sector?
The tertiary sector is concerned with providing a service.
Services are activities that are done by people or businesses for consumers.
Examples of tertiary sector businesses?
- Hairdressers
- Banks
- Supermarkets
- Cinemas
What is customer satisfaction?
Customer satisfaction is the service a consumer receives before during and after they have purchased a good or a service.
Examples of customer service?
- Customer loyalty
- Improved reputation
- Employee satisfaction
What is customer loyalty?
If a customer receives good quality service, they will be more likely to return. This will lead to increased sales and profits. It also means customers do not take their business to competitors.
What is improved reputation?
Customers who have received good service will be more likely to recommend the company to family and friends. A good reputation attracts new customers meaning a larger market share. It also allows for higher prices to be charged.
What is employee satisfaction?
Customers who are satisfied are less likely to complain. Having fewer complaints to deal with contributes to a business having a more motivated workforce.
If a company has a good reputation and low level customer complaints, this attracts a higher level calibre of employee.
Examples of poor customer service?
- Decreased profits
- Bad reputation
- Loss of market share
- Loss of competitive edge
- Low staff morale
Examples of maximising customer satisfaction?
- Market research
- Staff training
- After-sales service
- Customer care strategy
- Customer complaints procedures
- Quality products
How does market research maximise customer satisfaction?
Effective market research allows a business to find the wants and needs of its customers. This means that the product or service can be tailored to these needs, leading to greater customer satisfaction.
How does staff training maximise customer satisfaction?
Well trained staff will be knowledgable about the business and will be able to deliver a higher standard of customer care.
How does after-sales service maximise customer satisfaction?
After-sales service provides a service by the company after a purchase has been made. This service includes returns and refunds, guidelines on how to achieve the best from the product or service, and product maintenance.
How does customer care strategy maximise customer satisfaction?
Customer care strategy lets the customer know what level of service to expect and how complaints will be handled.
How does customer complaints procedures maximise customer satisfaction?
If a customer complaint is handled effectively, the customer will be more likely to return to the business.
Customer complaints procedures include things such as
- The length of time it would take
- Who should deal with a complaint
- How it should be processed
How do quality products maximise customer satisfaction?
A high-quality product ensures a customer is satisfied. The product must meet the customer’s needs. It is important for a company to have good quality assurance procedures in place to ensure no faulty or low quality products or services are given to customers.
What are the sectors of economy?
- Private
- Public
- Third
What are the types of organisations in the private sector?
- Sole trader
- Partnership
- Private limited company
What are the objectives of the private sector?
To maximise profits
What are sole traders?
A sole trader is a business owned by one person.
What do sole traders rely on?
Sole traders rely on
- Their own savings
- Bank loans
- Loans from friends and family
to finance their business
Examples of sole traders?
- Hairdresser
- Butcher
- Electrician
Advantages of a sole trader?
- Easy to setup
- Retains all profits for themselves
- Sole trader makes all decisions
Disadvantages of a sole trader?
- Unlimited liability
- Heavy worklaod
- Can be difficult to finance
What is a partnership?
- Partnerships can have a minimum of 2 and a maximum of 20 partners
- Set up by the deed of partnership document
Examples of partnerships?
- Lawyers
- Estate agents
- Doctors
- Dental practices
What is the deed of partnership?
The deed of partnership document sets out the terms of the partnership.
For example, it states how much money each partner invested in the partnership and what role each partner will have.