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Higher business > Understanding business > Flashcards

Understanding business Flashcards

1
Q

Sectors of industry

A

Primary
Secondary
Tertiary
Quaternary

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2
Q

Primary sector

A

The sector of industry consisting of businesses which extract raw materials from nature.

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3
Q

Secondary sector

A

The sector of industry which turns raw materials into new products.

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4
Q

Tertiary sector

A

The sector of industry which provides a service to the public in exchange for a fee/ commission

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5
Q

Quaternary sector

A

The support based sector, made up of businesses which provide information based services, to but not exclusively other businesses.

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6
Q

Sectors of economy

A

Private
Public
Third

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7
Q

Private sector of EC

A

The sector of economy made up of businesses owned and controlled by private individuals, with the goal of maximising profit and growing the business.

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8
Q

Public sector

A

The sector of economy made up of businesses owned by the government and controlled by government officials, with the goals of providing a high quality service to the public and staying within their budget.

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9
Q

Third sector of EC

A

The sector of economy consisting of ethical businesses, involved in raising funds and awareness for ethical causes and developing the community.

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9
Q

Third sector of EC

A

The sector of economy consisting of ethical businesses, involved in raising funds and awareness for ethical causes and developing the community.

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10
Q

Types of private sector business

A

Sole trader
Partnership
Private limited company
Public limited company
Franchise
Multinational company

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11
Q

Sole trader definition

A

A business owned and controlled by one person, in the private sector of economy and has unlimited liability, as well as there being no legal work necessary for setup.

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12
Q

Sole trader features

A

Owned by one person
Controlled by one person
Private sector of EC
Unlimited liability
No legal work needed for setup

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13
Q

Advantages of sole trader

A

Get all the profit
Make all the decisions
No legal work needed for setup
Could get government support when setting up.

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14
Q

Disadvantages of sole trader

A

Workload issues
Unlimited liability
Low startup funds
Illness closes down business.

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15
Q

Partnership definition

A

A business which is owned and controlled by 2-20 partners, in the private sector of economy, it has unlimited liability and a deed of partnership is typically made.

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16
Q

Features of partnership

A

Owned and controlled by 2-20 partners.
Private sector EC
Unlimited liability
Deed of partnership (not actually necessary)

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17
Q

Advantages of partnerships

A

Partners share workload
Partners can specialise in their expertise
Larger startup funds
Partners can share ideas
Share unlimited liability
More likely to get bank support

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18
Q

Disadvantages of partnership

A

Shared profits
Unlimited liability
Deed of partnership might need to be setup
Decisions may be compromised due to split control

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19
Q

Private limited company definition

A

A business in the private sector of economy with limited liability, it is owned by shareholders and controlled by directors, it needs an article and memorandum of association to be set up. It can only sell shares to approved members of the public.

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20
Q

Features of private limited company

A

Private sector of EC
Limited liability
Owned by shareholders
Controlled by directors
Legal work of memorandum and article of association necessary

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21
Q

Advantages of LTD

A

sell shares for added finance
Limited liability
Won’t lose control to outsiders

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22
Q

Disadvantages of LTD

A

Dividend profit
Legal procedures completely necessary
Not allowed to sell shares to the public
Being a shareholder doesn’t mean you have control over the business.

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23
Q

Public limited company definition

A

A business in the private sector of economy with limited liability, it is owned by shareholders and controlled by directors, it needs an article and memorandum of association to be set up. It sells shares in the stock market to the public and must have a share capital of 50,000 macaroons

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24
Q

Features of a PLC

A

Private sector of EC
limited liability
Owned by shareholders
Controlled by directors
Article and memorandum of association necessary
Share capital of 50,000 and selling shares to the public

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25
Q

Advantages of a PLC

A

Limited liability
Huge source of finance selling shares
Less risk for banks due to size so more sources of loans and mortgages,
Dominate a market due to size,
Professional directors

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26
Q

Disadvantages of PLC

A

Lose control to outsiders
Legal work needed for setup
More shareholders so higher dividend
Shareholders don’t necessarily have control of a business.

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27
Q

Franchise definition

A

A business where a franchiser sells the rights of a company and charges a royalty, and the franchisee buys the rights of a company to set up a branch and sell the business products in the private sector of economy.

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28
Q

Features of franchise

A

Rights owned by franchiser
Branches owned by franchisee
Controlled by franchiser usually, private sector of economy.

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29
Q

Advantages to the franchiser

A

Fast and inexpensive growth,
Increases brand awareness when new branches are setup,
Get royalties payment from the business.

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30
Q

Disadvantages to the franchiser

A

They don’t get all the profit,
Bad business actions on the franchisee’s part can tarnish whole business reputation.

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31
Q

Advantages to the franchisee

A

Are setting up a business with an already large and loyal customer base,
Can benefit from training employees,
Benefit from advertising campaigns made by the franchiser.

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32
Q

Multinational company definition

A

A business which does business in more than one country, with a head office in their home country, and branches in their host countries, such as retail outlets and production facilities.

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33
Q

Benefits of operating as an MNC

A

Increase brand recognition
Spread risk
Access new/developing markets
Lower production costs,
Avoid trader tariffs

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34
Q

Disadvantages of MNC

A

Difference in legislation
Difference in language
Transportation costs
Difference in demands
Difference in time zones

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35
Q

Disadvantages to the host country

A

Low paid labour is exploited
Put local firms out of business
They can take profits back to their own country
Use up natural resources
Damage environment

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36
Q

Public / government organisations

A

Businesses in the public sector of economy owned by the government, and controlled by elected government ministers, with the aim of providing high quality services to the public and staying within their budget, and financed through taxes.

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37
Q

Types of government

A

Uk government
Scottish government
Local government

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38
Q

Matters controlled by the UK government

A

Reserved matters such as foreign policy and defence

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39
Q

Scottish government matters

A

Things such as education and health

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40
Q

Local government matters

A

Road maintenance and disposing of waste

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41
Q

Public corporation

A

A government organisation founded on an act of parliament, which is run by elected chairpeople and financed through taxes

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42
Q

Nationalisation definition

A

The act of taking a private industry or business into public ownership.

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43
Q

Privatisation definition

A

The act of selling a publicly owned organisation to private individuals, to become part of the private sector.

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44
Q

Nationalisation reasons

A

Economic reasons - having one supplier for one industry
Ethical reasons To protect customers by charging fair prices
Financial reasons - private sector businesses may not be able to pay for the costs of maintenance
Social reasons - to ensure certain services are provided to everyone in the public.

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45
Q

Reasons for privatisation

A

Creates a profit motive
Increases competition
Cuts government spending
Increases government income

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46
Q

Charities definition

A

Non profit organisations which have the goal of raising funding and awareness for ethical causes, they are financed by donations and are owned and controlled by a board of trustees.

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47
Q

Charities advantage

A

Exempt from tax
Low wage cost /volunteers
Private companies will support the business to seem ethical
Receive government grants

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48
Q

Disadvantages of charities

A

They may struggle to compete with private organisations with more funding
They may have inconsistent workforce due to volunteering
Non profit

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49
Q

Voluntary organisations

A

Businesses which provide a service to the local community and their members, which are run by an elected committee and financed through membership

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50
Q

Social enterprise definition

A

A business which functions like a private sector business, however is in the third sector due to using profit made to fund an ethical cause and reinvest in the business, meaning owners get no profit.

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51
Q

Advantages of social enterprises

A

Have good CSR
High quality employees/ volunteers
Brand loyal customers
Receive government grants
Asset lock

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52
Q

Disadvantages of social enterprises

A

Must compete with private sector businesses, owners get no profit

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53
Q

Private sector business objectives

A

Maximise profit
Maximise market share
Grow the business
Satisfice owners
Survival
Good CSR
High quality product

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54
Q

Satisficing definition

A

Where a business managers and directors ensure that business shareholders or owners are happy with adequate results/ performance.

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55
Q

Public sector objectives

A

Provide high quality services
Stay within budget
Satisfice the members of parliament who run the government
Satisfy public

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56
Q

Mission statement

A

The overall aim of the business

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57
Q

Third sector goals

A

Maximise funding for ethical cause
Maximise awareness for ethical causes
Maximise profit (social enterprises)
Ensure members are happy with the voluntary organisations

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58
Q

Methods of growth

A

Internal/ organic growth
Horizontal integration
Lateral integration
Forwards vertical intervention
Backwards vertical integration
Conglomerate integration
Diversification

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59
Q

Organic/ internal growth

A

Where a business expands without integrating themselves with other businesses. Using their own resources

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60
Q

Methods of internal/ organic growth

A

Opening new branches
Increasing production output
Launching new products
Hiring more staff
Opening e commerce

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61
Q

Reasons for growth

A

Increase sales and profit
Increase market share
Take advantage of economies of scale
Spread risk over markets

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62
Q

Advantages of internal growth/ organic growth

A

Maintains control over business
Economies of scale
Increase market share
Grow how you want to

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63
Q

Disadvantages of internal / organic growth

A

Slower than external
May be limited opportunity in a saturated market

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64
Q

External/ inorganic growth

A

Where a business integrates with another to become larger and more powerful

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65
Q

Advantages of external growth

A

Reduced competition in market
More control over price
Economies of scale
Grow in markets with no room to grow
Grow faster than internal growth

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66
Q

External/ inorganic growth disadvantages

A

Businesses may disagree on objectives and goals
Costly to integrate businesses
Communication issues
Consumers may be unhappy with less market choice and product price
Lose control of a business .

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67
Q

Ways to achieve growth

A

Franchising
Acquisition
Takeover
Merger
Advertising
Producing new product ranges
Increasing staff

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68
Q

Merger definition

A

A where two businesses integrate with each other on equal terms and share control.

69
Q

Takeover

A

Where one larger business purchases another smaller business hostilely, meaning that the larger business has control.

70
Q

Acquisition definition

A

Where one larger business purchases a smaller business in an agreed fashion, however the larger business has control.

71
Q

Lateral integration def

A

Where a business does a merger or takeover with another business in related markets and the same sector of industry but not the same stage of production, meaning there is no direct competition.

72
Q

Horizontal integration

A

Where a business does a merger or takeover with another business in the same stage of production and market. Meaning they directly compete.

73
Q

Backwards vertical integration

A

Where a business does a merger or takeover with another business which is the business supplier, meaning they are integrating with a business of a previous sector of industry.

74
Q

Forwards vertical integration

A

Where a business does a merger or takeover with another business in a later sector of industry, meaning they integrate with their customer

75
Q

Diversification definition

A

Where a business moves into a new market either by itself, or by taking over or merging with a business already in the new market.

76
Q

Conglomerate definition

A

Where a parent business takes over a smaller business in a different market meaning the business expands into many different markets.

77
Q

Advantages of Horizontal integration

A

The business already has expertise in that market
The business is decreasing it’s competition
The business can charge a higher price
The business can become a market leader

78
Q

Disadvantages of Horizontal integration

A

Businesses could have to share resources,
Can be expensive to purchase another business,
Could lead to dissatisfaction in customers with less market choice
Could be prevented by monopoly

79
Q

Advantages of lateral integration

A

Business spreads risks across markets
Business can increase customer base over many markets,
Gain assets from business, that could be useful for both businesses.

80
Q

Disadvantages of lateral integration

A

May have to distribute resources and focus from main business
Don’t have expertise in that market

81
Q

Forwards vertical advantages

A

Always have an outlet for the product
Spreads risk across different markets
Could allow for beneficial product placement

82
Q

Disadvantages of forward’s vertical integration

A

Could mean distribution of resources and business focus
Business may not have the expertise to survive in new market

83
Q

Backwards vertical integration advantages

A

Can decrease the cost of raw materials
Limits competition supply choice
Could mean middle man is cut out, increasing profit margins
Allows for continuous supply of raw materials.

84
Q

Disadvantages of backwards vertical integration

A

Distribution of resources and business focus
May not have expertise to succeed/ survive in market

85
Q

Advantages of diversification and conglomerate

A

Spread risk across markets
Increase customer base and market share

86
Q

Disadvantages of diversification and conglomerate

A

May not have expertise necessary to survive and succeed
New markets mean business resources and focus are shared
Customers may be unhappy if larger businesses start running their company, concern about product quality and values.

87
Q

Methods of funding growth

A

Buy in
Buy out
Outsourcing
Asset stripping
Retaining profit
Divestment
Demerger
De integration
BBOARDDD

88
Q

Buy out

A

Where business managers and employees purchase the business because they think that they can run the business better.

89
Q

Buy in

A

Where a business is purchased by people outside of the business, in order to run the business better.

90
Q

Outsourcing

A

Where a business pays another firm to do work for them, this is typically done cheaper or with more expertise, in order for the business to focus on other activities.

91
Q

Asset stripping

A

Where a business purchases a failing business in order to sell off all of their valued items, by selling them individually for a higher price.

92
Q

De merger

A

Where a business splits into two different businesses. The businesses are owned by the same people but carry out different activities

93
Q

De integration

A

Where a business sells of and removes a business that had been previously integrated

94
Q

Divestment

A

Where a business sells off unnecessary business assets in exchange for capital

95
Q

External factors

A

PESTEC
Political
Economic
Social
Technological
Environmental
Competitive

96
Q

Political external factors

A

Income tax
Corporation tax
VAT
Legislation
political stability
Public spending

97
Q

Income tax

A

The tax which employees pay to the government on all money they earn.

98
Q

Corporation tax

A

The tax which businesses pay on all profit they make to the government.

99
Q

VAT

A

The tax the general public pays on top of the price of goods and services.

100
Q

Rates of VAT

A

standard - 20- most things
Reduced - 5 - home energy and gas
Zero -0 - food and children clothes

101
Q

Legislation

A

Laws made by the government which businesses must abide to. (HASAWA) (national minimum wage act)

102
Q

Political stability

A

Factors resulting in a change in the current political climate.

103
Q

Public spending

A

How and where the government spends their finance to improve the lives of citizens and provide infrastructure.

104
Q

Political policy

A

The governments plan for the economy and competition

105
Q

Types of policy

A

Economic and competition

106
Q

Types of economic policy

A

Fiscal and monetary

107
Q

Fiscal policy

A

Where tax rates are changed to impact public sector spending and demand

108
Q

Monetary policy

A

The policy which controls the supply of money into the economy - changing interest rates.

109
Q

Competition policy

A

The policy put in place to promote and regulate markets for increased success.

110
Q

Economic factors

A

Economic cycle
Inflation
Exchange rates
Interest rates
Unemployment

110
Q

Economic factors

A

Economic cycle
Inflation
Exchange rates
Interest rates
Unemployment

111
Q

Economic cycle

A

The economic activity of the country, whether it is in a boom or recession.

112
Q

Boom

A

An Increase in the gross domestic product of a country, resulting in an increase in consumer spending.

113
Q

Recession

A

A decrease in gross domestic product for two quarters, resulting in a decrease in consumer spending.

114
Q

Gross domestic product

A

The value of all of the products in the economy.

115
Q

Inflation

A

The increase of products price over a period of time.

116
Q

Unemployment rate

A

The percentage of capable workers without jobs in the economy.

117
Q

High unemployment means

A

More competition for jobs
Decrease in demand of products.

118
Q

Low unemployment rate means

A

Less competition for jobs
Increase in demand.

119
Q

Interest rates

A

The percentage extra that has to be paid back on borrowing or saving money.

120
Q

Exchange rate

A

The conversion rate for turning one currency into another.

121
Q

Strong pound

A

Where the pound has a high exchange rate
Meaning importing products costs us less
Exporting products costs other countries more

122
Q

Weak pound

A

Where the pound has a low exchange rate
Meaning importing cost us more
Exporting products to other countries costs them less.

123
Q

Social factors

A

Demographics
Changes in trends
Changes in ethics

124
Q

Demographics

A

Changes in the populations characteristics, such as life expectancy.

125
Q

Changes in trends

A

The change in what people are purchasing/ what is fashionable at the moment.

126
Q

Changes in ethics

A

Where the public becomes much more philanthropic and generous towards negative social issues.

127
Q

Technological factors

A

ICT
Automation
E commerce
New R+D

128
Q

ICT

A

Information communication technology

129
Q

Automation

A

Where machines are used to replace employees to do a job more efficiently.

130
Q

E commerce

A

Selling products online - prevents necessary retail outlet.

131
Q

New R AND D

A

Where new technology and scientific evidence is produced , allowing a company to be more efficient.

132
Q

Environmental factors

A

Climate change
Weather
Recycling
Pollution
Biofuels

133
Q

Competitive factors

A

Imitators
Price wars
Product differentiation

134
Q

Imitators

A

Rival products from competitors which copy your own product, and sell them for a cheaper price.

135
Q

Product differentiation

A

How your product stands out from competitors

136
Q

Price wars

A

Where competitor businesses drop their prices to steal each other’s customers

137
Q

Stakeholders

A

Shareholder
Employees
Government
trade unions
Lenders
Pressure groups
Local community
Owners
Suppliers
Directors/managers
Customers

138
Q

External stakeholders

A

Banks
Government
Pressure groups
Suppliers
Customers
Local community

139
Q

Internal stakeholders

A

Shareholders
Owners
Employees
Directors
Managers

140
Q

Conflicts of interest between stakeholders

A

Where business stakeholders goals and interests for the business clash and can’t occur at the same time.

141
Q

Interdependence of stakeholders

A

Where business stakeholders rely on each other for the business to succeed.

142
Q

What does the structure of a business depend on

A

Technology
Size
Product
Finance

143
Q

Span of control

A

The number of subordinates who report to a supervisor or manager

144
Q

Chain of command

A

How information and instructions are passed down the organisation.

145
Q

Tall/hierarchical structure

A

Long chain of command
Short span of control
Found in the public sector frequently
With employees of lowest authority and responsibility at the bottom and highest at the top
Many layers of management

146
Q

Flat structure

A

Short chain of command
Large span of control
Found in medium sized organisations
Few layers of management
Lowest authority and responsibility at bottom, higher sat the top.

147
Q

Matrix structure

A

A business structure which facilitates for two different business operations.
Where business employees and managers are arranged into two separate projects - their faculty job and team project.
The employees will have a two different managers
One line manager and a project team leader
When projects are finished matrix structure is disbanded.

148
Q

Entrepreneurial structure

A

A small business with one owner who controls the business, the owner makes all the decisions quickly, there is a short chain of command and a wide span of control.

149
Q

Delayering

A

Where layers of hierarchy are removed from a business structure.

150
Q

Consequences of Delayering

A

Wider span of control
Shorter chain of command
Faster business decisions
More staff responsibility
Greater delegation

151
Q

Downsizing

A

Where business activities are removed, by merging faculties together.

152
Q

Advantage downsizing

A

Decreases costs of wage and rent to the business
Business is more efficient
Business can focus on most important business activities..

153
Q

Disadvantages of downsizing

A

Valuable skills can be lost
Remaining staff will feel demotivated if not needed to use their most valued skills.

154
Q

Centralised businesses structures

A

Where decisions are kept at the top of the business structure
Associate with tall
Relies on competent managers
Employees a don’t make decisions
Greater uniformity
Less responsive to local external pressures

155
Q

Decentralised structure

A

Decisions are delegated to other departments
Associated with flat structure
Motivated staff
More responsive to local external pressures
Less uniformity

156
Q

Advantages of tall

A

More promotion opportunities
Staff know who to report to and their role
Greater supervision of employees due to narrow span of control means less mistakes

157
Q

Disadvantages of tall

A

Slower communication
Slower reaction to changes on market
Staff may feel stifled by intense supervision of managers

158
Q

Disadvantages of tall

A

Slower communication
Slower reaction to changes on market
Staff may feel stifled by intense supervision of managers

159
Q

Advantages of flat

A

Information is quickly communicate
Faster response to external factors
Staff feel empowered by large amounts of work delegated

160
Q

Flat disadvantages

A

Fewer promotion opportunities
Staff put under pressure by amount of work delegated
Mangers have less time supervising each staff meaning more mistakes made.

161
Q

Types of decision making

A

Strategic
Tactical
Operational

162
Q

Strategic decisions

A

Long term business decisions concerned with the focus and goals of the organisation, establishing what it hopes to achieve in the future, made by senior management or owners with little detail into how these goals are going to be achieved.

162
Q

Strategic decisions

A

Long term business decisions concerned with the focus and goals of the organisation, establishing what it hopes to achieve in the future, made by senior management or owners with little detail into how these goals are going to be achieved.

163
Q

Tactical decisions

A

Medium term decisions concerned with achieving the strategic goals of the decision, made by senior or middle management, and go into detail about what resources are needed to achieve these goals and how they will achieve these goals.

164
Q

Operational decisions

A

Short term decisions which are made by low level managers and employees to prevent and address day to day problems decreasing efficiency of the business

165
Q

Advantages of centralised decision making

A

Decisions are made by most experienced
Made quickly
Greater uniform

166
Q

Decentralised Decisions advantages

A

Motivates staff
Responds to local external pressures better
Provide better customer service

167
Q

Disadvantages of centralised decision making

A

Demotivates staff
Less response to local external pressures

168
Q

Disadvantages of decentralised decisions

A

Less experienced people make decisions
Less uniformity

Higher business (20 decks)

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