Understanding Business Flashcards

Question

Outsourcing- Disadvantages

Answer 1

Business will have less control over outsourced work so quality may fall More expensive that in-house as specialists come at a price

Answer 2

Changing laws & legislation - Government could introduce environmental laws & by complying, organisations will gain a good rep Changing income tax rates - Government could reduce tax rates giving customers a higher disposable income meaning they are more likely to buy products Changing VAT rates - Government could lower VAT making products more affordable for customers

Answer 3

Changing laws & legislation - Government could increase minimum wage meaning organisations have higher wage costs resulting in a lower annual profit Changing income tax rates - Government could increase income tax giving customers a lower disposable income Changing VAT rates - Government could raise VAT & selling price could put customers off buying

Answer 4

Set up with sole purpose of raising money to benefit others Financed - Donations or sponsorships Controlled by - Board of trustees

Answer 5

Exempt from paying some taxes Low wage costs as volunteers work for free Private companies more willing to donate as it’s good PR

Answer 6

Difficult to compete with large marketing budgets of organisations in the private sector Charities rely on volunteers who may leave for paid work

Answer 7

Aim to provide a service for their members & the local community Financed by - Membership subscriptions Controlled by - Elected committee & helped by volunteers

Answer 8

Aim to make a profit to benefit a specific group Owned by - Sole trader, partnership or shareholders in a limited company Controlled by - Board of directors

Answer 9

Social aims can endear a social enterprise to customers Likely to receive government grants due to positive impact on society Good-quality employees who believe in social mission attracted to organisation ‘Asset lock’ means if it shuts down the sale of any profits will benefit their cause

Answer 10

Aims to grow & increase market share A - Low-risk form of growth as franchisee invests the majority of the capital - Receives a percentage of franchisee's profits each year D - Reputation of whole franchise can be tarnished by one poor franchisee - Only a share of the profits is received

Answer 11

Aims to maximise profits A - Well known business with existing customers - Industry knowledge & training provided by the franchiser - Benefits from national advertisements carried out by the franchiser D - Little autonomy over decisions as the franchiser decides it all - Royalties have to be paid each year - High initial start-up fees

Answer 12

A business that has operations in more than one country

Answer 13

Wages & raw material costs lower in host country Business can avoid legislation in the home country Grants can be issued by governments to locate in their country Businesses can avoid quotas & tariffs issued by their own governments

Answer 14

Language barriers can slow down communication Cultural differences can affect production Exchange rates can affect purchasing & paying expenses in different countries Time differences can hinder communication between head office & branches around the world

Answer 15

Consists of businesses that are involved in exploiting natural resources

Answer 16

Businesses involved in manufacturing & construction, by taking natural resources & turning them into goods that can be sold later

Answer 17

Businesses that are involved in providing services rather than goods

Answer 18

Aiming for satisfactory result rather than best possible outcome Could aim only to make a level of profit good enough to satisfy main stakeholders

Answer 19

Try to achieve objectives they believe will improve their status within the country

Answer 20

Aiming to stick to their annual budget & not overspend

Answer 21

Involves one business buying another business

Answer 22

Risk of failure can be spread Economies of scale can be achieved Competition reduced which increases sales Buying business gains market share & resources of taken-over business

Answer 23

Can lead to job losses in taken-over business as buying business wants own employees Integration can be bad for customers as less competition means higher prices Change of name can put off loyal customers of taken-over business Can be expensive to acquire another business

Answer 24

Involves 2 businesses agreeing to join forces & become one organisation

Answer 25

Economies of scale can be achieved Each business can bring different areas of expertise to the merger Jobs more likely to be spared in both businesses Can overcome barriers to entering a market

Answer 26

Customers may not like the changes a merger brings Marketing campaigns to inform customers of changes can be expensive Can be bad for customers as less competition will mean higher prices

Answer 27

Franchising Becoming a multinational

Answer 28

Profits made by the business that aren’t given to shareholders

Answer 29

Selling off part of an organisation in order to concentrate on other more profitable areas of the business

Answer 30

When a business sells off part of the supply chain it owns

Answer 31

Business can focus on core activities Increased choice in ‘vertical chain’ as the business can look for supplies outside its organisation

Answer 32

Business will now have to pay marked-up prices for supplies Competitors could acquire de integrated components & take control of the supply chain

Answer 33

Taking over another company with intent to sell off its assets for a profit

Answer 34

When a single business splits into 2 or more separate components

Answer 35

Each new component can concentrate on its own core activities & grow as a result Each new component has the best chance to operate efficiently De-merged components can be divested which can meet competition regulations

Answer 36

Customers may be put off & abandon the businesses altogether Significant financial costs involved

Answer 37

Management of another business takes over the business

Answer 38

Management of a business buy the company they work for

Answer 39

When an organisation arranges for another organisation to carry out certain activities for it instead of doing it itself

Answer 40

Allows the business to concentrate on doing what it’s good at Should be high-quality work from outsourced activities Less labour & equipment required for outsourced activities Business is able to use the service when required

Answer 41

Business will have less control over outsourced work so quality may fall Communication between businesses needs to be clear to make sure specifications are met Business may have to share sensitive information that could get into hands of competitors More expensive than in-house as specialists come at a price

Answer 42

In order to promote competition for consumer benefit Prices kept low for customers Customer service is good Products & services are high quality Organisations can't participate in cartels The CMA can block mergers

Answer 43

Fiscal policy - Concerns tax rates it sets Monetary policy - The ways it controls the supply of money into the economy

Answer 44

High demand for products & employment Can increase prices improving businesses profits Inflation means increasing wage costs

Answer 45

Little demand for products & employment Have to make staff redundant & pay redundancy Prices cut meaning little profit

Answer 46

Demand for products & employment increases Customers in a better position to purchase products, increasing sales Developing new products & increasing prices leading to bigger profits

Answer 47

Ageing population - Can produce tailored products - Most are retired & can afford products so prices can increase Changing fashion trends - Can offer products customers want, increasing sales Ethical considerations - Businesses that practise ethically seen in a good light by customers, suppliers & the government

Answer 48

Ageing population - Market research needed which is expensive & time consuming Changing fashion trends - Some products have a short shelf-life Ethical considerations - Operating ethically will increase costs & therefore reduce overall profits

Answer 49

Social media - Organisations can keep in touch with customers & raise their profile to worldwide market Wi-Fi - Providing free wi-fi will attract customers who need to use it 4G - Enables employees to download information quickly

Answer 50

Social media - Customers can use it to spread bad reviews leading to a bad reputation Wi-Fi - Expensive to set up & maintain 4G - Not everywhere is equipped for 4G leaving these organisations behind

Answer 51

Weather - Could be impacted by favourable weather Recycling - Encourage recycling by their customers to impact less negatively on the environment Carbon footprint - Businesses that use renewable energy will save money on fuel bills

Answer 52

Weather - Adverse weather can affect transport networks Recycling - Takes time & effort to recycle rather than dispose Carbon footprint - Expensive to invest in renewable energy

Answer 53

Competition opening next door provides more choice to customers Improves market as it brings more choice & keeps prices low

Answer 54

Competition could lower prices which forces business to lower prices or risk losing customers Competition could launch new products meaning businesses will have to spend money developing products

Answer 55

Employees vs owners - Employees want a pay rise, owners want to maximise profits Government vs owners - Governments want to introduce legislation to improve society, owners may disagree with legislation as it will impact their business Customers vs owners - Customers want low prices whereas owners want to maximise profits Suppliers vs owners - Suppliers want to be paid as soon as possible in cash whereas owners want to trade credit to keep good cash flow

Answer 56

Owners & suppliers - Owners need suppliers to provide quality raw materials while suppliers need owners to keep buying from them Owners & customers - Owners need customers to buy their products & customers need a good quality product Owners & employees - Owners need employees to perform their best to increase sales while employees need owners to make good decisions & keep their job safe Managers & employees - Employees & managers need to work together to help the business succeed

Answer 57

Each staff member knows who to report to More promotion opportunities can motivate staff Narrow span of control means managers can support subordinates

Answer 58

Many levels slows down decision-making Organisation can be slow to react to changes in the market Narrow span of control means managers have fewer staff to share ideas with

Answer 59

Information can quickly be communicated through levels Can quickly respond to external factors Wide span of control means staff are empowered to make decisions themselves

Answer 60

Fewer promotion levels so staff may leave Staff may be delegated more tasks increasing pressure Wide span control means there's less time for planning

Answer 61

Money saved on managers salary Quick communication as shorter chain of command Wider span of control

Answer 62

Fewer promotion opportunities Will lose key staff in restructure Wider span of control

Answer 63

Standardised procedures ensures consistency Low risk of important info leaking from branches High degree of corporate identity as decisions made for the whole organisation

Answer 64

Less responsibility given to subordinates demotivating staff Decisions won't reflect needs of local markets Organisation will react slowly to external factors

Answer 65

Quick decisions as local managers don't need to consult senior managers More subordinates empowered encouraging creativity Senior management relived of constant decision-making

Answer 66

Local branches may compete with each other Additional training required for middle management Lower-level management can make decisions harmful for the whole business

Answer 67

Can cut wage costs Business is more competitive

Answer 68

Valuable skills lost when redundancies are made Remaining staff are demotivated

Answer 69

Kept at senior level of business