Understanding Business Flashcards
Describe the role of business in society.
Involves taking resources and using them to produce goods and services that people consume/use to satisfy their needs and wants
resources → goods and services → satisfy needs and wants
Describe the factors of Production.
Labour - Workers involved in production. eg: builders, teachers, plumbers.
Land - Natural resources which are used to provide a good/service. This can be in/under/on the land eg: oil, fish, trees, animals
Capital - Man-made equipment/machining to assist in production of goods/services. eg: tools, delivery trucks, money
Enterprise - person who comes up with the idea and develops it.
Describe what durable and non-durable mean. Give examples.
Durable: something that lasts and kept for a period of time and not bought often. Eg: TV, Car, iPad
Non-Durable: does not last and is bought often. Eg: Bread, Ice-cream, Fruit, Veg etc.
Describe the definitions of tangible and non-tangible.
Tangible is something that can be seen/touched
Non-tangible is something you can’t see/touch
Describe the sectors of industry.
Primary - extraction of raw materials/natural resources from the earth. ex: farming, mining, fishing
Secondary - Manufacturing. Involves taking the raw materials and turning them into new products. ex: textile factories, shipyards, car production
Tertiary - Provides services to consumers. eg: banking, hairdressing, cinemas
Describe the sectors of economy.
Private - If an organisation has a profit motive. Eg: Mackie’s, Tunnocks, AG Barr etc.
The Third Sector - Organisations that are not for profit. Eg: Oxfam, Barnardos, Hospice (charities)
Public - Organisations that are funded by the ”public purse” (taxpayers). Eg: NHS, Police, other armed services, BBC, etc.
Identify the characteristics of an entrepreneur.
Develops the business idea
Takes the risk
Combines factors of production
Makes the big decisions
Puts his/her own money in, or gets financed
Describe a sole trader.
A sole trader is a type of private sector business that own and control the whole business as one individual.
They have unlimited liability.
You can keep all your profits when tax has been paid, but if you have debts and can’t repay them, the bank will take as many possessions from you as it takes to get their debt repaid.
Describe a partnership.
A partnership is a type of private sector business that is owned and controlled by between 2-20 people.
In a partnership, you and your partner(s) personally share responsibility for your business. This includes:
- any losses
- bills for things you buy for your business like stock or equipment
- Partners share the business profits and each partner pays tax on their share.
Describe a private limited company (LTD).
A private limited company (LTD) is owned by shareholders and controlled by a board of directors.
These businesses have limited liability. This means that if they go bust, an investor will only lose the money invested.
The finances of a limited company are separate to any one person’s personal finances.
You must be invited to buy shares in the company.
An LTD can have between 1-50 shareholders.
The company has to produce a Memorandum of Association stating the details, responsibilities of directors and rights of shareholders.
Describe the positive impacts of having good customer service.
- Buy often from your company
- Recommend to others
- More sales/profits for companies
- Stay loyal to your company
- Less refunds
Identify the ways a business could improve customer satisfaction.
- Ensure employees are hired with the correct skillset.
- Train employees to a high standard.
- Incentivise employees with something so they have a reason to work hard
- Hire enough people to cope with customers
Describe a need.
Needs are the basic requirements that are essential for survival.
Examples: house, water, clothing.
Describe a want.
Wants are things we would like to have but don’t need to survive.
These include luxuries such as mobile phones, ice cream, expensive shoes etc.
Describe a good.
Goods are products that you can see and touch (tangible) such as laptops, clothes or food.
Describe a service.
Services are products that you cannot hold or touch (intangible) such as public transport, a haircut or a visit to the cinema.
Discuss advantages and disadvantages to being a sole trader.
ADVANTAGES
- All profits kept by the owner
- Owner has complete control.
- Owner can choose their own working hours/holidays.
- More of a personal service offered to consumers
- Very easy to set up.
DISADVANTAGES
Unlimited liability
Finance is restricted
Owner has no one to share problems and workload with
Work may stop if owner is on holiday or sick. If not it is difficult to find someone to trust in their absence.
Discuss the advantages and disadvantages with being in a partnership?
ADVANTAGES
Partners can bring in different areas of expertise.
More finance is available
Workload can be shared
Easier to raise finance from lenders.
DISADVANTAGES
Partners have unlimited liability.
Profits have to be shared between partners
Partners may disagree (weak point)
If one partner leaves or dies, a new Partnership Agreement has to be set up.
Identify the ways in which a sole trader is financed.
Owners savings
Business’ retained profit
Bank loan
Bank overdraft
Government grants
Trade credit
Debt factoring
Identify the ways partnerships get financed.
Partners’ savings
Partnerships retained profits
Bank loan
Bank overdraft
Government grants
Trade credit
Debt factoring
Describe a stakeholder.
A stakeholder is any person or organisation that has an interest in the success of the business.
Describe internal stakeholders.
Stakeholders inside the firm.
Describe external stakeholders.
Stakeholders outside the firm.
Identify 4 internal stakeholders.
Workers
Shareholders
Managers
Owners
Identify 5 external stakeholders.
Local community
Bank
Government
Suppliers
Donors
Pressure groups
Customers/Comsumers
Define the interest of a stakeholder.
The interest is what the stakeholder wants from the business.
Define the influence of a stakeholder.
Influence is the action or decision the stakeholder can take that will affect the business.
Identify examples of the interest of an owner.
Profits
Business to succeed
Identify examples of the influences of an owner.
Hire and fire staff
Extend product lines
Determine the opening hours
Describe the interests of the government.
The government wants a successful business to provide jobs
Identify examples of the interests of a manager.
Status and responsibility
Their decisions to be successful
Describe the influences of the government.
Provide a grant to the firm
Set a legislation controlling firm
Identify examples of the influences of a manager.
Appraise staff
Make decisions
Decide on the firm’s objectives
Identify examples of the interest of an employee.
Good salaries
Good working conditions
Job security
Describe the interests of the local community.
They want no pollution and they want jobs and wealth for the community.
Describe are the influences of the local community?
Pressurise the firm through pickets and letters to the press
Tell the populace to boycott the company if they are not happy
Describe examples of the influences of an employee.
Employees could go on strike
Can control their efforts which can affect reputation of firm
Identify examples of the interest of a shareholder.
High dividends
Describe the interests of the supplier.
Repeat orders
Paid on time
Identify examples of the influences of a shareholder.
Vote at AGM
Invest more or sell shares
Identify examples of the interests of a customer.
Cheap prices
Quality product/service
Describe the influences of the supplier.
Change the price of products
Extend the credit period
Stop supplying the firm if they don’t pay on time
Identify examples of the influences of a customer.
Change to another competitor
Their demands will control price
Boycott the company if they find they’re sources are unethical
Describe the interests of a bank.
Want firm to take out loans
Describe the influences of a bank.
Increase interest rate
Grant a loan
Give advice for the finances of the business
Identify the objective that is common with all businesses.
To survive.
Describe the objectives in the public sector.
• provide vital services to the public such as healthcare and education;
• make best use of the funds it has been allocated by the government;
• stay within an allocated budget;
• continually aim to improve the quality of the services offered;
• cut costs and reduce spending where possible;
• corporate social responsibility.
Describe the objectives in the 3rd sector.
• help their specified cause;
• raise as much in funding and donations as possible to help their cause;
• raise and increase awareness of their cause;
• increase the number of volunteers helping them;
• provide a service to those in need;
• survive and be able to continue to help their cause;
• continually aim to improve the quality of the services offered;
• corporate social responsibility.
Describe the objectives of a private sector business.
- Profit maximisation - this is when a business aims to reduce costs and make as much profit as possible.
- Sales maximisation - when this business aims to sell as many goods and services as possible. Common strategies to achieve this are through increasing promotional and advertising activities, and reducing the prices of goods and services.
- Customer satisfaction - The objective of customer satisfaction is when an organisation aims to treat its customers well by providing excellent customer service and to make them happy with their buying experience from the business.
- To be the market leader - to be the company is the market that has the most customers buying their goods and services.
- Enterprise and innovation - when the business aims to continue coming up with new ideas for products or making improvements to existing ones. This is important in keeping up with changing customer tastes and demands; a business needs to be as responsive to these as possible.
Describe Corporate Social Responsibility (CSR).
(CSR) an objective where the business aims to have a positive impact on the environment, its staff and the local community
Describe the external factors?
P - Political - Any action taken by the government. Eg: laws
E - Economic - current state of the economy
S - Socio-Cultural - cultural trends eg: buying habits AND population - birth rates
T - Technological - latest developments
E - Environmental - actions and laws which promote upkeep of environment
C - Competitive - actions of competitors that forces a firm to react
Describe the financial internal factor.
Financial - refers to the lack of finance or the availability of finance to a business.
A lack of finance may mean a business is unable to:
• pay its bills, e.g. electricity
• purchase raw materials, which can lead to a halt in production
• take on more staff
• grow, e.g. open up a new store
• carry out marketing activities
Identify the four internal departments.
Finance
Marketing
Operations
Human Resources (HR)
Identify the internal dept. would the following examples go under?
- Dealing with poor staff morale
- Deciding how much dividend to pay the shareholder.
- Deciding where to advertise the product.
- Negotiating a deal with the supplier.
- HR
- Finance
- Marketing
- Operations
Describe the current technology internal factor.
Current Technology - refers to the technology that a business is currently using. This could be the software, hardware, equipment or machinery they are using.
If the current technology a business is using is outdated, it may lead to the following adverse effects:
• money is spent fixing the technology which could be used elsewhere, e.g. advertising;
• productivity is slower, which can delay customer orders;
• production may have to stop if machinery breaks down;
• staff may get frustrated working with out-of-date software as tasks may take longer.
Competitors using up-to-date technology can gain an advantage over a business using out-of-date technology as their tasks can be completed much more quickly.
Describe the Human Resources internal factor.
Human Resources - refers to all of the employees in a workplace
Human resources can provide good customer service to a customer, which can result in customers coming back to the business.
Human resources can provide poor customer service to a customer, which can result in the customer not coming back to the business and not recommending the business to family/friends.
If human resources are unhappy with their pay, pension or working conditions, they may undertake industrial action such as strikes.
Discuss the advantages and disadvantages to having a private limited company (LTD)
Advantages
Control of the company cannot be lost to outsiders.
Easier to raise money (loans, selling shares).
If the company fails, the investors in a limited company are protected by the rules of limited liability.
Disadvantages
Must be registered with the Registrar of Companies.
High set-up costs (legal and administrative)
Harder to motivate workers without shares.
Explain the influence of 3 external factors on an organisation.
Political: Increase in national living wage, increases wage costs of employees.
Environmental: bad weather can result in late deliveries.
Competitive: competitor changing prices, may also have to adjust prices.
Compare the objectives of a sole trader with those of a charity.
A sole trader wants to make a profit, whereas a charity wats to increase donations.
A sole trader wants to increase market share, whereas a charity wants to increase awareness of cause.
Both want to be socially responsible.
Describe a public sector organisation in terms of ownership, control and finance.
A public sector organisation is owned by the government.
A public sector organisation is controlled by elected officials such as MSPs and councillors.
A public sector organisation is primarily funded through taxation.
Describe a private sector organisation in terms of:
- ownership
- control
- finance
- Owned by private individuals
- Controlled by the owners or board of directors
- Funded through personal investment, loans and through the profits the business generates
Describe a third sector organisation in terms of ownership, control and finance.
A third sector organisation is not owned by any one particular individual.
A third sector organisation is controlled by a board of trustees.
A third sector organisation is usually funded through donations and fundraising activities.
