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Business Management > Understanding Business > Flashcards

Understanding Business Flashcards

1
Q

What are goods?

A

Goods are tangible things you can see and touch.

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2
Q

What are services?

A

Intangible things which you pay for and experience but cannot see or touch - it is done by someone else.

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3
Q

What is capital?

A

The man made resources a business uses to produce a good or service – the assets of the business

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4
Q

What are some examples of capital?

A

tools, machinery and equipment

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5
Q

What are the 4 factors of production?

A

Capital, Enterprise, Land, Labour (CELL)

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6
Q

What is enterprise?

A

This is where the entrepreneur will combine all factors of production to create an innovative idea. They will use land, labour and capital to produce goods or services.

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7
Q

What is land?

A

This is all the natural resources a business uses to produce their goods and services.

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8
Q

What are some examples of land?

A

Plot of land, Coal, Diamonds, Wood, Oil, water

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9
Q

What is Labour?

A

The workforce of the business who produces the goods and services.

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10
Q

What are some examples of labour?

A

employees and managers

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11
Q

What is a need?

A

A need is something that you require to survive.

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12
Q

What are some examples of needs?

A

Food, Water, Shelter

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13
Q

What are wants?

A

A want is something that you desire but is not necessary for survival. It is something that you believe would enhance your life.

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14
Q

What are some examples of wants?

A

Phone, Laptop

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15
Q

What are the three sectors of industry?

A

Primary, Secondary and Tertiary

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16
Q

What is the primary sector?

A

Businesses in this sector take raw materials and natural resources from the ground

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17
Q

What are some examples of businesses in the primary sector?

A

farming, fishing.

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18
Q

What is the secondary sector?

A

Businesses in this sector make products.
They use raw materials from businesses in the primary sector and convert them into products

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19
Q

What are some examples of businesses in the secondary sector?

A

builders, bakers

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20
Q

What is the tertiary sector?

A

Businesses in this sector do not produce products. They provide a service.

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21
Q

What are some examples of businesses in the tertiary sector?

A

Shops, restaurants

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22
Q

What are the three sectors of economy?

A

Public, private and third.

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23
Q

Who owns businesses in the public sector?

A

Government

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24
Q

Who controls businesses in the public sector?

A

Managers appointed by the government

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25
Q

Who finances businesses in the public sector?

A

Tax

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26
Q

What do businesses in the public sector aim to do?

A

Provide a service to the public

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27
Q

What are some examples of businesses in the public sector?

A

NHS, Police Scotland

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28
Q

Who owns businesses in the private sector?

A

Private individuals e.g. shareholders

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29
Q

Who controls businesses in the private sector?

A

Private individuals/Board of Directors

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30
Q

Who finances businesses in the private sector?

A

Private investment, retained profit and bank loans

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31
Q

What do businesses in the private sector aim to do?

A

Make a profit

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32
Q

Who owns businesses in the third sector?

A

Private individuals,
members

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33
Q

Who controls businesses in the third sector?

A

Board of trustees, managers

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34
Q

Who finances businesses in the third sector?

A

Donations, fundraising, grants from the government

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35
Q

What do businesses in the third sector aim to do?

A

Benefit a social cause

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36
Q

What are some examples of businesses in the private sector?

A

ASOS, Waitrose

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37
Q

What are some examples of businesses in the third sector?

A

Shelter, Social Bite

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38
Q

What is unlimited liability?

A

the owner is responsible for all business debts

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39
Q

What is a sole trader?

A

A business owned by one person. Usually small in size e.g. hairdressers, butchers, electricians
Rely on their own savings, bank loans or loans from friends and family to finance their business.

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40
Q

What are some advantages of operating as a sole trader?

A

-Owner keeps all the profits
-Easy to set up: little legal requirements
-The owner gets to make all the decisions

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41
Q

What are some disadvantages of operating as a sole trader?

A

-The owner has unlimited liability
-The business has to close if the owner is ill/on holiday
-Hard to obtain finance
-Large workload as nobody to share decisions with

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42
Q

What is a partnership?

A

A business owned by 2-20 partners. Ownership, responsibility and profit all shared and agreed in a Partnership Agreement. Lawyers, estate agents, private doctor and dental practises often operate as partnerships.

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43
Q

What are some advantages of operating as a partnership?

A

-Partners can share the workload.
-Easier to obtain finance through partners
-Simpler to cover holidays and illness.
-Risks are shared.

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44
Q

What are some disadvantages of operating as a partnership?

A

-Profits are shared amongst partners.
-Chance of arguments or disagreements.
-Cost of drawing up a Partnership Agreement
-Partners have unlimited liability.

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45
Q

What is a partnership agreement?

A

an agreement that outlines the roles and responsibilities of the partners and also sets out important issues such as the split of profits, the decision-making process, and how to deal with retirements and appointments

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46
Q

What sector of economy do sole traders and partnerships come under?

A

Private sector

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47
Q

What is an Ltd (Private limited company)?

A

-The ownership of a limited company is divided up into equal parts called shares. Whoever owns one or more of these is called a shareholder.
-Shares are owned privately and are not available to the public on the stock market.
-There must be a minimum of one shareholder.
-Run by a board of directors.
-There is a legal requirement to publish annual financial statement

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48
Q

What are some advantages of operating as an Ltd?

A

-Owners maintain control of their business as they choose who to sell shares to - often supportive family members

-Easy to raise finance selling shares

-Shareholders have limited liability

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49
Q

What are some disadvantages of operating as an Ltd?

A

-Dividends must be given to shareholders

-The legal set up costs are expensive. Limited companies must use documents called Memorandum of Association and Articles of Association.

-Shares cannot be sold publicly

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50
Q

What sector of economy does an Ltd come under?

A

private sector

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51
Q

What are some different types of tax?

A

income tax
National Insurance
VAT
air passenger duty
fuel duty

52
Q

What is a social enterprise?

A

a business with social objectives but reinvests the profit they make into the cause they exist to support or the community

53
Q

Who owns social enterprises?

A

Social entrepreneurs

54
Q

Who controls social enterprises?

A

The entrepreneur

55
Q

What finances social enterprises?

A

retained profits, donations, fundraising

56
Q

What are some examples of social enterprises?

A

Social Bite, The Big Issue, The One World Shop

57
Q

Who owns charities?

A

trustees

58
Q

Who controls charities?

A

A board of trustees are elected

59
Q

Who finances charities?

A

Donations, government grants, fundraising

60
Q

What are charities objectives?

A

To help a social cause, to increase donations, survival

61
Q

What are some skills and qualities that entrepreneurs have?

A

Leadership, Communication, Determination, Risk-taking, Identifying a gap in the market, Marketing, Decision-making

62
Q

What is a skill?

A

an ability you can learn to be good at e.g. problem solving skills

63
Q

What is a quality?

A

a strong characteristic or attribute that a person possesses e.g. leadership qualities

64
Q

What are the 4 types of goods?

A

Capital, Consumer, Durable, Non-Durable

65
Q

What is a consumer good?

A

Goods consumed by private individuals

66
Q

What is a capital good?

A

Items that businesses own

67
Q

What is a durable good?

A

Goods which last a long time and can be re-used

68
Q

What happens once consumer needs have been met?

A

Once consumer needs have been met, we want thing to make life more comfortable and enjoyable

69
Q

What are the benefits of understanding consumer needs and wants?

A

To spot a gap in the market, To decide on the correct target market, To increase sales and profits, To grow the business

70
Q

What is wealth creation?

A

Adding value to a product during the production process

71
Q

What is a business plan?

A

A Business Plan is a written document that describes the core business objectives and how the business plans to achieve them over a set period of time.

72
Q

What is a business plan designed to do?

A

to help you, and others, understand how you plan to generate money and make your business sustainable

73
Q

Who looks at a business plan?

A

The government, to decide suitability for grants/planning permission. Investors/Venture Capitalists, to assess likely success. Banks, To assess the businesses ability to repay loans. Entrepreneurs, To make objectives clear.

74
Q

What is a mission statement?

A

It is a written summary (usually no longer than one page) and is displayed in the organisation’s reception area.

75
Q

What does a mission statement provide?

A

a statement of purpose for the business and is often referred to as a Mission Statement.

76
Q

What are the main aims of a business? (PPIGSS)

A

Provision of a quality service, Profit, Increase market share, Growth, Survival, Social Responsibility

77
Q

What types of organisations want to provide a service?

A

Public, Private and third

78
Q

Why do businesses want to provide a service?

A

Private and Social enterprises: good customer service
Public and charities: service for the community

79
Q

What types of organisations want make profit?

A

Private and Social enterprises

80
Q

Why do businesses want to make profit?

A

Private: so their business will be able to grow if it has increased retained profits
Social enterprises: want to maximise profits to have more money to help their cause

81
Q

What types of organisations want to increase market share?

A

Private sector-Large businesses

82
Q

Why do businesses want to increase market share?

A

Private: Increase sales so that they are the market leader. They can release a new product or increase promotion.

83
Q

What types of organisations want to grow?

A

Private and third.

84
Q

How do businesses grow?

A

Private: through increasing the number of shops, selling online, bringing out new products.
Charities: through raising awareness
Social enterprises: through both increasing sales and also raising awareness

85
Q

What types of organisations want to grow?

A

Private and third (usually smaller businesses)

86
Q

Why do businesses want to survive?

A

Private and social enterprises: have enough income from sales to cover costs.
Charity: aim to increase donations to cover costs.
(Public will aim to use taxes efficiently)

87
Q

What types of organisations want social responsibility?

A

Private, Public and third sector

88
Q

What is social responsiblity?

A

This is when a business aims to carry out its activities AND benefit society or the environment

89
Q

Why do business want social responsibility?

A

-Good reputation
-Customers are attracted by wanting to support an ethical business
-Good-quality employees may be attracted to an ethical business
-May be able to attract ethical investors

90
Q

What are the external factors that affect a business? (PESTEC)

A

Political, Economic, Social, Technological, Environmental, Competitive

91
Q

What does the political factor involve?

A

Tax: Government can raise or lower corporation tax (tax businesses pay) or value added tax on products

Laws: National Minimum Wage which impacts profits and employee rights, Health and Safety legislation so the business would have to pay for training

Political stability: Brexit the impact could be negative (loss of trade with EU customers), or positive (less restrictions e.g. Scottish fishermen)

Planning permission: If businesses which to expand they need to be granted planning permission from the government

92
Q

What does the Economic factor involve?

A

Recession: this is when the amount of money being spent on goods and services gets low and the products being sold decreases. This can lead to unemployment.

Unemployment: If unemployment is high, businesses have more workers to choose from, can keep wages down

Interest rates: This is the amount charged by the bank to borrow money. When they are high businesses borrow less.

Exchange rates: This is the price of one currency expressed in terms of another currency.

93
Q

What does the social factor involve?

A

Social influences are concerned with changing opinions, values and beliefs. These affect habits and spending of customers:

Demographics- birth rate, immigration, ‘ageing population’
Lifestyles- health conscious, veganism, electronics, flexible working practices
Tastes and trends- scrunchies, Vinyls, Loom Bands 2014, Prime drinks 2022

94
Q

What does the technological factor involve?

A

The way new developments in practices and equipment affect a business

ICT: Makes processes and equipment more efficient e.g. using apps to communicate
Research and Development: Using 3D printers, smartphones and apps to innovate new products
Automation: Machines replacing people e.g. self service machines, drones
E-commerce: Sell 24/7 worldwide

95
Q

What does the environmental factor involve?

A

Climate change: reducing the business’s carbon footprint e.g.using solar panels

Weather: seasonal changes can impact sales e.g. sale of suntan lotion increase in summer.
Bad weather or Natural disaster can cause disruption to supplies and production e.g. a snow storm can stop a lorry reaching the business

Increasing use of recycling: this will attract ‘Green Customers’

Decrease in Pollution: e.g. noise, traffic can improve a businesses reputation

96
Q

What does the competitive factor involve?

A

A competitor is another business who offers the same or similar products or services. A competitor may
Sell at a lower price
Locate near your business
Offer better quality/USP

The business may respond by
Lowering prices
Opening for longer hours
Running a promotion
Move to a new location

97
Q

What are the internal factors that affect a business? (HFC)

A

Human Resources, Finance, Current Technology.

98
Q

What impact do human resources have on a business?

A

The skills, experience and motivation of employees and managers can impact positively or negatively on a business.

99
Q

What are some examples of human resources factors that may positively or negatively affect a business?

A

Employees
Badly performing employees will result in inferior products being produced and a poor service being offered to customers. This will affect sales and the reputation of the business.

Managers
Inexperienced managers may make poor decisions which could result in missed opportunities or high staff turnover.

100
Q

Why does finance affect a business?

A

A business needs adequate funds in place in order for it to survive and grow successfully.

101
Q

If a business does not have available finance a business will not be able to..

A

Invest in advertising
Develop new products
Hire new staff
Expand their premises etc.

102
Q

Why does current technology have an impact on businesses?

A

Up to date technology ensures businesses are efficient, gives them competitive edge and increases sales opportunities e.g. online shoppers.
Out of date technology can lead to higher repair costs, poorer quality and loss of competitive edge.

103
Q

What does having current technology allow a business to do?

A

Using social media allows businesses to communicate with customers

Technology can also save on costs of traveling to meetings allowing staff to work from home.

104
Q

What is an internal stakeholder?

A

People or groups within the business with an interest in its success

105
Q

What is an external stakeholder?

A

People or groups outside the business with an interest in its success

106
Q

What are some types of stakeholders?

A

owners, shareholders, employees, banks, customers, suppliers, local community, pressure groups, local government, national government

107
Q

What interest do owners/shareholders have in a business?

A

make a profit
receive high dividends

108
Q

What is a dividend?

A

a reward, cash or otherwise, that a company gives to its shareholders

109
Q

What influence do owners/shareholders have on a business?

A

Make all the big decisions
investing or withdrawing equity into the business
change management

110
Q

What interest do managers have in a business?

A

get promoted
win bonuses
have job security

111
Q

What influence do managers have on a business?

A

hiring and firing
creating company policies
making day-to-day decisions and long term decisions

112
Q

What interest do employees have in a business?

A

job security
higher pay
improved working conditions

113
Q

What influence do employees have on a business?

A

increasing or decreasing productivity
providing good or bad customer service
in extreme cases, withdrawing their labour and going on strike

114
Q

What interest do customers have in a business?

A

quality products and services
low prices
value for money

115
Q

What influence do customers have on a business?

A

deciding whether or not to purchase the product or use the service
affecting an organisation’s reputation by word of mouth, reviews and social media

116
Q

What interest do the bank have in a business?

A

the organisation can pay their loans in full and on time

117
Q

What influence does the bank have on a business?

A

permitting or denying loan requests
changing interest rates on loans offered
changing repayment lengths

118
Q

What interest does the government have in a business?

A

Want businesses to pay corporation tax
create jobs and wealth for the population
provide goods and services for the population

119
Q

What influence does the government have on a business?

A

raising or lowering corporation tax
introducing or repealing laws that affect businesses
offering grants to attract firms to locate to depressed areas

120
Q

What interest do suppliers have in a business?

A

regular orders from their customers (the other businesses)
prompt payment

121
Q

What influence do suppliers have on a business?

A

raising or lowering prices of goods
changing credit terms
changing delivery times
increasing or decreasing the quality of their goods/materials

122
Q

What interest does the local community have in a business?

A

firms to bring jobs to the area
good, safe environment to live in
good transport and communication links

123
Q

What influence does the local community have on a business?

A

protesting and petitioning if unhappy at an organisation’s conduct
Boycotting the organisation

124
Q

How do businesses measure customer service?

A

Questions from staff
Mystery shoppers
Consumer Panel
Customer questionnaires
Review websites, social media

125
Q

How do businesses maximise customer service?

A

Offering advice about products and their uses
Investigating late or missing orders
Assisting when errors have been made to orders/deliveries
Managing refunds or replacement orders
Dealing with general enquiries and complaints
Being polite and friendly to customers

126
Q

Why is good customer service important for businesses success?

A

Enhances the organisation’s reputation

Good publicity from happy customers – bad experience will be spread through word of mouth

Regular repeat orders – loyal customers

Loyal customers means more sales and a bigger market share

Attract a better calibre of staff

127
Q

What is the negative impact of bad customer service?

A

Dissatisfied customers
Loss of customers
Bad publicity
Demotivated staff
High staff turnover
Increased costs
Bad reputation

Business Management (7 decks)

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