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Higher Business Management > Understanding Business > Flashcards

Understanding Business Flashcards

1
Q

Explain wealth creation

A

Created by a business by adding value.

When the final value of goods + services provided in the UK is added up it is known as the Gross domestic product (GDP)

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2
Q

Benefits of wealth creation

A
  • Jobs created - reduces unemployment
  • Other businesses keen to invest
  • Infrastructure improved + roads + transport links
  • Because of reduced unemployment, demand for goods + services increases as does the standard of living
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3
Q

Costs of wealth creation

A
  • Volume of non-renewable resources can decrease
  • Too much demand for goods + services can cause inflation
  • Greenfield sites are lost
  • Businesses can have environmental impact on a country or specific location
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4
Q

Types of business organisations

A

Private:

  • Sole traders
  • Partnerships
  • Public + private limited companies

Public:

  • National government
  • Local government organisation

Third:

  • Non profit making organisation
  • Social enterprises
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5
Q

Public limited company

A

Ownership - Shareholders

Control - Board of directors

Liability - Limited

Financed - Selling items on stock exchange

Advantages - Take advantage of economies of scale because of size and large amounts of capital can be raised by selling shares

Disadvantages - Financial statements have to be produced annually and no control over who buys shares in the company

Objectives - Maximise profits and sales

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6
Q

Private limited company

A

Ownership - Private individuals

Control - Board of governors

Liability - Limited

Financed - Issuing shares, borrowing loans

Advantages - limited liability, set up costs decreased and legal process is simpler

Disadvantages - Profits shared among shareholders

Objectives - Maximise profit and sales

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7
Q

What is a franchise

A

A person who starts a business and provides a product or service supplied by another business

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8
Q

Advantages for franchisee

A
  • Can begin trading in the new established reputation of the franchiser immediately - reduces failure
  • Franchiser will offer training and business support and advice
  • Franchiser is likely to advertise nationally saving the franchisee money
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9
Q

Disadvantages for franchisee

A
  • Requires significant capital investment to set up
  • A percentage of the revenue is paid to the franchiser
  • Franchiser may impose strict rules on the franchisee and restrict the ability to operate on their own initiative - can be demotivating
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10
Q

Advantages for franchiser

A
  • Gain a larger gain market share without spending large amounts of money
  • Earns a percentage of franchisees revenue each year
  • Risks and uncertainties are shared between franchisee and franchiser
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11
Q

Disadvantages for franchiser

A
  • Reputation of whole business is dependant on the success of individual franchisees
  • Time and recourses are devoted to support franchisee
  • Only a percentage of the franchisees revenue goes to the franchiser which could be lower than what the franchiser earns themselves
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12
Q

Name the sectors of industry and explain them

A

Primary - Extraction of raw materials from the ground
Secondary - Manufacturing and assembly of goods. Take raw materials and transform them into a tangible finished product.
Tertiary - Provide a service, an intangible product.
Quaternary - Knowledge based and info service, concerned with innovation, research and development.

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13
Q

Explain horizontal integration

A

Two businesses providing the same service, or producing the same product, join together.
Allows to gain market share and grow bigger and reduce the no. of competitions in the market.

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14
Q

Explain Vertical integration

A

When businesses in the same industry, but who operate different stages of production, join together.

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15
Q

Explain backward vertical integration

A

Taking over a supplier.

Should have sufficient supplies available at reasonable prices.

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16
Q

Explain forward vertical integration

A

Taking over a customer

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17
Q

Explain diversification

A

Two businesses that provide different goods and services join together. Aka conglomerate.
Reduces risk of failure by operating in more than one market and allows profit to be obtained in more than one market.

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18
Q

Explain takeover

A

One large business takes control and ownership of a smaller business

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19
Q

Explain merger

A

Two businesses of about the same size agree to become one.

Allows sales and market share to increase

20
Q

Explain organic growth

A

When the business increases the number of goods and services it offers or increases the no. of branches / outlets and employees that it has.

21
Q

Explain deintregation / demerger

A

When a business splits into two or more separate businesses

22
Q

Explain divestment

A

When a business sells off some of its assets or smaller parts of the business to raise finance

23
Q

What is corporate culture

A

The values, beliefs and norms relating to the organisation that are shared by all staff

24
Q

How can a business created a strong corporeal culture?

A

They can create symbols or logos that customers recognise
Make staff uniforms consistent throughout the organisation
Develop policies for dealing with customers
Merchandising products linked to the organisation

25
Q

How is a corporate culture communicated?

A 
Staff training 
YouTube videos 
Uniform 
Social events 
Company events 
Honouring employees
26
Q

What are the external factors that affect a business?

A 
Political
Economic 
Social
Technological 
Environmental 
Competition
27
Q

Influence that external factors can have on a business

A

Political - A change in, or introduction of, a new law. this may reduce restrictions on trade and allow the business to gain greater sales and profit
Economic - Changes to economic policies by the government. This may restrict the ability of banks to lend money which may cause cash flow problems.
Social - changes in fashion trends and taste. A business can take advantage of new opportunities by producing products that customers demand, increasing sales.
Technological - new piece of technology becomes available. Technology can be expensive to purchase and maintain, which could result in less profit
Environmental - changes in weather. Depending on a certain product, the temp may increase demand, increasing sales.
Competition - competitor introducing a new product. Gives customers a wide range of products to choose from.

28
Q

Definition of internal and external stakeholder

A

Internal:
People inside the business who are interested in influencing its activities because it affects them in some way. - employees, managers, owners.
External:
People outside the business who are interested in influencing its activities because it affects them in some way - government, banks, customers, suppliers, the local community.

29
Q

Definition of interdependence

A

When someone internal or external in a business are dependent on each other

30
Q

Example of conflict between owners and employees

A

Owners want to pay employees low wages to maximise profit whereas employees want high wages to have a high standard of living.

31
Q

Different types of decision making

A

Strategic - long term, made by senior managers, concern the overall objectives and direction of business. Example - to expand into a new country
Tactical - Medium term, made by middle managers (Head of department), concern to achieve the strategic decisions of the business. Example - to bring out a new product
Operational - short term, made by junior managers, concern the day to day activities of the business. Example - training, working hours.

32
Q

What are the main functions of management

A 
Planning 
Organising 
Controlling 
Co-ordinating
Commanding
Delegating 
Motivation

(POCCC DM)

33
Q

How can a manager evaluate if a decision has been effective?

A
  1. Check to see if objectives have been reached
  2. Look at financial info
  3. As employees - they’re implementing decision
  4. Ask customers
34
Q

Why do senior managers make strategic decisions?

A
  1. More skilled + experienced
  2. Have an overview of entire organisation
  3. Have significant knowledge of the market they operate
  4. High up in business
35
Q

Political influences on a business

A
  • A change in, or introduction of, a new law.
  • A change in amount of tax to be paid
  • New gov targets to protect environment
36
Q

Economic influences on a business

A
  • No. Of people unemployed
  • Change in interest rate
  • Changes to economic policies by gov
37
Q

Social influences on a business

A
  • Changes in fashion trends and taste
  • Changes in demographics
  • Increase in no. of family friendly arrangements employers need to offer
38
Q

Technological factors influencing a business

A
  • New piece of technology

- Growth of s - commerce

39
Q

Environmental influences on a business

A
  • Changes in weather

- Increased pressure to recycle

40
Q

Competition influences on a business

A
  • New competitor entering market

- Competitor introducing new product

41
Q

Explain POGADSCIE

A 
P - Identify the problem 
O - Identify the objectives 
G - Gather information 
A - Analyse information 
D - Devise possible solutions 
S - Solve the problem 
C - Communicate the decision
I - Implement the decision 
E - Evaluate effectiveness
42
Q

Definition of Multinationals

A

A business that has operations in more than one country.

They have a home country and subsidery offices

43
Q

Advantages of multinationals

A
  • Health and safety legislation may be more relaxed in other countries - don’t have to spend as much to comply with them = decreased costs
  • Access to a larger market, can sell products in countries they operate = increased sales
  • Lower labour costs in some countries, especially in developing countries due to lower costs of living = decreased costs
44
Q

Disadvantages of multinationals

A
  • Different cultures and language barriers can cause problems in communication = slower decision making - lower productivity.
  • Lots of different legislation to comply with in each country - time consuming and expensive to lay lawyers
  • Changing exchange rates between countries can cause problems in calculating costs and profits may lead to wrong decisions being made
45
Q

Discuss the use of customer grouping (4)

A

Advantages:
- Understand needs and wants of the customer better leading to higher customer satisfaction - repeat sales

  • Relationship can be developed between the business and the customer - brand loyalty - repeat sales
  • Can respond to changes in the external environment quicker

Disadvantages:
- Expensive due to duplication of resources

  • If the contact leaves: loss of continuity
  • Need to create new grouping for new customer = expensive due to staffing/ resources

Higher Business Management (5 decks)

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