understanding business activity Flashcards
scarcity
there are not enough products to fulfil the wants of the population
Opportunity cost
another alternative given up by choosing the next best alternative
specialisation
people and a business focus on what they are best at
division of labour
production is splint in different tasks and each worker performs one of these tasks
factors of production CELL
-capital-the finance and equipment needed to make products
-enterprise-the skill of the person who brings other factors of production together to make goods
-land- all resources provided by nature
-labour - the no. of people to make the products
how to increase added value
-increase the selling price of product and keep the total cost of materials the same
-decrease the total cost of materials and keep the selling price of the product the same
added value
how much more a business sells a product for than the total cost of materials
added value= selling price-total cost
mixed economy
primary- extracts an uses the natural resources to produce raw materials
-secondary-takes the raw materials and converts them into manufactured goods
-tertiary-n providing services to consumers and other sectors
public sector
owned by the government, government will make decisions on what and how to produce
private sector
businesses not owned by the government
Entrepreneur
person who organises, operates and takes risk to make the business better
-hard working
-risk takers
-optimistic
-effective communicators
-self confident
-independant
-creative
business plan
contains business objectives, important details about the operations finance and other owners
Government support for startups
-reduce unemployment
-increase competition
-increase output
-grow further and increase GDP
business size
-the number of people employed in the business
-the value of output of the business
-the value of sales
the total value of capital invested into the business
marketing
Targeting a larger audience
economies of scale
factors that lead to a reduction in average costs as a business. grows
purchasing
when businesses buy in bulk so they get cheaper prices
managerial
big businesses can afford specialist managers
external growth
when the business takes over or merges with another business
financial
bigger businesses get better interest rates from banks as they are less risk
internal growth
when there business expands its existing operations
types of external growth
-horizontal
-vertical
-conglomerate
Vertical integration
firm taking over/merging with another firm in the same industry but different stage of production
horizontal integration
-firm taking over/merging with another firm in the same industry
Conglomerate merger
firm merging/taking over another firm in different industry AKA diversification
sole trader
business owned by just one person
-no need for capital
-unlimited liability
-no one to discuss business matters
-unincorporated
-they are their own boss
-relationships w/ customers
-
why business fails
-poor management
-failure to plan for change
-poor money management
-over-expansion
-competition
why businesses grow
-higher profits
-more status for owners and managers
-can benefit from lower costs
-larger share of its market
diseconomies of scale
-poor communication
-low morale
-slow decision making
partnership
2 or more people
-requires a partnership agreement
-easy to set up
-more capital invested
-partners are motivated because any losses are shared by partners
-unlimited liability
-unincorporated ;partener dies partenership dies
private limited company
- it can sell shares
-incorporated
-articles of association
-memorandum of association
public limited company
-shares can be sold to the public
-difficult to set up legal formalities
-dangers of being taken over due to public shares
business objectives
-survival
-generating profit
-return shareholders
-growth of business
-market share
-service to community
joint venture
two or more businesses start a project together sharing capital risk and profits
-profits are shared
-disagreements over important decisions
-risks are shared
-costs are shared
franchise
agreement of a business based upon and existing brand
stakeholder
-person with a direct interest in the performance of a business
-internal and external shareholders
