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cambridge igcse business studies > understanding business activity > Flashcards

understanding business activity Flashcards

1
Q

business activity def

A

the process of producing goods and services to satisfy customer demand

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2
Q

need def

A

a good or service essential to living

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3
Q

want def

A

a good or service that people would like, but that is not essential to living

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4
Q

needs examples

A

water, shelter, food

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5
Q

wants examples

A

phones, cars, holidays

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6
Q

economic problem def

A

unlimited wants cannot be met because there are limited factors of production. this creates scarcity

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7
Q

factors of production def

A

the resources needed to produce the goods and services - land, labour, capital and enterprise

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8
Q

land meaning

A

all natural resources such as minerals, ores, fields, oil and forests.

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9
Q

labour meaning

A

number of people available to work

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10
Q

capital meaning

A

machinery, equipment and finance needed for production of goods and services.

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11
Q

enterprise meaning

A

people prepared to take the risk of setting up a business - entrepreneurs

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12
Q

scarcity def

A

there are not enough goods and services to meet the wants of the population

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13
Q

opportunity cost def

A

the benefit that could have been gained from an alternative use of the same resource.

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14
Q

specialization def

A

people and businessees concentrate on what they are best at

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15
Q

division of labour def

A

production is divided into separate tasks and each worker does just one of those tasks.

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16
Q

consumer goods def

A

products which are sold to the final consumer. they can be seen and touched, for example computers and food.

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17
Q

consumer services def

A

non-tangible products such as insurance services, transport

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18
Q

capital goods def

A

physical goods, such as machinery and delivery vehicles, used by other businesses to help produce other goods and services

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19
Q

durable consumer goods

A

reuseable: tv, chairs

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20
Q

non-durable consumer goods

A

used once: food and drink

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21
Q

how can a brand increase added value

A

branding, service quality, product features, convenience

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22
Q

primary sector def

A

firms whose business activity involves the extraction of natural resources

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23
Q

business activites of the primary sector

A

farming, fishing, forestry, mining

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24
Q

secondary sector def

A

firms that process and manufacture goods from natural resources

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25
Q

business activities of the secondary sector

A

refining, manufacturing, construction

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26
Q

examples of the primary sector

A

rice, fish, wood, coal

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27
Q

examples of the secondary sector

A

food canning, furniture making, car manufacturing

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28
Q

teritary sector def

A

firms that supply a service to consumers and other businesses

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29
Q

businesses in the tertiary sector

A

shops, restaurants, banks

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30
Q

chain of production def

A

the production and supply of goods to the final consumer involves the activities from primary, secondary and tertiary sector businesses.

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31
Q

what is a LDC

A

less developed country

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32
Q

what is a MDC

A

more developed country

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33
Q

industrialisation meaning

A

the growing importance of secondary sector business activity and the reduced importance of primary sector business activity. the emerging economies of both china and india are good examples.

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34
Q

de-industrialisation meaning

A

the growing importance of the tertiary sector and the reduced importance of the secondary sector. the uk and the usa are good examples of this type of economic activity

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35
Q

if consumers have a higher income…

A

they will expect better quality and a wider choice of products
they have a better education and know they can buy goods from suppliers in a differet region or country through e-commerce
have more leisure time - increase in demand for leisure activites

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36
Q

mixed economy def

A

an economy where the resources are owned and controlled by both the private and public sectors.

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37
Q

private sector def

A

the part of the economy that is owned and controlled by individuals and companies for profit

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38
Q

public sector def

A

the part of the economy controlled by the state or government

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39
Q

in what sector do consumer choices play a large part in business decision-making and their choice of product

A

private

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40
Q

who makes the decision of what, how, and for whom in a public sector business

A

the government

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41
Q

if some consumers cannot afford products a private sector business will

A

do nothing

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42
Q

if some consumers cannot afford products a public sector business will

A

sell them at a lower price or provide them free of charge.

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43
Q

entrepreneur def

A

an individual who has an idea for a business takes the financial risk of managing a new business.

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44
Q

what ideas for enterprise might an entrepreneur have

A

new idea for good or service
offering an existing good or service in a way that has not been offered before
ofering an existing good or service in a new location

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45
Q

characteristics of an entrepreneur

A 
innovative
self-motivated and determined
self-confident
multiskilled
leaderhsip qualities
initiative
results driven
risk taker
good at networking
46
Q

busienss plabn def

A

a detailed written document outlining the purpose and aims of a business which is often used to persuade lenders or investors to finance a business proposal.

47
Q

revenue def

A

the amount a business earns frim the sale of its products

48
Q

contents of a business plan

A 
the business (workers,entrepreneur)
business opportunity
(market research)
the market
objectives of business
financial forecasts
49
Q

how do business plans assist entrepreneurs

A

persuade lenders
purpose and direction
objectives and financial forecasts

50
Q

when a business needs a new business plan for when it wants lenders or investors to provide finance what is it called

A

a corporate plan

51
Q

why are governments keen to help start ups

A

they provide jobs
increase the variety of products available
competition in the market will lead to lower prices and better quality
small busiensses often provide specalist goods and services to consumers and larger firms
some will expand to be the next large firm
smaller businesses often have lower costs

52
Q

business start up def

A

a newly formed business. they usually start small but some might grow to become much bigger

53
Q

most common types of government support for start ups

A 
grants/interest free loans
lower taxation rates
rent free premises for a period of time
free or subsidied training for workers
information, advice and support from specalist agencies
54
Q

capital employed

A

value of all the long term finance invested into the business. used to buy the things that a business needs before it can produce goods or services, e.g factory/office buildings, machienry and inventory

55
Q

can you use number of employees to measure business s size

A

yes but if one business has a lot of automation and fewer workers it will not be reliable.

56
Q

why would some businesses expand

A 
increased profits
larger market share
economies of scale
greater power to control the market
protection from the risk of takeover
57
Q

internal growth

A

increasing the number of goods it can produce, eg machinery
developing new products
finding new markets for products

58
Q

external growth

A

horizontal integration
forward vertical integration
backward vertical integration
conglomerate integration

59
Q

what is external growth

A

when a business merges or takes over another business in another industry. this is known as integration

60
Q

sole trader def

A

a business that is owned and controlled by just one person who takes all of the risks and all of the profits

61
Q

why would someone be a sole trader

A

make the decisions
decide their hours
have a business about their skills and interests.

62
Q

advaantage sof being a sole trader

A

quick and easy
complete control
small amount of start up capital
owner keeps all profit

63
Q

disadvantages of being a sole trader

A

risks losing personal wealth (unlimited liability)
often difficult to raise funds
difficult to compete with larhe firms
long hours to make a living
if they die or retire the busienss no longer exists

64
Q

start up capital def

A

the finance needed when firstr settign up a business

65
Q

partnershup def

A

a business formed by two or more people who will share responsibility for the day to day running of the business. partners usually invest capital into the business and will share profits.

66
Q

advantages of a partnership

A

greater access to finance
better dexcision making
management and runnign shared
easy to set up

67
Q

disadv of a partnership

A

unlimited liablity
must share profits
business decisions binding to all partners even if they dont agree
partnershuips often fairly small

68
Q

franchise def

A

a business system where entrepreneurs buy the right to use the name, logo and prodct of an existing business

69
Q

adv of franchises

A

less chance of failure

franchisor often prodes advice and training, and finance promotion, and checking the suppliers are good quality

70
Q

disadv of franchises (to franchisee)

A

inital cost is expensive
franchuisor takes % of profits every year
strict controls on what the franchisee can do
franchisee will have to pay for local promotions

71
Q

joint venture def

A

two or more businesses agree to wwork together on a project and set up a separate business for this purpose

72
Q

adv of joint ventures

A

reduces risk and cuts costs
each busienss brings different expertise
market and product knowledge can be shared

73
Q

disadv of joint ventures

A

mistakes damage the reputation of all the firms

clash of different business cultures or styles of leaderhip

74
Q

what is an unicncorporate dbusienss

A

one which does not have a seperate legal identity from its owners. owners legally responsible for activities of the business

75
Q

what is an incorporated business

A

it has a seperate legal identity form the oweners. owners not legally responsible for the activties of thebuseinss

76
Q

why would a business chose to change type of business organisation

A

reduce legal and financial risk
separate legal identity
to raise additional capital

77
Q

what does choosing the type of business to depend on

A 
number of owners
owners role in management of business
attitude to financial risk
how quickly the owners want to start operating
potential size of buisiness
78
Q

public corporation def

A

a business organisation that is owned and controlled by the state

79
Q

objective def

A

a statement of a specific target to be achieved. they should be smart

80
Q

what does smart stand for

A 
specific
measurable
achieveable and agreed
realsitic and releveant
time sepcifi
81
Q

different business objectives

A 
survival
profit
growth
market share
corporate social responsibility
82
Q

market share def

A

the revenue of a business expressed as a percentage of total market revenue

83
Q

corportate social responsibility def

A

busiensses taking responsibility for the impact their activities might have on society and the environemnt

84
Q

pressure group def

A

organizations of like-minded people who put pressure on businesses and governments to change their policies to reach a predetermined objectives

85
Q

social enterprise def

A

a busienss with social objectives that reinvests most of its profits back into the business or benefiting society at large

86
Q

stake holder def

A

an individual or gorup which has an interest in a business because they are affected by its decisions

87
Q

two types of stakeholder

A

exteral and internal

88
Q

types of internal stakeholder

A

owners/shareholders
managers
employees

89
Q

types of external stakeholder

A 
lenders
suppliers
customers
government
local commuinity
90
Q

objectives of a owner/shareholder as a stakeholder

A

to get high returns/dividends as a reward for risking investment
to benefit from an increase in share value

91
Q

objectives of managers as a stakeholder

A

to have job satisfaction and status

to recieve salary increases and bonuses

92
Q

objectives of employees as a stakeholder

A

to have job security

to receive a fair wage that reflects their contribution to society

93
Q

objectives of lenders as a stkaeholder

A

to get interest payments hwen due

to have borrwing repaid by the date

94
Q

objectives of suppliers as a stakeholder

A

to get prompt payments for goods supplied on credit

to be treated failry and not be forced to reduce their prices

95
Q

objectives of cusotmers as stakeholders

A

to get quality goods after sales ervive

to be charged a fair pruce

96
Q

objectives of governmetn as stakeholders

A

to be paid the correct amount of taxes on time

minimal spending on unemployment benefits

97
Q

objectives of local community as stakeholders

A

to get benefits for local economy such as employment and subsidising community facilities
avoid negative impact of business activities such as pollution

98
Q

public sector organizations benefits

A

accessible
affordable
open to all

99
Q

horizontal integration

A

two firms in the sam eindustry and same sector of business activity

100
Q

forward veritcal integration

A

two firms in the same industry but one is a customer of another

101
Q

backward vertical integration

A

two firms in the same industry, but one is a supplierr to the other

102
Q

conglomerate integration

A

two buisinesses in completely different businesses.

103
Q

reasons for business failure

A 
economic influences
poor planning
poor cash flow management
poor management skills
lack of objectives
failure to invest in new technologies
lack of finance
poor choice of location
poor marketing
competition
104
Q

unincorporated business def

A

a business that does not have legal identity seperate from its owners. owners have unlimitied liability for business debts

105
Q

unlimited liability def

A

if an unincorporated business fails, then the owners might have to use their personal wealth to finance any business debts.

106
Q

shareholder def

A

a person or organisaton who owns shares in a limited company

107
Q

private limited company def

A

often a small to medium sized company, owned by shareholders who have limited liability. the company cannot sell its shares to the general public

108
Q

public limited company def

A

often a large company, owned by shareholders who have limited liability. company can sell shares to general public

109
Q

ordinary shareholders def

A

the owners of a limited company

110
Q

limited liability def

A

the shareholders in a limited liability company which fails only risk losing the amount they have invested and not any of their personal wealth

111
Q

dividend def

A

a payment, out of profits, to shareholders as a reward for their investment

112
Q

collateral def

A

non current assests offered as security against borrowing

cambridge igcse business studies (6 decks)

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