Unit 1 - 1.1 What is a Business? Flashcards
Stages of the production process
Inputs → processes → outputs
Types of inputs into production process
4 Factors of Production:
* Capital
* Enterprise
* Land
* Labour
4 functions / processes of a business
- Human resources
- Finance and accounts
- Marketing
- Operations management
Types of outputs
Goods and services
Human resources
Manages the personnel of the organisation
* their concerns, flaws
* works on hirement, promotion and lay off
Examples of HR work (name 3)
- workforce planning
- recruitment
- training
- appraisals
- dismissals
- rebundancies
Finance and accounts
Manages the organisations money
* record and report financial documents
* concerned with spending and saving of financial reserve
Why must finance and accounts record and report financial documents? (2)
- to comply with legal requirements (e.g. tax)
- to inform stakeholders such as shareholders and potential investors of the activity of the firm
Marketing
Responsible for identifying and meeting the needs and wants of customers
* works on promoting the business and attracting customers
The 7 Ps of marketing
- Product
- Price
- Place
- Promotion
- People
- Processes
- Physical evidence
Operations management
Responsible for the process of converting raw materials into components and finished goods
* also applies to providing services
Sectors of the economy
- Primary
- Secondary
- Tertiary
- Quaternary
Primary sector (name 3 examples)
Involved in the extraction, harvesting and conversion of natural resources
* agriculture
* fishing
* mining
* oil extraction
Secondary sector (name 3 examples)
Businesses involved in the manufacturing and construction of products
* breweries
* bottlers
* publishing firms
Tertiary sector (name 3 examples)
Businesses specialise in providing services to the general population
* retailing
* transportation
* distribution
* healthcare
Quaternary sector (name 3 examples)
Involved in intellectual, knowledge-based activities that generate and share information
* information communications technology
* research and development
* consultancy services
The chain of production
Links all the production sectors by tracking the stages of an item’s production from the extraction of materials until it is being delivered
1. Extraction
2. Manufacturing
3. Services
4. Consumers
Added value
The increased utility of a product which simultaneously increases its price
Entrepreneurs
An individual who plans, organises and manages a business, taking on financial risks in doing so
Characteristics of entrepreneurs (name 4)
- Taking substantial risk
- Having a vision for the business
- Rewarded with profit
- Responsibility for the employees
- Failure may result in personal costs
Opportunities for starting up a business
GETCASH
* Growth
* Earnings
* Transference and inheritance
* Challenges
* Autonomy
* Security
* Hobbies
How is growth an opportunity for a start up business?
There can be an appreciation in the value of the assets of the business (such as land or buildings) known as capital growth
* this has potential to be worth more than owner’s salaries
How are earnings an opportunity to start up businesses?
Owners of businesses can earn excess salaries than from any other occupation they might pursue working for someone else
How does transference and inheritance give opportunities to start up businesses?
Could be cultural norm for entrepreneurs to pass business to the next generation which secures the future of this younger generation
How is challenge an opportunity for start up businesses?
Many people view the setting up and running of a business to be an enjoyable challenge that motivates them
How is autonomy an opportunity for start up businesses?
Autonomy allows independence, freedom of choice and flexibility to the owner which to many is highly attractive as it allows control over their work
How is security an opportunity for a start up business?
Self-employment offers more job security than working for an employer
* it is easier to increase personal wealth for financial security in retirement
How are hobbies opportunities for a start up business?
Some people want to pursue their passion and turn their hobby into a business
Challenges for starting up a business? (10)
- Lack of finance
- Unestablished customer base
- Cash flow problems
- Marketing problems
- People management problems
- Production problems
- Legalities
- High production costs
- Poor location
- External influences
How is lack of finance a challnege to starting up businesses?
Most owners of new or small businesses do not have the credentials to secure sufficient funcding
* may have to take loans which destabilise the security of the business in case of failure
How does an unestablished customer base challenge a start up business?
It is difficult for new businesses to attract customers due to their foreignity and underdeveloped marketing in comparison to their competitors
How do cash flow problems pose challenges to start up businesses?
When the amount of money going out of the business outweighs the cash coming in resulting in difficulties with liquidity
How do marketing problems create challenges for starting up businesses?
The business may fail to meet consumer demand and satisfaction due to their inexperience in promotion and distribution. This can result in poor sales and profitability
How can people management problems create challenges in start up businesses?
Lack of experience in hiring the correct people with the right skills can lead to poor levels of labou productivity
* they may need to retain or rehire people which can be expensive and time consuming
How are production problems challenges to start up businesses?
They may not be able to accurately forecast levels of demand and can under or overproduce
* underproduce: dissatisfied customers, loss of potential sales
* overproduce: stockpiling, wastage and increased costs
How do legalities pose challenges for start up businesses?
They need to comply with necessary documentation (such as business registration procedures)
* New businesses may not be familiar with such documentation and not be able to complete it
Gymshark - case study (opportunities)
Made at 19 in 2017
* initially made website and did custom made products
* marketing through influencers
* made tracksuit that shot up business
* did expo with lot of ppl
* now an international business
McDonald’s - Iceland case study (challenges)
As a result of financial crisis in 2008
* collapse of major banks in Iceland = economic instability
* fall in exchange rate led to huge increase in import prices
* small population (300,000) meant limited customer base
* to remain profitable = raised Big Mac prices by 20%
* mismanagement of company = highly indebted due to loans from foreign banks
* overtaken by competition from KFC
Huda Kattan
- quit job in finance to become makeup artist
- started business with sisters when she couldn’t find false lashes
- makes around $250 million annually from cosmetics
Rihanna
- discovered by Jay-Z as a teenager
- starte career as a musician before starting clothing and beauty line (Fenty)
- became a billionaire in 2021
