Unit 1 Flashcards

1
Q

1.1 business

A

aims to meet the needs and wants of individuals
or organizations by combining human, physical,
and financial resources (1.1)

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2
Q

1.1 business activit

A

Resource inputs (human, physical, financial,
enterprise)–processes to add value
(production)–Product outputs (goods and
services) (1.1)

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3
Q

1.1 business
functions

A

human resources, finance and accounts,
marketing, operation (production) (1.1)

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4
Q

1.1 Role of Human
resources

A

Ensure: appropriate people are employed to
make the product or service and that the people
are suitably rewarded. Recruitment, training,
dismissal, determine compensation (1.1)

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5
Q

1.1 Role of Finance
and accounts

A

Ensure: appropriate funds are available. forecast
requirements, keep accurate records, procure
financial resources from various providers, and
ensure proper payment for operation (1.1)

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6
Q

1.1 Role of
Marketing

A

Ensure: business offers a product/service that is
desired by a sufficient # of people (operation is
profitable) Appropriate strategies to promote,
price, package, and distribute (1.1)

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7
Q

1.1 Role of
Operations
Management or
Production

A

Ensure: appropriate processes are used to make
product of desired quality. Control quantity and
flow of stock, determine method of production,
look for ways to produce more efficiently (1.1)

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8
Q

chain of production

A

the steps through the different sectors that must
be made to turn raw materials into a consumer
good that is marketed

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9
Q

corporate social
responsibility

A

business practice that involves participating in
initiatives that benefit society

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10
Q

horizontal
integration

A

a business acquiring or merging with another
business same line off business and same stage of production
–›increased market share

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11
Q

vertical integration

A

involve in earlier or later stages in the chain of
production either through acquiring other
business or internal growth

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12
Q

benefit of vertical
integration (6)

A

lower transaction cost, reliable supply, avoid
regulation, increasing market power (gain
flexibility in pricing), better promotion, eliminate
other business

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13
Q

sectoral change

A

size of each sector changes, change in
composition in economy–social technology
(social context supporting certain sectors to
grow)

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14
Q

impact of sectoral
change (5)

A

factor substitution, some businesses are obsolete,
strain on human resources, reallocation of finance,
demand for physical resources, environmental
impacts

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15
Q

business plan

A

set out how org will meet its objectives, applies to
specific period, include long-term and short-term
objectives, should be reviewed and updated,
detailed budget planning

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16
Q

purpose of business
plan (5)

A

support launch of new org or business idea;
attract finance; support strategic planning
provide a focus for development, work as a
measure of business success

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17
Q

element of business
plan (6)

A

business idea, aims and objectives (set out the
idea in a context: USP, how to develop
idea);business organization (location, structure,
type, decision-making, profit-sharing, legal
requirement to set up);HR (HR plan, type of
contract, responsibility and reward;finance (start
up capital, projected budgets, income statement,
cash-flow forecasts);marketing (market research,
sales forecast, 4P);operations (lead time, supply
chain)

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18
Q

Criteria for business type identification

A

the owner of the business, the runner of the
business, no legal distinction/limited liability,
close/less communication, access to finance,
privacy and accountability, start-up paperwork
and expense

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19
Q

benefit of sole
trader (7)

A

complete control, flexible working hours and
change, privacy, minimal formalities, close ties to
customer, fast decision-making, responsive to
change

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20
Q

disadvantage of
sole trader (7)

A

100% liability, stress and responsibility, lack of
continuity, limited growth, limited access to
finance, challenging competition in market, false
decision-making,

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21
Q

Partnerships

A

formed by 2~20 people, joint decision-making
owned and managed by more than one person,
no legal distinction, more finance, sleeping
partners, offer more varied service, greater
accountability, maybe don’t share profit equally

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22
Q

advantage of
partnership (5)

A

creativity and innovation, specialization and
division of labor, expertise, stability and lower
risk, continuity, more access to finance

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23
Q

disadvantage of
partnership (4)

A

slower decision-making and conflicts, not enough
access to finance, profit it shared, unlimited
liability

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24
Q

why become a
company? (5)

A

limited liability, enhanced status and recognition,
sell share to purchase capital, stability and
continuity, access to finance

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25
advantage of owning a share
share value may increase, receive dividend, limited liability
26
disadvantage of owning a share
share value may decrease, may not receive dividend, share can be diluted
27
Company
shareholders own, do not run; separate legal entity, business record are public (Memorandum of Association, Articles of Association), greater finance available, more accountability (Annual General Meeting, Extraordinary General Meeting)
28
advantages of company (6)
stability and continuity, access to finance, limited liability, enhanced status, possibility for growth, established organizational structure
29
disadvantages of company
set-up difficult and costly, sell shares may not be successful (risk), only partial control, loss of privacy, no control over stock market and buyer of shares, decision-making slow and irresponsive
30
for-profit social enterprise
business that has a social purpose, profit not priority (not maximized), aims to improve human, social, or environmental well-being, no compromise
31
Cooperative
form of partnership whereby the business in owned and run by all the "members", member participate actively
32
types of cooperatives (5)
financial; housing; worker's; producer; consumer
33
financial cooperative
social aim takes precedence over profit, lower interest rate, provide cheaper service, lower the standard to give loans
34
housing cooperatives
provide housing for members, surplus reinvested, social harmony, member follow rules
35
worker's cooperatives
no salary to managers, employment of workers is priority, often no dividend
36
producer cooperatives
collaborate in stage of production, maximize utilization of capital, enjoy economy of scale
37
consumer cooperatives
consumer pay lower price as members
38
Public Private Partnership
collaboration between business and community, greater democracy and transparency, same function, profit not priority
39
advantage of PPP (3)
favorable legal status, strong communal identity, benefits to stakeholder community
40
Disadvantage of PPP (3)
decision making is complex and slow, insufficient capital for growth, insufficient financial strength
41
nonprofit social enterprise
generate surplus; NGO and charities
42
charities
rely on donations, unclear ownership and control, exempt from tax
43
advantage of NPOs (4)
CSR, foster philanthropic spirit in community, foster informed discussion. innovation
44
disadvantage of NPOs (3)
lack of control but intense lobbying, employees may act inappropriately for good means, irregular funding
45
vision statement
forward looking, speak to long-term aims and highest aspirations, less specific, guiding principle
46
mission statement
more grounds in the aims of accomplishing objectives to achieve the mission
47
difference between vision and mission statement
concept, purpose (future or present) audience (inspire internally, bind external stakeholders;define accountability, measure success), no change
48
three types of objectives
strategic, tactical, operational
49
strategic obj
medium- and long-term objective set by senior managers to guide company determines the actions necessary to achieve the goals and mobilises resources to execute the actions. (affects: whole company) How will the goals/aims be achieved by the resources?
50
tactical obj
medium- and short-term objectives set by middle managers to achieve strategic objectives, affects department
51
operational
day-to-day objectives set by managers or workers to reach tactical objectives as efficiently as possible affects teams
52
hierarchy of objectives
increasingly specific in content, increasing quantity, follow the organizational hierarchy,
53
SMART
specific, measurable, achievable, relevant, time- specific
54
business strategy
plan to achieve a !strategic objective! in order to work towards the aims of the business (when. what, where, why)
55
business strategy involves? (4)
where, planning, implementation, evaluation of process
56
business tactic
plan to achieve tactical objective to work towards the strategies of the business, short-term, changeable, achieve measurable target,
57
reason to change objectives (6+7)
internal: leadership, HR, organization, product, finance, STEEPLE
58
why set ethical objectives
building up customer loyalty, create positive image, positive working environment, reduce risk of legal redress, satisfy customer's ethical expectations, increasing profits (access to finance)
59
impact of implementing ethical objectives
business itself (reaction or resistance to change), competitors, suppliers, customers, local community, government
60
why SWOT analysis
help business set objective through identification of SWOT
61
4 strategies using SWOT
S+O growing, W+T defensive, W+O re-orientation, S+T defusing
62
why Ansoff Matrix
help business plan and set objectives
63
what do aims do?
direct, control, review
64
how to enforce aims (3)
appropriate strategies, resource used correctly, review constantly
65
common objectives (5)
profit maximization, growth, increasing market share, CSR, maximizing shareholder value
66
market penetration,
e+e, increase market share, 4P and marketing
67
key factor to succeed in market penetration (3)
growth potential of the market, strength of customer loyalty, power and ability of competitors
68
market development
look for new markets for existing product, identify clientele base, e-commerce
69
to success in market development (3)
effective market research, local knowledge, effective distribution
70
to reduce the risk of product development (3)
market research, strong R&D system, first mover advantage
71
risk of diversification (2)
lack of familiarity in market, untestedness of products
72
to succeed in diversification (4)
market research, diligent testing (both the market and the cost of entry), recognition from existing business, possible tie-ups
73
economies of scale
reduction in average unit cost as a business increases in size
74
diseconomies of scale
increase in average unit cost as a business increases in size
75
internal economies of scale (6)
technical, managerial, financial, marketing, purchasing, risk-bearing
76
external economies of scale (2)
consumers, employees
77
internal diseconomies of scale
technical, managerial, financial, marketing, purchasing, risk-bearing
78
external diseconomies of scale
employees
79
advantages of being a small business (5)
greater focus, greater cachet, motivation, competitive advantage (personalized service), less competition
80
advantages of being a big business (5)
survival, economies of scale, higher status, market leader status, increased market share
81
entrepreneurship and intrapreneurship
entre: an individual who demonstrates enterprise and initiatives in order to make a profit; intra: an individual employed by a large org who demonstrates entrepreneurial thinking in the development of new products or service
82
Innovation
1. market reading; 2. need seeking; 3. technology driving
83
stakeholders
an individual or group who has an interest, often financial, in the activities and success of an organization
84
internal stakeholders include
shareholders, CEO, senior managers, middle managers, foreman and supervisors, employees and unions
85
external shareholders include
government, suppliers, customers, local community, financiers, pressure groups, media
86
stakeholder analysis
in: owners, managers; middle: suppliers, employees, consumers, financiers; outer: gov, community, media, pressure groups
87
power-interest model
minimal effort, keep informed, keep satisfied, key players
88
Micro-financier
idea by Muhammad Yunis: provide small amount of finance to those who traditionally don't have access to.
89
Vision statement dleffinition
a philosophy, vision, or set of principles which steers the direction and behavior of an organization
90
primary sector
engaged in farming, fishing, oil extraction and all other industries that extract natural resources so that they can be used and processed by other firms
91
secondary sector
firms that manufacture and process products from natural resources, including computers, brewing, baking, clothing and construction
92
tertiary sector
provide services to consumers and other businesses, such as retailing, transport, insurance, banking, hotels, tourism and telecommunications
93
Quaternary sector
subsector of tertiary sector: focused on information technology (IT) businesses and information service providers
94
Reasons to start up a business
rewards, independence, necessity, challenge, interest, finding a gap, sharing an idea
95
steps of starting up a business
organize the basics-›researching the market-›plan the business-›establish legal requirement-›raise finance-›test the market
96
problems that a new business may face
organization (eg. bad location, registered name, unsuitable structure); market research (eg. inappropriate target, too optimistic, weak channel of communication); bad business plan; vague goal, finance.
97
NGO
social enterprises aiming to support a socially desirable cause; not organized by government
98
charity
a specific form of NGO whose aim is to provide as much relief as possible for those in need; focus on philanthropy
99
advantage of charity (4)
help people or causes in need; foster a philanthropic spirit in the community; foster informed discussions in the community about allocation of resources; fosters innovation;
100
disadvantage of charity (4)
unclear ownership; lack of control and intense lobbying; employees' passion and zeal that ill serve the org; irregular funding
101
CSR
the concept that all businesses have an obligation to operate in a way that will have a positive impact on society.
102
franchise
An original business, known as the franchisor, that developed the business concept and product, then sells to other businesses (franchisees) the right to offer the concept and sell the product
103
in franchising, franchisors provide
stock, fittings, uniforms, staff training, legal and financial help, global advertising, global promotions
104
in franchising, franchisees-
employ staff, set prices, set wages, pay royalty, create local promotions, sell franchisor's products, advertise locally
105
adv of franchise for franchisees (5)
established brand and product; established format of selling; reduced set-up costs, secure supply of stock; legal, financial, technical help
106
disadv of franchise for franchisees (5)
unlimited liability, pay royalties; no control over product, no control over supply, no global decision-making
107
adv of franchise for franchisors (4)
quick access to larger market, makes use of local knowledge; no risk/liability; more profit from royalty
108
disadv of franchise for franchisors (2)
lose some control; image may suffer if franchise store fails
109
impact of globalization (4)
increased competition; greater brand awareness; skill transfer; closer collaboration
110
reasons for the growth of multinational companies (4)
improved ICT; dismantled trade barriers; deregulated global financial market; Increasing economic and political power of the multinational companies
111
MNC's + impact on host countries (4)
economic growth; new ideas; skill transfer; product variety; short-term infrastructure projects
112
MNC's - impact on host countries (4)
MNC avoid local tax; loss of cultural identity; loss of domestic talent to MC in other countries; domestic companies lose market share; MNCs may quickly shift overseas for cheaper resources available
113
types of growth(2)
internal (organic), external (inorganic, fast-track)
114
Internal growth
occurs slowly and steadily, out of existing operations of the business, lower risk, slower, selling more products/ developing product range, self-financed using retained profits
115
external growth
quick and riskier, entering into an arrangement to work with another business
116
types of external growth (4)
M&A, joint venture, strategic alliance, franchise
117
Merger
two businesses become integrated by joining together and forming a bigger combined business
118
acquisition
one business taking over another
119
takeover/hostile takeover
when an acquisition is unwanted by the company being acquired
120
M&A integration (4)
horizontal integration, backward and forward vertical integration, conglomeration (diversification)
121
why conglomeration?
1. reduce overall corporate rick;2. have complementary seasonal activity
122
ADV of integration (4)
economies of scale, innovation of combined HR control up or down the chain of production, complementary activity
123
disadvantage of M&A (3)
costly (legal fees), culture clash, risk
124
joint venture
two business agree to combine resources for a specific goal over a finite period of time; separate business created by two parent businesses
125
adv of joint venture (3)
increased sales, shared skills and expertise, does not lost legal existence or identity,
126
disadv of joint venture (2)
shared profit, conflict
127
strategic alliance
businesses collaborate for a specific goal, can be 2+ businesses, no new business created, independent, more fluid (membership)
128
disadv of strategic alliance (4)
more businesses make coordination of agreement more difficult, no legal existence-›less force extant, no economies of scale, lacks stability
129
internal stakeholders include (6)
shareholders, CEO, senior managers, middle managers, foreman and supervisors, employees and unions
130
external shareholders include (8)
government, suppliers, customers, local community, financiers, pressure groups, media, (competitors)
131
power-interest model
minimal effort, keep informed, keep satisfied, key players
132
sole trader
An entrepreneur who owns the entire business and received 100% profit.
133
Examine the potential problems that Subway may face as a result of its planned rapid expansion.
The following are examples of potential problems for Subway as a result of its planned rapid expansion. Liquidity problems can occur where working capital is "squeezed to the limit" in order to sustain rapid rates of growth. This will jeopardize a firm's ability to meet its short-term liabilities. Coordination of human resources may become too complex as spans of control widen. Managers may not be able to keep up with the pace of change and productivity could start to suffer. Diseconomies of scale will result. Linked to this point are the problems of maintaining consistent and effective communication across operations leading to further diseconomies of scale. However, the planned rapid expansion will provide opportunities for Subway (as we saw in concept 1: Globalization). Subway is currently the largest franchised organization in the world and further expansion would bring considerable opportunities in global marketing and economies of scale (financial and risk bearing). The interview with the CEO of Operations in unit 4.7 indicates that Subway would be able to take advantage of local entrepreneurial spirit and motivation (especially in potentially very large markets such as India). Judgment Even as Subway grows and sales revenues rise inevitably, the impact of the first three points combined is that direct costs could rise and ultimately the increased sales activity may not be translated into increasing profitability. With rapid expansion, it is important to keep a close eye on the key financial ratios (outlined in units 3.5 and 3.6) to detect potential diseconomies of scale. However, it would appear that, given Subway's significant growth to date, it has been able to manage this change successfully.
134
Enterprise
Enterprise: the entrepreneur develops a business idea, and then organises other resources to carry out the business activity.
135
Unicorponated business
Unincorporated businesses businesses where there is no legal distinction between the owner of the business and the business itself-everything is carried out in the name of the owners (e.g. sole traders and partnerships)
136
Incorporated business
Incorporated businesses businesses that have a separate legal entity from their owners (e.g. private limited companies and public limited companies
137
Ltd.
-private limited companies
138
PLC
Public limited company
139
Deed of partnership
Legal document, which states each partner's' rights in the event of a dispute.
140
Ltd advantages
Advantages • Limited liability. • No limit on the number of owners. • Shares can only be sold privately. • Better decision making. • Easier to raise additional funds.
141
Ltd disadvantages
Disadvantages • Profits have to be shared among much larger number of members. • Setting up business takes time and it's costly. • Company's financial accounts are public. • No member has full control of the company. • Firms are not allowed to sell their shares to the public.
142
PLC advantages
Advantages • Shares can be sold to the public. • Limited liability. • Easier to raise loans from banks. • Because of their size, they can dominate the market.
143
PLC disadvantages
Disadvantages • Setting up business takes time and it's costly. • Company's financial accounts are public. • Less able to offer personal services to their customers. • Risk that an outsider take control of the company.
144
Pressure groups
Pressure groups circles of people that attempt to influence decision makers in politics, business and society (e.g. Greenpeace, which aims at exposing global environmental issues)
145
PPC
Public-private cooperation (PPC) occurs when the government creates a commercial partnership with the private sector to provide certain goods or services (e.g. government school project that is managed by a private consortium)
146
Business aim
Business aims define the firm's purpose and long-term goals, often expressed in the mission statement
147
Relationship between aim and objectives
Aim → strategic objective → tactical objective → operational objective
148
CSR aims to
• treat customers and suppliers fair and equally; • compete fairly (i.e. not engaging in predatory pricing); • treat the workforce with dignity and listening carefully to their needs.
149
Technical economies of scale
Technical Increasing the size of the units of production decreases costs.
150
Managerial EOS
Managerial Managers can specialize in doing one particular job rather then attempting to do several different tasks at the same time - every manager can do better by focusing on an aspect of the business they know the most about /are the most interested in.
151
Financial EOS
Financial Larger firms have an advantage over small firms when it comes to raising finance.
152
Marketing EOS
Marketing Larger firms can have bigger and effective marketing campaigns. They are able to spread their advertising budget over higher output.
153
Purchasing EOS
Purchasing Larger businesses can get discounts when purchasing their inputs through bulk buying as they have a higher bargaining power.
154
Internal growth definition
A business grows by using its own resources to increase the of operation
155
External growth definition
Business grows by collaborating with buying up, or merging with another firm.
156
Backward vertical integration
Different stages of production, merger with previous stage of production