Unit 1 Flashcards
Why do businesses exist
To provide products/ services to satisfy customer needs & wants
To fill the gap in the market
Give 2 mission statements of successful businesses
google - to organise the world’s information and make it universally accessible and useful
amazon - to be earth’s most customer-centric company
coca-cola - to refresh the world and make a difference
what does SMART stand for
Specific, measurable, achievable, relevant, time-based
What two reasons do businesses set objectives for
- to coordinate business activity and give a sense of direction
- to give a common purpose to workforce so they have a more motivated and productive staff
What are the 4 common business objectives
Profit
Growth
Survival
Cash flow
Give 3 external influences on corporate objectives and decisions
Competition
Pressure from SH
Changes in consumer taste
Economic situation
Political and legal environment
What is the main objective for non-profit organisations
Focus on generating sufficient profit to reinvest into the business
What is the main objective of public sector organisations
Meeting social needs and providing essential services
What is the main objective of private sector organisations
Maximising profit for owners
What is the relationship between costs and price
An increase in costs means higher prices for consumers (this can lead to a fall in demand)
Give one reason why profit is important
-It’s a reward in exchange for the risk taken by entrepreneurs
-It’s a motivator
-it’s a measure of success
What are two ways to improve profits
-Increase sales revenue
-Decrease costs
Do unincorporated or incorporated businesses have limited liability
Incorporated
What type of businesses are unincorporated
Sole traders
Partnerships
What type of businesses are incorporated
LTD
plc
What are 3 advantages of sole trader companies
- less paperwork
- control of business decisions
- more earning potential
- easy/ cheap to set up
- privacy
What are 3 disadvantages of sole trader companies
- unlimited liability
- less customer trust
- limited skills
- limited capital for investment
- limited collateral for loans
What are 3 advantages of private limited companies (LTD)
- reduced risk of personal liability
- more tax efficient
- easier to access growth funds
- more flexible than plc
- higher business profile
What are 3 disadvantages of private limited companies (LTD)
- shares are less attractive
- have to share ownership
- higher setting up costs
- more legal formalities
- finance for expansion harder to raise than plc
What are 3 advantages of public limited companies (plc)
- limited liability
- easier to raise finance due to stock exchange
- greater scope for investment
- suppliers more willing to offer credit
- expansion opportunities
What are 2 disadvantages of public limited companies (plc)
- greater scrutiny
- founders may lose control is shareholding is less than 51%
- more regulations and compliances
What are 3 advantages of partnerships
NOT AQA
- different partners = different skills
- shared workload/ responsibilities
- banks more likely to lend money to an org w/ many partners than a sole trader
What are 3 disadvantages of partnerships
NOT AQA
- unlimited liability
- profit shared
- May not always agree on decisions
What is an advantage of franchising
- franchisee benefits from economies of scale
- franchisee gets a proven business system and training from franchiser
What is a disadvantage of franchising
- franchisee has to pay initial fee and ongoing royalties to franchiser
- franchisee may feel restricted by limitation placed by franchiser who monitors performance
What are 2 advantages of non-profit organisations (charities)
- limited liability
- tax exempt/ tax relief
What’s a disadvantage of non-profit organisations (charities)
- limited funding
Give 3 factors that affect the choice of business form
- the need for finance in order to expand
- the size of business and level of investment needed
- degree of control wanted by owners
- business objectives
- level of risk involved
Give 3 reasons shareholders invest
- to provide financial support
- to be involved in running of a business
- to gain control
- for dividends
- to make capital gain
Give 2 roles of shareholders
- to provide finance for a business
- to influence how a business operates
- to influence decisions taken by management
Name 3 factors that influence the supply and demand
- state of economy
- performance of company
- competition in market
- proposed takeover
- investors expectations & their response to rumours
What does PESTLE stand for
Political factors
Economic factors
Social factors
Technological factors
Legal factors
Environmental factors
Give 3 external factors influence cost and demand
- market conditions
- incomes
- interest rates
- demographic factors
- environmental issues and fair trade
Give 4 factors that influence demand
- price
- tastes and fashion
- competition
- substitutes
- seasonal factors
- marketing and advertising
- gov action
- complements
What are 2 disadvantages of competition
- when competition is based on price, quality is sacrificed in pursuit of low costs
- intense competition can lead to a business being forced out the market
What is fair trade
A certification system that aims to ensure standards are met in producing and supplying products, materials and ingredients
What are 2 advantages of fair trade
- a good wage system
- gives voice to small producers who previously had little bargaining power
- fair trade initiatives can protect vulnerable segments of the population
What are 3 disadvantages of fair trade
-expensive - may be out of reach for local entrepreneurs
-product choice reduced for consumers
-difficult to make sure abusive labour practices aren’t reintroduced after certification expired/ abandoned
-some reports show working conditions in fairtrade certified cooperatives is worse than non-certified
