Unit 1 Flashcards
entrepreneur
an individual who plans, organizes, and manages a business, taking on financial risks in doing so
business
a business is a decision-making organisation involved in the process of using inputs to produce goods and/or services
consumer goods
physical and tangible goods sold to the final consumer e.g food, TV’s
consumer services
non-tangible products that are sold to final consumers e.g insurance, hotel accomodation
capital goods
physical goods used by industry to aid in the production of other goods and services e.g machines, vehicles
functions of a business
- operations
- finance and accounts
- marketing
- human resources
functions of HR
manages personnel of the organisation
- workforce planning
- recruitment
- training
- health and safety
- dismissals
- redundancy
functions of finance and accounts
- manages organisations’ money
- accurate recording and reporting of financial documents must take place to:
+comply with legal requirements (taxation laws)
+inform stakeholders (shareholders and potential investors
functions of marketing
- responsible for identifying and meeting the needs and wants of customers
- seven P’s of marketing:
product
price
place
promotion
people
processes
physical evidence
functions of operations
- responsible for the process of converting raw materials and components into finished goods
- process of providing services to customers
factors of production
land: everything that provides us with raw materials, e.g raw materials and site for building
labour: manual and skilled labour making up the workforce: skilled, unskilled, temporary, permanent
capital: finance needed to start up and run the business: finance, machines, factories, office
enterprise: risk-taker, decision-maker, coordinator
primary sector
businesses engaged in the extraction of natural resources to be used and processed by other firms e.g
farming, fishing, oil extraction
secondary sector
businesses that manufacture and process products from natural resources, e.g furniture, brewing, baking, clothing and construction
tertiary sector
businesses that provide services to consumers and other businesses e.g insurance, transport, hotels
quaternary sector
businesses in this sector are involved in intellectual, knowledge-based activities that generate and share information
challenges for new businesses
- production problems
- poor location
- lack of finance capital
- legal issues
- marketing problems
- poor cash problems
- external economic issues
- high production costs 1
opportunities for starting new businesses
Growth
Earnings
Transference and inheritance
Challenge
Autonomy
Security
Hobbies
business plan
a business plan is an official document that describes a business, its objectives and its strategies, the market it is in and its financial forecasts
private sector
business owned and controlled by individuals or groups of individuals
public sector
organisations accountable to and controlled by the state
mixed economy
economic resources are owned and controlled by both the private and public sectors
free-market economies
economic resources are owned largely by the private sector, with little state intervention
command economy
economic resources are owned, planned and controlled by the state
privatisation
the sale of public sector organisations to the private sector
sole trader
a business that is exclusively owned by one person who has full control of it and is entitled to all of the profit
partnership
a business formed by two or more people to carry on a business together, with shared capital investments and usually shared responsibility
limited liability
the only potential loss a shareholder has if the company fails is the amount invested in the company, not the total wealth of the shareholder
unlimited liability
if the company fails the owners risk losing the amount that they have invested into the company as well as personal wealth
private limited company
usually a small to medium sized company where the owners have limited liability and a separate legal identity from the business, owners can sell shares to friends and family not the general public
public limited company
usually a medium to large company where the owners have limited liability and a separate legal identity from the business, owners sell shares to the public on the stock exchange
social enterprise
a business with social and/or environmental objectives that reinvests most of its profits into benefiting society rather than maximising returns to owners
social entrepreneur
a person who establishes an enterprise with the aim of solving social problems or achieving social change
charity
an organisation set up to raise money to help people in need or to support causes that require funding
triple bottom line
the three objectives of social enterprises: economic, social, environmental
public corporation
a business enterprise owned and controlled by the state, also known as a public sector enterprise
cooperative
a group of people acting together to meet the common needs and aspirations of the members, sharing ownership and making decisions democratically
non-profit organisation
any organisation that has aims other than making and distributing profit, usually governed by a voluntary board
non-governmental organisation (NGO)
a legally constituted body that functions independently of any government and that has a specific humanitarian or social purpose
added value
the difference between the cost of purchasing raw materials and the price that the finished goods are sold for
mission statement
a statement of the business’s core aims, phrased in a way to motivate employees and to stimulate interest from outside groups
vision statement
a statement of what the organisation would like to achieve or accomplish in the long term
corporate aims
long term goals which a business hopes to achieve
business objectives
short or medium term specific goals which must be achieved in order for an organisation to attain its overall corporate aim
market share
sales of the business as a proportion of total market size, in a given period
shareholder value
the financial gains received by the owners of a company’s shares
strategic objectives
a long-term target for the whole organisation, designed to achieve the corporate aim
tactical objective
a short-term target aimed at resolving a particular problem or meeting a specific part of a longer-term objective
ethics
moral guidelines that determine decision-making
stakeholders
people or groups of people who can be affected by ay action taken by an organisation and therefore take an interest in its decisions
corporate social responsibility (CSR)
the responsibility that a business takes for the impact of its actions on stakeholders and the environment
social audit
an independent report on the impact a business has on society. this can cover pollution levels, health and safety records, sources of supplies, customer satisfaction, and contribution to the community
SWOT analysis
form of strategic analysis that identifies and analyses the main strengths and weakness of the business and opportunities and threats faced by the business
STEEPLE analysis
a form of strategic analysis of the macro-environment in which a business operates
ansoff matrix
model used to show the degree of risk associated with four growth strategies
market penetration
achieving higher market shares in existing markets with existing products
product development
the development and sale of new products or developments in existing markets
market development
strategy of selling existing products in new markets
diversification
process of selling different, unrelated goods or services in new markets
stakeholder concept
the view that businesses and their managers have responsibilities to a wide range of groups, not just shareholders
internal stakeholders
- employees
- managers
- shareholders
external stakeholders
- banks and lenders
- suppliers
- customers
- the government
- pressure groups
- competitors
acquisition
when a company buys at least half of the shares of another company and becomes the controlling owner with the agreement of the existing owner
merger
an agreement by shareholders and managers of two businesses to bring both businesses together under a common board of directors with shareholders in both businesses owning shares in the newly merged business
takeover
when a business wishes to acquire another company but this is opposed by that company’s managers, “hostile takeover”
synergy
the concept that following a merger or acquisition the combined value and performance of two businesses will be greater than the sum of the separate individual businesses
internal growth
expansion of a business by means of opening new branches, shops or factories, also known as organic growth
scale of operation
the maximum output that can be achieved using the available inputs
internal economies of scale
reductions in the average costs of production that result from an increase in the scale of operations of a business
external economies of scale
reductions in the average costs of production of a business that result from a growth of the industry
internal diseconomies of scale
factors that cause average costs of productions to rise when the scale of operation of a business is increased
external diseconomies of scale
factors causing unit costs for a business to rise as an industry expands, especially in a given region
external growth
business expansion achieved by means of merging with or taking over another business, either from the same or a different industry
horizontal integration
integration with a business that is in the same industry and at the same stage of production
forward vertical integration
integration with a business that is in the same industry but a customer of the existing business
backward vertical integration
integration with a business that is in the same industry but a supplier of the existing business
conglomerate integration
merger with or takeover of a business that is in a different industry
joint venture
two or more businesses agree to work closely together on a particular project and create a separate business division to do so
strategic alliance
an arrangement between businesses in which each agrees to commit resources to achieve an agreed set of objectives
franchise
a business that uses the name, logo, and trading systems of an existing successful business
multinational company
business organisation that has its headquarters in one country but with operating branches, factories and assembly plants in other countries
emerging market economy
a country with an economic system which results in low to middle income per head of population
globalisation
the growing interaction and integration between markets, businesses, people and governments worldwide
