Unit 1 Flashcards
1.1 - 1.4
Goods
Physical products that can be purchased e.g. cars, phones, books
Services
Products that meet a need/demand e.g. dog-walking, gardening and insurance
Products
Something produced or supplied by a business
What makes businesses important?
- Businesses can create wealth
- New products created
- Businesses employ people
- Businesses improve national status
Small businesses and Large businesses
Small businesses are companies with less than 50 employees and large businesses have more than 250 employees.
Capital
Goods that are made in order to produce other goods and services e.g. machinery, lorries.
Enterprise
Bringing other factors of production together for creation, decision making and finance.
Land
All natural resources for production e.g. coal, oil, livestock
Labour
Physical and mental effort involved in production
Primary Sector
Extraction of raw materials from the earth e.g. mining, farming and fishing.
Secondary Sector
Transforming raw materials e.g. manufacturing
Tertiary Sector
Service industry e.g. retail, restaurants and hotels.
Aims
Long term statement of what the business wants to achieve
Objectives
Precise goals that work towards the aims
Common business objectives
- Survival during early years or difficult markets
- Sales growth and profit growth
- Expansion e.g. more stores, products and staff or going international
- Improving cash flow
- Increasing market share
- Increasing shareholder value
- Diversification
Why set up objectives?
- Clear guidelines
- Co-ordinates business activity
- Motivates workers to succeed
- Emphasises what time and money should be spent on
Revenue and Total Revenue
Revenue = Money received from sales
Total Revenue = Selling price x items sold
Fixed costs
Doesn’t change directly with output levels e.g. rent and salaries
Variable costs
Changes directly with output levels e.g. raw materials
Total costs
= Total fixed costs + Total Variable costs
Profit
Difference between total revenue and total costs
Why is profit important?
- Can be reinvested into the business
- Attracts new investors
- Helps to obtain investments and loans
- Pays taxes
Mission Statement
A qualitative statement of an organisation’s aims to describe general purpose.
Wants
Desired products that people could live without
Needs
Products essential for survival
Private Companies
Owned by founders or other private owners for their own financial gain. Provides the vast majority of products used.
Public Companies
Provides publicly shared goods and services for the public’s benefit and are typically non-for-profits. E.g. NHS, libraries and education
Entrepreneur
Someone who builds a business for themselves based on an idea.
PESTLE Analysis
- P - Political - Government’s control and influence over the economy or industry e.g taxation.
- E - Economic - Directly impacts a company’s long term position in a market. The economy can affect how a company prices products.
- S - Social - Culture has impacts on peak buying times, buying habits and lifestyle choices. E.g media, religion, preferences and opinions.
- T - Technological - Tech innovations may affect markets and/or consumer choices e.g automation.
- L - Legal - Can affect policies and regulations e.g employment laws, consumer protection.
- E - Environmental - Physical environment and environmental protection requirements e.g climate, location, climate change and weather.
Factors that influence product demand:
- Price. If increased, consumers will be more careful in decision making and may look for cheaper alternatives.
- Tastes and fashion. Changes in this affect demand so businesses monitor industries closely for consumer trends.
- Marketing and advertising. Campaigns by a business increases product/service awareness and therefore increases demand.
- Seasonal factors. Time of year and weather affects demand e.g scarves are not in high demand in summer.
Factors of Competition and their impacts on cost and demand:
- Investment in new equipment and technology. Can reduce costs and reduce prices which increases demand.
- Improvements in operational procedures. Increases efficiency, cuts costs, and is more competitive.
- Effectiveness of the marketing mix. Meeting and exceeding customer needs increases demand and competitiveness.
- Innovation through research and development. Increased demand as customers will want the latest trends/technology.
- Financial planning and control. Lowering costs and monitoring expenditure.
- Quality procedures. By managing production quality at each stage, it becomes more competitive as reduced costs and wastage.
- Staff skills, education and training. Increased competitiveness as they become industry experts.
- Incentive schemes for staff. Improves workforce motivation resulting in more productivity, less absences and lower turnover rates
Sole Trader
- A business owned and ran by a single individual.
- Can employ as many people as they want.
- No legal processes to startup and has to declare profits to HMRC.
- Gives the owner more freedom and complete control of all aspects of the business.
- Cons: Harder to gain finance, limited range of skills, high workloads, high interest rates on loans due to increased risks of failure.
- Unlimited liability: Owner of a business is liable for all debts that the business may face.
Public Limited Company
- A business with limited liability.
- Must haves: Shared capital of minimum £50,000. 2 Shareholders. 2 Directors. A qualified company secretary.
- Company has ‘PLC’ after its name.
- Company’s value is known as its market capitalization, which is the total issued share of a PLC. (Current share price x number of shares issued).
- Shares are traded publicly on the stock exchange.
Private Limited Company
- A small to medium sized business, often run by a family or small group of owners.
- Shares can’t be sold without other shareholders agreeing and are sold to private individuals, often invited by the company to invest.
- Shareholders are rewarded by share value increasing and receive dividends which are shares in the company’s profit distributed equally.
- Has a separate legal identity from the owners (limited liability).
- Company has ‘LTD’ after its name.
- Accounts have to be filed at Companies House and are unavailable to the public.
Non-Profit Organisations
- Established for social, communal, environmental, cultural or welfare aims and objectives and not for financial gain.
- Any profits reinvested into the business.
- Operates under different legal structures like charities.
Public Sector Organisations
Owned and run by the government with the main objective to provide services to the public e.g NHS.
Private Sector Organisations
Owned and run by private individuals with the main objective to maximise sales and profit e.g Tesco, Apple, Ford, JD and McDonalds.
Shareholders
Owns a share in the organisation they invested into and can have a say on how the business is run by voting on key issues.
Share Price Influences
- New products or takeover bids.
- Company’s performance and demand.
- Expected company’s future performance.
- Press, magazines, stockbroker reports and websites.
Real Incomes
Amount of disposable income available to consumers. Affected by: Inflation, wage growth, employment levels, interest rates and tax policies.
Key environmental business issues:
- Sustainability
- ‘Green’ supply chain
- Minimising packaging.
- Promoting policies
- Complying with laws
- Carbon emissions
- Waste disposal
Target Audience/Market
The customer at whom a product is aimed, this can be defined by
numerous parameters such as age, gender, etc.
Nationalisation
This is the act of a government purchasing and controlling a business,
typically ‘for the benefit’ of the people of the country, examples include
the NHS and the BBC in the UK
Gross Domestic Product (GDP)
A measure of the total value of all production by the economy
of a country
Liquid Assets
Something of value to a business which can easily be
traded for legal tender (cash).
Diversification
A business varying or expanding the range of their production offering.
