Unit 1 Flashcards
What should a business consider when setting up?
Is there a business opportunity?
How will the business be financed?
What is required to get the business up and running?
What legal aspects have to be considered?
What products or services will be sold and to whom?
What is a supplier?
A business that sells and supplies products to another business
What is production?
Using raw materials, labour and machinery to make products
What is a customer?
A person or organisation that buys the product or service
What is a consumer?
The person that uses and consumes the product
What is the market?
Where buyers and sellers meet to exchange goods and services
What are most customer needs based on?
Good quality Good product range Convenient location Good customer service Fair price
What is primary research?
Also known as field research it is collecting data that did not exist before.
This first-hand contact with customers is valuable to the business in understanding the market
What is secondary research?
Also known as desk research it is collating data that already exists
How is primary research collected?
Survey
Focus groups
Observation
Questionnaires
How’s secondary research collected?
Internet sites Sales data Local newspapers Market reports Government statistics
What are the benefits and drawbacks of primary research?
Benefits: More accurate Up-to-date Specific to the needs Direct customer contact
Drawbacks:
Time-consuming
What are the benefits and drawbacks of secondary research?
Benefits:
Quicker
Effective are collecting quantitative data
Drawbacks:
More general
Everyone can access this data
What is qualitative data?
Information about opinions, judgements and attitudes
What is quantitative data?
Data that can be expressed as numbers and statistically analysed
What is a business?
An organisation whose purpose is to produce goods and services to meet the needs of customers.
A business might produce its own goods or buy them from a supplier and sell them to customers.
Why is market mapping used?
It helps to identify market segments and position their products through identifying gaps in the market.
A market map can help position and compare products in a market
What’s a market segment?
A group of buyers with similar characteristics and buying habits e.g. Gender.
What does market segmentation allow?
To meet specific customer needs To differentiate their products To focus on a specific group of customers To target marketing activity Develop own unique brand image To build a close customer relationship
How can a business compete
By offering... High quality Better design Better product features Stronger brand image Better after sales service Wider product range More enjoyable experience
What is a brand?
I named products that customers do you see as being different from other products and that they can associate or identify with.
What’s added value?
The increased worth a business creates for a product.
The difference between what a business pays it’s suppliers and the price that is able to charge for the product.
This can be done by lowering costs or adding something which makes customers willing to pay a higher price.
How can value be added?
Branding Improve quality Better design USP More convenience Greater speed
The higher the added value, the quicker costs can be paid off and the quicker profits are made
What are the benefits of setting up as a franchise?
Having an established brand name with a good reputation Higher chance of survival National advertising and promotions Ongoing support Training
Disadvantages of starting out as a franchise
Expensive start up costs
Royalty payments
Lack of control
What are the three main enterprise skills?
Risk taking
Showing initiative
Willingness to undertake new ventures
What is enterprise?
Another word for business
Or
The ideas and initiatives involved in starting a new business. They may provide goods or services.
What’s deliberate creativity?
Intentional creation of new ideas through recognised and accepted techniques e.g. Creating lists, mind mapping, brainstorming, combining things, making it bigger/smaller.
What’s blue skies thinking?
Coming up with as many ideas as possible out of the blue to solve a problem.
What’s lateral thinking?
Thinking differently to try to find new and unexpected ideas e.g. By using De Bono’s size thinking hats.
What questions should they ask?
Why do I want to start my business?
Why should I change?
Why not set up a website business?
What’s a patent?
Right of ownership of an invention, design or proves when it’s registered with the government.
What’s copyright?
Legal ownership of material such as books, music, films etc which prevents these being copied by others.
What are trademarks?
The logo, symbol, sign or other features of a product or business that cannot be copied by others.
What’s invention?
Identifying new products, processes or new ways of making products.
What’s innovation?
Bringing an invention to the market
What’s a calculated risk?
Putting a numerical value or probability on a risk and the likelihood of it coming true.
Weighing up the risks and rewards of a new business idea is important in judging the outcome and viability of a start up.
What are mind maps?
A method of getting ideas onto paper when thinking ahead, planning the paper and trying to identify new opportunities.
What are OTHER enterprise skills?
Planning Drive Thinking ahead Determination Seeking opportunities
(Please Don’t Trip Down Stairs)
What are financial and non financial objectives of starting a business?
Financial: Survival Profit and income Wealth Financial security
Non financial:
Personal satisfaction
Independence and control
Helping others / social enterprise
What are entrepreneurial qualities?
Planning - identifying a direction and plan of action for the business
Initiative - being pro-active and getting a job done
Taking risks - entrepreneurs are risk takers since they invest their own time and capital
Determination - being resilient when things go wrong
Persuasion - being able to convince customers, suppliers and banks
Leadership - sharing vision, employing and leading others
Luck
How do you calculate revenue?
Revenue = selling price * quantity sold
What are fixed costs?
Costs which do not vary with the output produced by a business output
E.g. Salaries and business rates
What are variable costs?
Costs which vary directly with the output of the business
E.g. Raw materials and labour
How are costs calculated?
Variable costs = cost per unit * quantity produced
Total costs = variable + fixed costs
How’s profit/loss calculated?
Profit = revenue - total costs
What is profit?
When revenues of a business are greater than it’s total costs.
If a business’s costs are greater than revenues, it makes a loss.
Profit isn’t cash flow
How can profit be increased?
Lower variable costs
Lower fixed costs
Increase sales price
Increase quantity of sales
Why is profit important?
It’s needed to survive, reinvest profits, give incentives to start a business, provide security, reward employees and generate wealth.
Making a loss can result in being: Unable to repay loans Unable to pay bills and wages Experiencing cash flow problems Unable to survive
What’s a cash flow forecast?
It predicts how cash will flow through a business over time.
It can identify cash flow problems.
What’s cumulative cash flow?
The sum of cash flow over time
What are cash inflows?
Money from owners
Bank loans
Cash from sales
What are cash outflows?
Wages Raw materials Interest on loans Advertising Bills
What’s opening and closing balance?
Amount of money in the business at the start and end of the month.
What is the result of insolvency? (Debt)
The inability to: Pay debts Repay bank loans Pay wages to employees Buy raw materials and products to sell Promote the business
What’s a business plan?
Plan for development of a business giving forecasts of items such as sales, costs etc.
Within a business plan there's: An overview Objectives Market research Personnel Finances Production
What’s the purpose of a business plan?
Convince a bank to loan the business money Forecast financial projections Identify customer needs Market research Produce a plan of action
What are long term sources of finance?
Share capital (for limited traders) Personal savings Venture capitalists (external investors (Dragons den)) Grants Loans Mortgages Retained profits Leasing (renting)
What is ‘selling shares’?
A share is a part-ownership in a business. A limited company can sell shares to potential investors to raise capital.
These are called shareholders.
What are short term sources of finance?
Bank overdraft Trade credit Factoring (receiving cash immediately from a factor e.g. Bank rather than being paid) Credit cards Trade credit/delayed payment
What’s the marketing mix?
The analysis of product, price, place and promotion
How’s the product of the marketing mix impacted?
The product itself has to meet the needs of customers and have correct attributes a d features that customers want.
How’s the place of the marketing mix impacted?
How the product is distributed / how it gets to consumers.
They must consider how (online or through retail)
How’s the promotion of the marketing mix impacted?
Communication between the business and customer that makes the customer aware of its products: Advertising Sales promotion Public relations Sponsorship
What’s the price of the marketing mix impacted?
It must reflect the value customers place on the product.
High quality goods have higher prices.
What’s unlimited liability?
When the owner is legally responsible for any debts of the business therefore there’s potential for the owner to lose personal belongings to pay of debts
What’s limited liability?
When the owners and the business are separate legal entities. Any debts incurred by the business belong to the business and the owners can only lose up to the amount they’ve invested.
About sole traders:
Unlimited liability
100% control over decisions
100% profits kept
More privacy
About private limited companies:
Limited liability
Control depends on proportion of business sold as shares
Profits shared proportionally
Accounts are filed and can be viewed by everyone
Why have a legislation?
So the government tracks activity
So taxes can be collected
To protect the businesses from illegal activity
To protect customers from illegal business practises
What are the taxes on small businesses?
VAT - value added tax, tax on the value of sales. Businesses that sell more than a certain amount register to pay VAT
NIC - National insurance contributions, tax on earning of workers and sole traders linked to state benefits.
Corporation tax - a tax paid by limited companies on the profits of the company
Income tax - tax on income by workers
Examples of good customer service:
Dispatching orders quickly 100% accuracy on orders Offering excellent after sales care Providing a personal service Being convenient Being polite and friendly Responding quickly to complaints
Benefits of good customer satisfaction
Repeat purchases Loyalty Businesses can charge a premium price Good reputation Differentiation
What documents are used in the recruitment process?
Job description
Job advert
Application form
What causes shortage and surplus?
Shortage: high demand, low supply
Surplus: low demand, high supply
What factors are likely causes to result in the rise in price of cocoa?
Higher demand by chocolate manufacturers
Poor weather leading to a poor harvest of cocoa
News reports suggesting health benefits from cocoa
When would a business have to pay interest?
On top of it’s repayments for a loan.
On any amount which is overdrawn.
What’s the result of a rise in interest rates?
It will INCREASE the cost of borrowing.
Businesses on a variable interest rate may struggle to repay loans
Small businesses are less likely to borrow money to start up or expand
Customers spend less as borrowed money costs more
What’s the result of a fall in interest rates?
It will DECREASE the cost of borrowing
Businesses will have more money to spend
Businesses may borrow money for a start up or expansion
Customers spend more as they’re likely to borrow more and spend their money
What’s SPICED?
Strong Pound Imports Cheaper Exports Dearer (more expensive)
What’s WPIDEC
Weak Pound Imports Dearer Exports Cheaper
How are exchange rates calculated?
£ to foreign (multiply by exchange rate)
Foreign to £ (divide by exchange rate)
Effects of a fall in the value of the pound
Sales (exports) increase
Tourism increases
People buy more UK goods
Import costs rise (bad)
Effects of a fall in the value of the pound
Sales (exports) decrease
Tourism decreases
People buy fewer UK goods
Import costs fall (good)
What’s the business cycle?
Fluctuations in the level of economic activity over time.
Businesses are affected differently - a business selling essentials won’t be affected the same way a business selling luxuries would be.
What’s economic activity?
The amount of buying and seeking that takes place between businesses and consumers in a period of time.
If this rises, it’s known as economic growth.
What are the stages of the business cycle?
Boom - strong increase in economic activity
Slowdown / downturn - economic activity begins to slow
Recession - negative economic growth
Recovery / upturn - economic activity begins to rise
What are the impacts of a boom?
Businesses invest and expand
Businesses take on more employees
Sales increase
Consumers borrow and spend more
Consumer and business confidence high
What are the impacts of a downturn or recession?
More likely to experiment cash flow problems
Businesses save and cut back in spending
Businesses may make some employees redundant
Sales fall and prices may be cut
Consumers borrow and spend less, they prefer to save
Consumer and business confidence low
Identify 3 effects on a small business of a downturn in the business cycle?
Low demand owing to business closures
Lower prices on goods bought from suppliers
Lower fixed costs due to lower interest rates
Who are stakeholders to a business?
Managers Workers Customers Competitors The local community Government Suppliers Owners/shareholders
Cantwells is a business the makes zips for clothing. It decides to make 5 workers redundant.
Which one of the following is most likely to benefit from this decision?
A) suppliers and the business because they will now sell more zips to Cantwells
B) the local community as there will be more spending in local stores
C) government as it will collect more tax
D) owners as their costs will fall
D
How can a recipe idea be protected from being copied?
By using a copyright
Copyright is for an idea
A patent is for a product.
What documents could a candidate submit when applying for a job?
Covering letter (CV)
Application form
Curriculum vitae
What’s the least important factor when decides where to locate a business?
Supplies
Legislation protects workers from which type of discrimination?
Age
What laws are found within business?
National minimum wage
Anti discrimination
Sales of goods act
Trades description
Health and safety legislation
