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Business > UNIT 1 - BUSINESS ACTIVITY > Flashcards

UNIT 1 - BUSINESS ACTIVITY Flashcards

1
Q

What is the definition of a need?

A

Needs are required by individuals to survive, such as water and food.

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2
Q

What is the definition of a want?

A

Wants are items that an individual would like to have but are not needed for survival, such as a phone or a car.

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3
Q

What is the definition of an entrepreneur?

A

A person who takes a risk in starting up and running a business enterprise.

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4
Q

What is the definition of a good?

A

A possession that is tangible, made by a business and sold to a customer.

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5
Q

What is a service?

A

Something that a business does for customers either for money or out of kindness.

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6
Q

What does it mean by spotting an opportunity?

A

The ability to see a gap in the market and to recognize the need for a particular good/service.

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7
Q

What are the qualities of an entrepreneur?

A

Determined, Leader, Risk taker, Confident, Hard working.

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8
Q

What are the skills of an entrepreneur?

A

Planning, financial skills, marketing and product skills, and administrative skills.

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9
Q

What is the definition of calculated risk?

A

When an entrepreneur knows they are going to make a loss but plans to try and minimize the effects of it on the business.

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10
Q

What are motives of an entrepreneur?

A

Need a flexible work schedule, More control over working life, Feel that skills are being wasted and potential is not being fulfilled.

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11
Q

What is the definition of a business plan?

A

A simple plan that sets out details of the product/service and explains where the finance will come from, how it will be marketed, and contains financial forecasts.

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12
Q

What are the advantages of a business plan?

A

Helps gain outside investment from banks, Reduces risk, Identify resources needed, Gives employees a sense of direction.

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13
Q

What are the main parts of a business plan?

A

The business idea and its unique selling point, Objectives and aims, Target market, Competitors.

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14
Q

What are the disadvantages of a business plan?

A

Takes time as it needs constant updating of the business’ activities. Sales might be overestimated and costs might be underestimated.

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15
Q

What are the main types of ownerships?

A

Sole trader, Partnership, Limited companies - PLC’s and Ltd’s.

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16
Q

What is the definition of a sole trader?

A

A business owned by one person who has the sole responsibility of the business and the decisions.

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17
Q

What are the advantages of being a sole trader?

A

Easy and quick to set up in something you enjoy, Owner has complete control over the business, Owner keeps all the profits.

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18
Q

What are the disadvantages of being a sole trader?

A

Limited skill set, Unlimited liability, Difficult to take time off.

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19
Q

What is the definition of a partnership?

A

A business owned by two to twenty people.

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20
Q

What are the advantages of being in a partnership?

A

Shared costs, Shared decision making, Shared workload.

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21
Q

What are the disadvantages of being in a partnership?

A

Shared profits, Decisions might take more time, Unlimited liability.

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22
Q

What is the definition of a deed of partnership?

A

A legal document which is an agreement between partners that sets out the rules of the partnership such as how profits will be shared.

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23
Q

What is the definition of unlimited liability?

A

Where if the business goes into debt then the owner(s) of the business have the responsibility of covering the costs, putting their personal assets at risk.

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24
Q

What is a limited company?

A

A business that is owned by shareholders who have bought shares from the company.

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25
Q

What is the structure of a limited company?

A

It is owned by its shareholders and is run by its directors who are elected by the shareholders who oversee the managers.

26
Q

What is a shareholder?

A

The owners of limited companies and can be called stockholders who are paid in dividends.

27
Q

What are dividends?

A

A payment to the shareholders from the profit of the business.

28
Q

What is limited liability?

A

Is where if a business goes into debt the owners will only lose the money they invested into the business and are not at risk of losing personal assets.

29
Q

What is a private limited company? (Ltd)

A

A company which has been issued with a certificate of incorporation where shares are sold privately.

30
Q

What are the advantages of a private limited company?

A

Company has control on the shareholders of the business, Limited liability, Ability to sell shares to raise capital.

31
Q

What are the disadvantages of a private limited company?

A

More legal paperwork, More time to set up, May require outside help to manage finances.

32
Q

What is a public limited company? (PLC)

A

A large business where the shares are sold publicly on the stock exchange.

33
Q

What are the advantages of a public limited company?

A

Capital through sales on the stock market, Rapid growth as business is on stock exchange which will raise awareness, Limited liability.

34
Q

What are the disadvantages of a public limited company?

A

Expensive to set up requiring a minimum of £50,000, All financial details have to be published publicly, Increased media scrutiny.

35
Q

What is the definition of an aim?

A

Where the business wants to go in the future, its goals.

36
Q

What does market share mean?

A

The percentage of sales a business has in its market.

37
Q

What does market leaders mean?

A

The business that has the biggest market share in their industry.

38
Q

What is the definition of an objective?

A

Clearly defined targets for a business to achieve over a certain period of time.

39
Q

What are the examples of business objectives?

A

Survive, Break even, Expand and make profit, Become an ethical business.

40
Q

Why might a business’ objectives change over time?

A

Market conditions - saturated/size? Technology - Development, Internal factors - change countries it’s selling its product to.

41
Q

What is the definition of a stakeholder?

A

Any group or individual that has an interest in a business and its activities.

42
Q

What are the two types of stakeholders?

A

Internal, External.

43
Q

What are examples of stakeholders?

A

Shareholders and owners - may want to expand, Managers - career progression, Employees - job security.

44
Q

What are examples of conflict of interest?

A

Owners may want to reduce employee wages to increase their dividends. Reduce jobs to reduce costs will affect employee job security.

45
Q

What does economies of scale mean?

A

When the average costs of a business decrease as they expand in size and increase output.

46
Q

What are the different types of economies of scale?

A

Purchasing, Managerial, Financial, Technical, Risk bearing, Marketing.

47
Q

What are the two types of business growth?

A

External (organic), Internal (inorganic).

48
Q

What are examples of internal growth?

A

Growth without the involvement of any other business. Promotion, New stores, Expand the product range.

49
Q

What are the advantages of internal growth?

A

Economies of scale, Diversification, Increased market share, Remaining competitive.

50
Q

What are disadvantages of internal growth?

A

Risk of failure, Time consuming, Expensive.

51
Q

What are examples of external growth?

A

Growth due to the involvement of another business. Integration: Merger, Takeover.

52
Q

What is a merger?

A

When two businesses decide to work together to increase their market share.

53
Q

What is a takeover?

A

When one business buys out another business which can either be agreed or hostile when it is rejected by the company.

54
Q

What are the 4 main types of integration?

A

Vertical integration, Backwards integration, Horizontal integration, Diversification (conglomerate) integration.

55
Q

What is horizontal integration?

A

When a business buys a rival competitor in the same industry.

56
Q

What are the pros and cons of horizontal integration?

A

Increased market share, reducing competitors, economies of scale. Harder to control, might be shut down like Sainsbury and Asda merger.

57
Q

What is backwards vertical integration?

A

When a business joins together with a business earlier in its supply chain (producer).

58
Q

What are the pros and cons of backwards vertical integration?

A

Might secure raw materials at a cheaper cost and they will travel faster. Might be unfair to the producer to cut costs and might not be experienced.

59
Q

What is forwards vertical integration?

A

When a business joins together with a business further on in the supply chain.

60
Q

What are the pros and cons of forwards vertical integration?

A

Secures how the good or service is sold, which can change brand image. Less likely to get economies of scale as the business operates in different areas.

61
Q

What is conglomerate integration?

A

When a business joins together with a business in a completely different market.

62
Q

What are the pros and cons of conglomerate integration?

A

Wider spread audience and spread the risk. Risky as both businesses have no experience in the other.

Business (6 decks)

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