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AS BUSINESS > UNIT 1 - Business and its environment > Flashcards

UNIT 1 - Business and its environment Flashcards

1
Q

Chapter 1 - enterprise

What are the four factors of production?

A
  • Land (land used and land affected)
  • Labour
  • capital (finance and resources used)
  • Enterprise - the initiation of an entire business
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2
Q

Chapter 1 - Enterprise

consumer goods

A

the physical and tangible goods sold to the general public

  • durable consumer goods: eg. cars & washing machines
  • Non-durable consumer goods: eg. food & drinks
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3
Q

Chapter 1 - enterprise

consumer services

A

the non-tangible products sold to the general public

  • eg. public transport, hotel accomodation
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4
Q

Chapter 1 - enterprise

capital goods

A

The physical goods used by industry to aid in the production of other goods and services

  • eg. machines and commercial vehicles
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5
Q

Chapter 1 - enterprise

Creating value

A

increasing the difference between the cost of purchasing bought-in materials and the price the finished goods are sold for

the process

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6
Q

Chapter 1 - enterprise

added value

A

The difference between the cost of purchasing bought-in materials and the price the finished goods are sold for

The result

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7
Q

chapter 1: enterprise

What are the 7 business needs?

A
  • land
  • capital
  • government
  • enterprise
  • labour
  • suppliers
  • customers
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8
Q

Chapter 1: Enterprise

opportunity cost

A

The benefit of the next most desired option which is given up

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9
Q

Chapter 1: Enterprise

Entrepreneur

A

Someone who takes the financial risk of starting and managing a new venture

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10
Q

Chapter 1: Enterprise

characteristics of a successful entrepreneur

A
  • innovation
  • Commitment and self-motivation
  • multi-skilled
  • Leadership skills
  • Self- confidence
  • risk-taking
  • motivated
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11
Q

Chapter 1 - Enterprise

Challenges faced by entrepreneurs (5)

A
  • Identifying successful business opportunities
  • sourcing capital
  • determining a location
  • competition
  • building a customer base
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12
Q

Chapter 1 - Enterprise

Why do businesses often fail? (4)

A
  • lack of record keeping
  • lack of cash and working capital
  • poor management skills
  • changes in the business environment
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13
Q

Chapter 1 - Enterprise

Impact of enterprise on a country’s economy (6)

A
  • Employment creation
  • Economic growth
  • firms’ survival and growth
  • innovation and technological change
  • exports
  • personal development
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14
Q

Chapter 1 - Enterprise

Social enterprise

A

a business with mainly social objectives that reinvests most of its profits into benefiting society rather than maximizing returns to owners.

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15
Q

Chapter 1 - Enterprise

Triple bottom line

A

The three objectives of social enterprises:

  • economic
  • Social
  • Environmental
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16
Q

Chapter 2 - Business structure

Primary sector business activity

A

Firms engaged in farming, fishing, oil extraction and all other industries that extract natural resources so that they can be used and processed by other firms

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17
Q

Chapter 2 - business structure

Secondary sector business activity

A

Firms that manufacture and process products from natural resources, including computers, brewing, baking, clothes-making and construction.

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18
Q

Chapter 2 - business structure

Tertiary business activity

A

Firms that provide services to consumers and other businesses, such as retailing, transport, insurance, banking and hotels

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19
Q

Chapter 2 - business structure

What is industrialisation?

A

Industrialisation is the increased importance of secondary-sector businesses in developing countries

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20
Q

Chapter 2 - business structure

What is deindustrialisation?

A

Deindustrialisation is the decreased importance in secondary-sector activity, and increased importance in the tertiary sector. This is often suited for more developed countries.

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21
Q

Chapter 2 - Business structure

Public sector

A

Compromises organisations accountable to and controlled by the central or local government.

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22
Q

Chapter 2 - Business structure

Private sector

A

Compromises businesses owned and controlled by individuals or groups of individuals

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23
Q

Chapter 2 - Business structure

What comes under the private sector of businesses? (4)

A
  • Sole traders
  • Partnerships
  • Limited companies (Private Ltd; Public PLC)
  • Cooperatives
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24
Q

Chapter 2 - Business structure

Command economy

A

economic resources are owned, planned and controlled by the state.

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25
Q

Chapter 2 - Business structure

Free-market economy

A

Economic resources are owned largely by the private sector with very little state intervention

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26
Q

Chapter 2 - Business structure

Mixed economy

A

Economic resources are owned and controlled by both private and public sectors

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27
Q

Chapter 2 - Business structure

Sole trader

A

a business in which one person provides the permanent finance, and, in return, has full control over the business and is able to keep all its’ profits.

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28
Q

Chapter 2 - Business structure

What are some advantages of being a sole trader? (4)

A
  • Easy to set up
  • Complete control of business and running
  • personal relationships with staff
  • Business can be based on own interests of the individual
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29
Q

Chapter 2 - business structure

Disadvantages of being a sole trader (5)

A
  • Unlimited liability
  • competition of bigger firms
  • difficulty raising additional capital
  • long hours
  • lack of continuity
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30
Q

Chapter 2 - Business structure

Partnership

A

A business formed by two or more people to carry on a business together, with shared capital investment and, usually, shared responsibilities.

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31
Q

Chapter 2 - Business structure

Advantages of a partnership (4)

A
  • both people may specialise in different areas of management
  • shared decision-making
  • additional capital invested by both people
  • losses shared between two+ people
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32
Q

Chapter 2 - business structure

Disadvantages of a partnership (5)

A
  • Unlimited liability
  • profits must be shared
  • no continuity of the business if it goes down or people die
  • cannot gain equity finance through shares
  • Not as much control in decisions as a sole trader
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33
Q

Chapter 2 - business structure

limited liability

A
  • to do with shares

The only liability - or 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)

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34
Q

Chapter 2 - Business structure

Private limited company

A

A small - medium sized business that is owned by shareholders who are often members of the same family; this company cannot sell shares to the general public

35
Q

Chapter 2 - Business structure

Advantages of a private limited company (6)

A
  • limited liability
  • separate legal personality
  • continuity
  • original owner still able to maintain control
  • capital able to be raised through family and friends
  • greater status than unincorporated businesses
36
Q

Chapter 2 - business structure

disadvantages of a private limited company (3)

A
  • More legal formalities
  • equity capital not able to be received by the public
  • less secrecy over financial affairs than sole trader or partnership.
37
Q

Chapter 2 - business structure

Share

A

A certificate confirming part ownership of a company and entitling the shareholder owner to dividends and certain shareholder rights.

38
Q

Chapter 2 - business structure

Shareholder

A

A person or institution owning shares in a limited company

39
Q

Chapter 2 - Business structure

Public limited company

A

a limited company, often a large business, with the legal right to sell shares to the general public. - Share prices are quoted on the national stock exchange

40
Q

Chapter 2 - Business structure

Memorandum of association

A

States the:

  • name of the company
  • Address of the head office through which it can be contacted
  • Max share capital
  • declared aims of the business

Helpful for potential shareholders

41
Q

Chapter 2 - business structure

Articles of association

A

Covers the internal workings and control of the business. eg.

  • names of directors
  • procedures to be followed at meetings
42
Q

Chapter 2 - Business structure

What are the 4 other forms of business organisation?

A
  • Franchises
  • Cooperatives
  • Joint ventures
  • Holding companies
43
Q

Chapter 2 - Business structure

Franchise

A

A business that uses the name, logo and trading systems of an existing successful business

44
Q

Chapter 2 - Business structure

Advantages of a franchise (5)

A
  • fewer chances of a new business failing
  • Advice and training offered by franchiser
  • National advertising paid for by franchiser
  • Supplies obtained from established and quality-checked suppliers
  • Franchiser unlikely to open another branch in same local area
45
Q

Chapter 2 - Business structure

Disadvantages of a franchise (4)

A
  • Share of profits and revenue to be paid to franchiser each year
  • Initial franchise license can be pricey
  • No choices of supply or suppliers
  • Strict rules over pricing and workings of the business
46
Q

Chapter 2 - Business structure

What are cooperatives?

A
  • all members contribute to running of the business, decision making, workload and responsibilities
  • Profits shared equally
47
Q

Chapter 2 - business structure

Advantages of a cooperative business (3)

A
  • Buying in bulk and increased economies of scale
  • teamwork
  • motivation from all members with shared profits
48
Q

Chapter 2 - business structure

disadvantages of cooperative businesses

A
  • Slow decision making
  • Capital shortages due to no sales of shares to general public
49
Q

Chapter 2 - Business structure

Joint venture

A

Two or more businesses agree to work closely together on a particular project and create a separate business division to do so.

50
Q

Chapter 2 - Business structure

Advantages of a joint venture (3)

A
  • costs and risks of a new venture are shared
  • Different companies can put their strengths together
  • May be able to attract major markets in different countries
51
Q

Chapter 2 - Business structure

Disadvantages of a joint venture (3)

A
  • Styles of management and culture may clash
  • blame for errors and mistakes
  • Failure of one partner could lead to danger for the whole product
52
Q

Chapter 2 - Business structure

Holding company

A

A business organisation that owns and controls a number of separate businesses, but does not unite them into one uified company

eg. Meta

53
Q

Chapter 2 - Business structure

Public corporation

A

A business enterprise owned and controlled by the state - also known as nationalised industry

54
Q

Chapter 2 - Business structure

Advantages of a public corporation (2)

A
  • Social objectives rather than purely for profits
  • Finance raised mainly from the government
55
Q

Chapter 2 - Business structure

disadvantages of a public corporation (2)

A
  • government interference for political reason
  • potential inefficiency due to lack of strict profit targets
56
Q

Chapter 3 - Size of business

What are the 6 ways to measure a business?

A
  • revenue
  • Number of employees
  • Capital employed
  • Market capital
  • Market share
  • Business specific measures
57
Q

Chapter 3 - Size of business

Revenue

A

Total number of sales made by a business in a given time period

58
Q

Chapter 3 - Size of business

Capital employed

A

Total value of all long-term finance invested

59
Q

Chapter 3 - Size of business

Market capitalisation

A

Total value of a company’s issued shares

Current share price x total number shares issued

60
Q

Chapter 3 - size of business

Market share

A

sales of a business as a proportion to total market sales

  • total sales of a business / Total sales in the market*
  • x100*
61
Q

Chapter 3 - size of business

What is the importance of small businesses? (6)

A
  • Job creation
  • Dynamic entrepreneurs with new ideas
  • Competition for larger businesses
  • Supply of specialist goods
  • All businesses start off small
  • Lower average costs
62
Q

Chapter 3 - size of business

How can the government assist smaller businesses? (3)

A
  • reduce profits tax
  • Loan guarantee
  • Information
63
Q

Chapter 3 - size of business

Strengths of family businesses (3)

A
  • Commitment
  • reliability & pride
  • Knowledge & Continuity
64
Q

Chapter 3 - size of business

Weaknesses of family businesses (4)

A
  • may have lack of continuation down generations
  • informality
  • Traditions - may make it difficult to evolve & change
  • Conflict
65
Q

Chapter 3 - size of business

Why might a business want to grow? (5)

A
  • increased profits
  • increased market share
  • Increased economies of scale
  • Increased power & status
  • Reduced risk of being a take-over target
66
Q

Chapter 3 - Size of business

Internal growth

A

Expansion of business by means of opening new branches, shops or factories (also known as organic growth)

67
Q

Chapter 4 - Business objectives

SMART

A

S - Specific

M - Measurable

A - Achievable

R - Realistic and Relevant

T - Time specific

68
Q

Chapter 4 - Business objectives

What is the order of the hierarchy of objectives?

A
  • Aim
  • Mission (statement)
  • Corporate objectives
  • Divisional objectives
  • Departmental objectives
  • Individual Objectives

AMCDDI

69
Q

Chapter 4 - Business objectives

What are corporate aims?

A
  • Long term goals that a business hopes to achieve. - The core central purpose of a business will be expressed in its corporate aim(s)
70
Q

Chapter 4 - Business objectives

Mission statement

A

A statement of the business’s core aims, phrased in a way to motivate employees and to stimulate interest by outside groups

71
Q

Chapter 4 - Business objectives

Advantages and disadvantages of mission statements

A

Advantages

  • Inform outside groups
  • Motivate employees
  • Helps establish ‘what the business is about’

Disadvantages

  • very general, so not very specific
  • Impossible to analyse
  • Often very general, so hard to make completely unique
72
Q

Chapter 4 - Business objectives

What are corporate objectives?

A

Goals or targets for a business - shorter term than a corporate aim. More specific and broken down

73
Q

Chapter 4 - Business objectives

Common corporate objectives (7)

A
  • Profit maximisation
  • Profit satisficing
  • Survival
  • Growth
  • Increased market share
  • Maximising Shareholder value
  • Corporate social responsibility (CSR)
74
Q

Chapter 4 - Business objectives

corporate social responsibility (CSR)

A

This concept applies to those businesses that consider the interests of society by taking responsibility for the impact of their decisions and activities on customers, employees, communities and the environment

75
Q

Chapter 4 - Business objectives

What are some reasons a corporate objective may change? (3)

A
  • A new business may have satisfied the “survival” stage
  • Change in competition - may lead to growth down to survival
  • Short term objective may want to transition into a longer-term objective
76
Q

Chapter 4 - Business objectives

Factors that determine the corporate objectives of a business

A
  • Corporate culture
  • Size & legal form of business
  • Public or private sector business
  • How many years business has been operating
  • Divisional, departmental, and individual objectives
77
Q

Chapter 4 - Business objectives

Management by objectives (MBO)

A

A method of coordinating and motivating all staff in an organisation by dividing its overall aim into specific targets for each department, manager and employee.

78
Q

Chapter 4 - Business objectives

Ethical code of conduct

A

A document detailing a company’s rules and guidelines on staff behaviour that must be followed by all employees

79
Q

Chapter 5 - Stakeholders in a business

stakeholders

A

People or groups of people who can be affected by - and therefore have an interest in - any action by an organisation

80
Q

Chapter 5 - Stakeholders in a business

Stakeholder concept

A

The view that businesses and their managers have responsibilities to a wide range of groups, not just shareholders

81
Q

Chapter 5 - Stakeholders in a business

Internal stakeholders examples (4)

A
  • Suppliers
  • owners/management
  • employees
  • shareholders
82
Q

Chapter 5 - Stakeholders in a business

External stakeholders examples (5)

A
  • customers
  • employees’ families
  • local communities
  • Government
  • Lenders
83
Q

Chapter 5 - stakeholders in a business

Explain compromise for businesses and it’s stakeholders

A

Meeting as many stakeholder objectives as possible, or meeting the needs of the most important ones. This may have to be put in place, as not all business decisions will appeal to all stakeholder groups.

AS BUSINESS (6 decks)

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