Unit 1: Business in the Real World

Question 1

What does a Business do?

Answer 1

Sell products or provide services to customers.

Question 2

What is a Good?

Answer 2

Physical Items

Question 3

What is a Service?

Answer 3

Actions performed to aid customers

Question 4

What are Needs?

Answer 4

Things you cant live without

Question 5

What are Wants?

Answer 5

Things you would like to have

Question 6

Why are Businesses set up?

Give 3 reasons

Answer 6

• Fulfil a Business opportunity
• To benefit people [Non-profit etc…]
• To sell a good or service they think people will want to pay for

Question 7

What is the Primary Sector?

Answer 7

The production of Raw Materials

Question 8

What is the Secondary Sector?

Answer 8

The manufacturing of Goods. Turning the Raw Materials into finished products

Question 9

What is the Tertiary Sector?

Answer 9

The Provision of Services

Question 10

What is an Entrepreneur?

Answer 10

Someone who takes the risk of enterprise activity [Taking up an especially complex project]

Question 11

Why may someone become an Entrepreneur?

Provide 4 Reasons

Answer 11

• Financial Reasons
• Independence
• Dissatisfaction with current job
• They may believe they have found a gap in the market

Question 12

What qualities do Entrepreneurs have?

Provide 4 Qualities

Answer 12

• Hardworking
• Organised
• Innovative
• Willingness to take calculated risk

Question 13

What are the Four factor of production?

Answer 13

• Land; Earths natural recourses
• Labour; The work done
• Capital; the equipment that help produce goods or services
• Enterprise; The people who take risks

Question 14

What is Opportunity cost?

Answer 14

The benefit that is given up in order to do something else

Question 15

What is a Sole Trader?

Answer 15

A business with one owner

Question 16

3 Advantages of being a Sole Trader?

Answer 16

• Easy to set up
• You are your own boss
• You have control of what is done with profits

Question 17

3 Disadvantages of being a Sole Trader?

Answer 17

• Long hours of work
• Unlimited liability; you are legally responsible for everything that happens to the business
• Difficulty raising money; as banks see sole traders as risky

Question 18

What is a Partnership?

Answer 18

Two or more people running a business

Question 19

3 Advantages of a Partnership?

Answer 19

• More ideas
• Share workload
• More Money can be put into the business

Question 20

3 Disadvantages of a Partnership?

Answer 20

• Legal Responsibility for partners action
• Unlimited liability; Legally responsible for business
• Profits are shared between partners; so may be less money earned

Question 21

What is a Limited Company?

Answer 21

Companies owned by Shareholders. The more shares you own, the more control you get.

Question 22

What is a Private Limited Company [Ltd]?

Answer 22

When the ownership of shares of a business are restricted - shares can only be bought if all the shareholders agree.

Question 23

What are advantages of a Private Limited Company [Ltd]?

Answer 23

• Control; over how the business is managed and how many people get to share profits.
• Easier to get a Loan or Mortgage
• Limited Liability; you cant lose more than you invest

Question 24

2 Disadvantages of a Private Limited Company [Ltd]?

Answer 24

• Expensive to Setup; due to legal paperwork
• Legally obliged to publish accounts; which competitors can see

Question 25

What is a Public Limited Company [PLC]?

Answer 25

When a companies shares can be bought by anyone. [Traded on the Stock Market]

Question 26

2 Advantages of a Public Limited Company?

Answer 26

- More capital can be raised; therefore easier to expand - Limited liability

Question 27

3 Disadvantages of a Public Limited Company?

Answer 27

- If someone buys enough shares they can take over the company - Accounts have to be made public - More share holders = More the profit has to be shared

Question 28

What is a Not-for-Profit Business?

Answer 28

When a business aim to generate capital for the sake of funding the community

Question 29

5 Aims for a Business?

Answer 29

- Survival - Growth - Maximise Profits - Be more ethical - Achieve Customer Satisfaction

Question 30

What is an Objective ?

Answer 30

A specific target that measures whether we have achieved our Aim [For example an aim can be to grow, the objective will be to set up 200 more firms nationally etc...]

Question 31

Explain how objectives of of a start up business are likely to be different from that of a more established business?

Answer 31

A start up may prioritise survival whereas a more established business may have an objective of growth

Question 32

What are Stakeholders?

Answer 32

People affected by a business [Owners, Employees, Local Community, Customers, Government etc...]

Question 33

What is Revenue?

Answer 33

The income earned by a Business

Question 34

What is a Fixed Cost?

Answer 34

A cost that does not vary with output [They have to be paid whether the business is profitable or not. Like Salaries, rent etc...]

Question 35

What is a Variable Cost?

Answer 35

Costs that increases or decreases depending on a Businesses output [For example; running machinery. more machinery = more output = higher variable cost]

Question 36

What is Profit [or loss] ?

Answer 36

The difference between revenue and cost.

Question 37

What is a Business Plan?

Answer 37

A plan of what a business will do in order to achieve its aims

Question 38

3 Advantages of creating a Business plan?

Answer 38

- Highlights possible flaws in business - before they've wasted time and money - Convince investors - Forces the business to be organised, careful and efficient

Question 39

3 Disadvantages of a business plan?

Answer 39

- Can take up Time and Money - Business plans may be overestimated - Not Flexible; in business the unexpected can happen.

Question 40

5 Factors that affect Location of a Business?

Answer 40

1) Location of Raw materials 2) Location of Market 3) Labour Supply 4) Competition 5) Cost

Question 41

What is Average Unit Cost?

Answer 41

The average amount things cost [Total cost ÷ Units Sold]

Question 42

What is Economies of Scale?

Answer 42

When the Average Cost decreases [as your output grows]

Question 43

3 ways Larger Firms benefit from Economies of Scale?

Answer 43

- More profit - Can afford to decrease price; increasing customer engagement - More profits can be reinvested into the business

Question 44

What are Diseconomies of Scale?

Answer 44

When the Average Cost increases [as your output grows]

Question 45

What is Internal Expansion [otherwise known as organic growth] ?

Answer 45

When a Business grows through doing more of its own activities.

Question 46

3 Examples of Internal Expansion?

Answer 46

- E-commerce - Outsourcing - Opening new stores

Question 47

What is Franchising?

Answer 47

When a company gives other firms the right to sell its products in return for a percentage of the profits.

Question 48

3 Advantages of Franchising?

Answer 48

- Increase Market Share - Increase Brand Awareness - You don't have to deal with the costs of opening up a new place

Question 49

1 Disadvantage of Franchising?

Answer 49

- If Franchisee has poor standards the reputation can be tarnished

Question 50

What is External Expansion?

Answer 50

Expanding by working with other Businesses

Question 51

3 Examples of External Expansion?

Answer 51

- Joining with Supplier [control cost and quality of its raw materials] - Joining with Competitors [bigger market share] - Joining with Unrelated Firms [to diversify market]

Question 52

What is one Reason why External Expansion may be Negative?

Answer 52

- A clash in Work-Culture and possibly leading to decrease productivity