Unit 1 - Business In The Real World Flashcards
What are the main products that businesses sell?
Businesses sell products that can be:
* Goods
* Services
Define ‘goods’ in the context of business.
Goods are physical items like books or furniture.
What are ‘services’ in a business context?
Services are actions performed by other people to aid the customer.
What are ‘needs’ in terms of goods and services?
Needs are things that you can’t live without, like water and food.
What are ‘wants’ in terms of goods and services?
Wants are things you would like to have but can survive without, like holidays and jewellery.
What are some reasons people start businesses?
People start businesses for various reasons:
* To make a good or provide a service
* To distribute goods
* To benefit others (not-for-profit)
* To fulfill a business opportunity
What is the PRIMARY SECTOR in the economy?
The PRIMARY SECTOR produces raw materials.
What does the SECONDARY SECTOR do?
The SECONDARY SECTOR manufactures goods, turning raw materials into finished products.
What is the role of the TERTIARY SECTOR?
The TERTIARY SECTOR provides services to consumers and businesses.
What is ‘enterprise’ in a business context?
Enterprise can mean either a business or the personal qualities to see and take advantage of new business opportunities.
Who is an entrepreneur?
An entrepreneur is someone who takes on the risks of enterprise activity.
What are some financial motivations for becoming an entrepreneur?
Financial reasons can include:
* Earning more money than before
* Improving quality of life
What does it mean to identify a gap in the market?
Identifying a gap in the market means thinking of a useful good or service that no other business is providing.
What are some personal motivations for entrepreneurship?
Personal motivations can include:
* Desire for independence
* Following an interest
* Dissatisfaction with current job
List some qualities of a successful entrepreneur.
Successful entrepreneurs often possess qualities such as:
* Hardworking
* Organised
* Innovative
* Willingness to take calculated risks
Fill in the blank: Enterprise involves identifying new business opportunities and then _______.
[taking advantage of them]
True or False: Entrepreneurs only take financial risks when starting a business.
False
What are the Four Factors of Production?
The four factors of production are land, labour, capital, and enterprise.
What does ‘land’ include in the context of factors of production?
‘Land’ includes all of the Earth’s natural resources, such as non-renewable resources (natural gas, oil, coal), renewable resources (wind, tidal power, wood), materials extracted by mining (diamonds, gold), water, and animals found in an area.
What is opportunity cost?
Opportunity cost is the benefit that’s given up in order to do something else; it’s the cost of the choice that’s made.
What is the significance of opportunity costs in business decisions?
Managers compare opportunity costs when making decisions to determine the best way to use limited resources.
What is a sole trader?
A sole trader is a business owned by one person, who may employ others.
What are the advantages of being a sole trader?
Advantages include ease of setup, being your own boss, and having full control over profits.
What are the disadvantages of being a sole trader?
Disadvantages include long working hours, unlimited liability, lack of a separate legal identity, and difficulty in raising funds.
What is a partnership in business?
A partnership involves two to twenty partners who share decision-making and profits, unless otherwise stated in a deed of partnership.
What are the advantages of partnerships?
Advantages include more ideas and skills, shared workload, and increased capital for business growth.
What are the disadvantages of partnerships?
Disadvantages include shared legal responsibility, potential for disagreements, and shared profits.
What are the two types of limited companies?
The two types of limited companies are private limited companies and public limited companies.
What is a key feature of a limited company?
A limited company is incorporated, meaning it has a separate legal identity from the owners.
What does limited liability mean for owners of a limited company?
Limited liability means that owners only risk losing the money they have invested in the company.
Who owns a limited company?
A limited company is owned by shareholders, and control is proportional to the number of shares owned.
What does ‘private’ mean in private limited companies?
‘Private’ means that shares can only be sold if all shareholders agree.
What is a disadvantage of private limited companies?
Private limited companies are more expensive to set up than sole traders or partnerships due to legal paperwork.
What is a key advantage of private limited companies?
The big advantage is limited liability — owners can’t lose more than they invest.
What does ‘public’ mean in public limited companies?
‘Public’ means that the company shares are traded on a stock exchange and can be bought and sold by anyone.
What is a key advantage of public limited companies?
Public limited companies can raise much more capital than any other kind of business.
What is a disadvantage of public limited companies?
It can be hard to get shareholders to agree on how the business is run.
What must businesses decide when starting?
Businesses must decide whether to have limited or unlimited liability.
What type of liability do smaller businesses typically have?
Smaller businesses, such as sole traders and partnerships, tend to have unlimited liability.
Can a business change its ownership structure over time?
Yes, businesses can change their ownership structure as they grow.
What is a not-for-profit business?
Not-for-profit businesses do not aim to make a profit for their owners; any surplus is reinvested.
What is a key feature of social enterprises?
Social enterprises generate income by selling products, using profits to benefit society.
What is a challenge faced by not-for-profit organizations?
Not-for-profit organizations can struggle with financial stability, especially if they rely on donations.
What is an unincorporated association?
An unincorporated association is easy to set up but has unlimited liability for its managers.
What is a common legal structure for larger not-for-profit organizations?
Larger not-for-profit organizations are often incorporated and limited by guarantee.
What are business aims?
Overall goals that businesses want to achieve.
What is the main short-term aim of new businesses?
Survival, as around 60% of new businesses close within five years.
What do most businesses aim to maximise?
Profits, although it may take a few years for a new firm to make any profit.
What does growth mean for businesses?
Growth can mean increasing the number of employees, products sold, or income from sales.
What is the aim of increasing shareholder value?
To make shareholders more wealthy by increasing the value of the firm.
What does market share indicate?
The percentage of a market’s total sales that a particular product or company has made.
What is a common aim for new businesses regarding market share?
To capture a part of the market and establish itself.
What do some firms aim to do socially and ethically?
Act in ways that are best for society and avoid causing harm to the environment.
How is customer satisfaction measured?
By carrying out customer opinion surveys.
What are business objectives?
Specific, measurable steps that help businesses achieve their aims.
How do objectives differ from aims?
Objectives are more specific and measurable than aims.
What factors affect a business’s objectives?
The size of the business, level of competition, and type of business.
How can a company’s objectives change over time?
As a firm evolves, its objectives may shift from survival to growth and maximising profits.
What external factors can influence a business’s objectives?
New legislation, changes in the economy, technology, and environmental expectations.
How do businesses use objectives to monitor success?
By checking if the objectives have been achieved after a period of time.
What is a common objective to measure success?
Profit, such as meeting a yearly profit target.
What is an example of a firm that might focus on customer satisfaction?
A small, local business that depends on word of mouth.
