Unit 1 business in the real world (mock) Flashcards
Land
All of the earths natural resources (renewable and non renewable) there is not enough supply to satisfy the demand
Labour
Work done by the people who contribute to the production process
Capital
The equipment, factories and schools that help to produce goods or services
Enterprise
Refers to the people (entrepreneurs) who take risks and create things from the other three factors of production (land, labour and capital)
Goods
Physical items like books or furniture
Services
Are actions preformed by other people to help the customer e.g hairdresser
Primary sector
Produces raw materials from natural resources which are used to make goods
Secondary sector
Manufactures goods, they turn raw materials into finished goods e.g. a chocolate factory turns cocoa and milk into chocolate
Tertiary sector
Provides services e.g haircuts
Why someone would want to become an entrepreneur
- Financial reasons
- They have found a gap in the market for a new product
- might want the independence of being your own boss
- some people may be dissatisfied with their current job
Characteristics of an entrepreneur
- Innovative (good at spotting opportunities and problems)
- risk taker
- hard working
- determined
- organised
Opportunity costs
Sacrifice we make every time we do something e.g. if you go out for dinner you won’t be able to do homework
Entrepreneur
A person who starts up their own business
Sole trader
Have just one owner, most small business are sole traders e.g hairdresser
Sole trader advantages
- easy to set up
- you are your own boss
- you alone decide what happens to any profit
Sole trader disadvantages
- you might have to work long hours
- if the business gets sued you are responsible
- it can be hard to make money to start it up
- limited liability
Partnership
A business that has two or more owners e.g. Ben and Jerry’s
Partnership advantages
- more ideas
- greater range of skills
- more people to share work so less working hours
- more money can be put into the business
Partnership disadvantages
- Each partner is legally responsible for what the other partner does
- you can disagree
- Profits are shared
- unlimited liability
Private limited companies (ltd)
Companies owned by a group of shareholders and run by directors, shares can only be sold privately e.g. Apple
Ltd advantages
- It is easier to get a mortgage than it is if you are a sole trader or partnership
- owners have lots of control
- has limited liability
Ltd disadvantages
- More expensive to set up than partnerships because of all the legal paperwork
- the company is legally obligated to publish its accounts every year
Limited liability
If you are in debt, the shareholders are legally responsible to pay
Unlimited liability
If you are in debt you are responsible to pay it, your personal possessions are at risk if you can’t pay
Public limited company (plc)
The company shares are traded on the stock exchange, and can be bought and sold by anyone
Plc advantages
- Much more capital can be raised by a plc than by any other kind of business
- have limited liability
Plc disadvantages
- it is hard to get lots of shareholders to agree
- each shareholder has very little say
- it is easy for someone to buy enough shares to takeover the company
- the accounts have to be made public
- more people to share profits with
Types of business aims
Survival, growth, maximise profit, increase shareholder value, increase market share, Do what’s right socially and ethically, Achieve customer satisfaction
What is a business aim
Overall goals that they want to achieve
Business objectives
Objectives are more specific than aims, they are measurable steps on the way to the aim e.g. sell 30 products in a week
They also can see if they are being successful
Different factors that effect objectives
- Size of business
- level of competition
- type of business
Not-for-profit
Don’t try to make a profit, they need to make enough income to cover their costs many of the not for profit companies are charities they are hard to set up because there are lots of rules
Stakeholder
Anyone who is affected by a business.
Owner (stakeholder)
The most important stakeholder. They make profit if the business is successful and decide what happens to the business
Local community (steakholders)
The local community where the business is based will suffer if the firm causes lots of noise or pollution. They may gain if the company provides good jobs and sponsors local activities
Customers (steakholders)
Customers want high quality products at low prices. They benefit when objectives are based on customer satisfaction
Internal Steakholders
Are groups within a business e.g. owners and workers
External stakeholders
Are groups outside of the business e.g. the community
Employees stakeholder objectives
- Higher earnings
- job security
- discounts
Owners/shareholders stakeholder objectives
- higher profit
- expand the business
- dividends
- growth
Local community stakeholder objectives
- environmentally friendly
- local jobs
Government stakeholder objectives
- tax
- legal behaviour
- growth
Suppliers stakeholder objectives
- payed on time
- kept informed
Customers stakeholder objectives
- good products
- good service
Negotiation
Negotiations occur when two sides discuss what they want and try to reach a conclusion. E.g.Employees may negotiate for a better pay. Suppliers may demand better terms and conditions.
Direct action
Customers can stop buying a product off of a business if they are unhappy with their behaviour. Employees can strike
Refusal to co-operate
Local councils can refuse to co-operate with a business if they do not like its behaviour, for example, they could refuse planning permission
Voting
The owners of a business can make their views clear and can vote on what the organisation should do next
Location
Where a business is geographically situated
Why is location important
- Costs(rent)
- sales
- image
Factors affecting business location
- competitors
- costs
- type of business
- transport links
Export
Goods and services sold overseas to consumers and business
Proximity
The distance from the customer
Tariff
A tax on foreign goods imported into the country
Protectionist measures
Policies That government use to protect their own business against foreign competitors
Imports
Goods and services purchased from overseas by consumers and businesses
Quota
Limit on the number of foreign goods imported into the country
Advantages of locating overseas
- cheaper land
- cheaper labour
- learn another language
- higher profits
Disadvantages of locating overseas
- language barrier
- have to trust employees
- travelling
- complex legal structures
- higher tax
Business plan
A document that states what a business is trying to achieve and how they intend to do it
Business plan is created to
- help set up a business successfully
- raise finance
- set objectives
- co-ordinate actions
Main sections of a business plan
- objectives of the business
- details of prices and expected sales
- analysis of the financial position of business
- analysis of market
Business plan disadvantages
- time consuming
- money consuming
- may stick too tightly to the plan
- might be too optimistic when writing it
Business plan advantages
- convinces financial backers(banks)
- help the owner solve problems
- helps make aims and objectives
Revenue
The income that a firm receives from selling its goods or services. Can also be referred to as ‘turnover’
Total costs
Fixed costs + variable costs
Fixed costs
The costs that do not change when a business changes its outputs
Variable costs
The costs that vary directly with the business output
Expanding a business
The increase in the size of status of the business
Reasons business want to expand
- increases in market share
- cost savings
Reasons a business will not want to expand
- to keep control
- offer personal service
- avoid risk
- avoid stress
Ways a business measures itself
- value of sales
- value of the business
- number of employees
Internal growth
Expansion from within the business e.g: open up more stores
External growth
Expansion involving another business e.g: merge with another business
Advantages of internal growth
- easier to manage and control
- less risk
- cheaper
Internal growth disadvantages
- slow
- market share could fall
External growth advantages
- benefit from other business’s expertise
- quick
External growth disadvantages
- can be hard to integrate both business
- expensive
- can cause redundancy
Franchising
When one business sells the right to another business to use its name and sell its products
