Unit 1- Business in the real world (Paper 1 & 2) Flashcards
3 reasons for starting a business
Making profit, benefiting others, gap in the market
Primary business
Produces raw materials extracted from nature
Secondary business
Manufacture goods from raw materials into finished goods. Also includes construction
Tertiary business
Provide services. Also involved in distribution process
Name 4 factors of production
Land, labour, capital, enterprise
Describe land (f of p)
Land where business is based, natural resources on that land
Describe labour (f of p)
All people work in the business
Describe capital (f of p)
Buildings and machinery needed by business
Describe enterprise (f of p)
Entrepreneurs who set up the businesses, organise factors of production and take risks
What is an entrepreneur?
Someone who takes a calculated risk through starting a business
2 financial reasons for starting a business
Making profit, investing money
3 non-financial reasons for starting a business
Work-life balance, skills and interest, being their own business
8 words to describe a good entrepreneur
Innovative, risk-taker, hard working, organised, determined, persuasive, leadership, teamworker
4 advantages of sole trader
Quick and easy to set up, simple to run, keep all profits, quick decision making
4 disadvantages of sole trader
Unlimited liability, harder to raise finance, limited time off, stressful
4 advantages of partnership
Quite simple for 2-20 people to set up, bring more knowledge and skills, jobs shared so less stressful, easier to raise finance
4 disadvantages of partnership
Unlimited liability, profits have to be shared, decision making takes longer, short life- if partner leaves
What’s in a deed of partnership?
How profits are shared, how much each partner invests, how decisions are taken, what happens if a partner leaves
4 examples of an Ltd
Iceland, Virgin, John Lewis, Clark’s
Who are shares available to in an Ltd?
Friends and family
3 advantages of an Ltd
Limited liability, easier to raise finance, stable form of structure
3 disadvantages of an Ltd
Shareholders have to agree how profits are distributed, greater costs, less privacy
4 examples of a PLC
BP, Boots, Barclays, Marks and Spencer
Who are shares available to in a PLC?
The stock market
3 advantages of PLC
Limited liability, can raise large sums of finance, stable form of structure
3 disadvantages of PLC
Public can see information, risk of being taken over, separation of ownership and control
6 possible aims for a business
Survival, profit/sales maximisation, share value, quality, growth, social responsibilities
4 roles of objectives
Direction, focus for employees, allows planning, measurement of success
Name 7 stakeholders
Customers, employees, managers, suppliers, local community, government, shareholders
What are managers and employees mainly interested in?
Pay, job security, promotion, job satisfaction, success of business
What are shareholders mainly interested in?
High profits, success and growth, proper running of business
What is the government most interested in?
Payment of taxes, creating jobs, compliance with legislation
What are suppliers most interested in?
Fair or high prices, profitable and continuous trade, financial stability
What are customers most interested in?
Value for money, quality meets need
What is the local community most interested in?
Success of business, compliance with local laws
4 factors that influence location
Market, raw materials, labour, competition,
What should be included in a business plan?
The idea, objectives/aims, finance required, market, how it will operate
2 ways of internal growth
Franchising, outsourcing
2 ways of external growth
Mergers, takeovers
Franchising
Giving other businesses the right to sell its products
Outsourcing
Pay another firm to perform tasks for you
Merger
Consolidation of 2 titles
Takeover
One entity takes ownership of another
Economy of scale
Average cost per unity falls as output grows
Diseconomy of scale
Once economies of scale is reacted- if business grows/increases output, leads to increased average cost per unit
