unit 1 revision Flashcards
what is a good
goods are tangible items that can be used and stored. businesses make goods and sell them to customers. e.g clothes
what is a service
services are intangible actions. Often the business does something for you in return for a fee paid. e.g hairdressing
what are durable goods
something that lasts a long time and can be used more than once e.g car
what is a non-durable good
something that lasts a short period of time and can only be used once e.g a cinema ticket
factors of production - capital
capital means the man-made resources that the business use - such as buildings, machinery and tools. reward is interest
what is land
land means the natural resources that the business use - for example, a plot of land, coal, forests, water. reward is rent.
what is labour
labour means the workforce of a business - for example managers, shop assistants, cleaners etc. reward for labour is wages
what is enterprise
enterprise means the business ideas that entrepreneurs or owners have about how to use land, labour or capital to make a profit
what is a need
needs are basic requirements for survival and must be satisfied. examples include water, food and shelter
what is a want
wants are not essential to survival. these are luxuries that make your life more comfortable. examples of wants include Wi-Fi, designer clothes and laptops
what is adding value
adding value is the difference between the selling price and the cost price of a good or service.
what is wealth creation
It is the additional wealth that is added at each stage of the production process.
primary
primary sectors involve extractive industries such as mining or forestry which gather or extract raw materials.
secondary
secondary sectors involve manufacturing such as carpenters or builders which transform the raw materials into products.
tertiary
tertiary sectors are concerned with providing a service. for example hairdressers, dog walking or window cleaning
private sector
Private sector organisations are owned and controlled by private individuals. Funded by owners capital. They aim to survive and make profit. e.g. local newsagent or large supermarket chains
public sector
public sector organisations are owned and controlled by the government. They aim to provide a service to the public and are funded by taxes. public sector organisations function in areas such as health, education, police.
third sector
third sector organisations are owned and controlled by trustees. They are funded by grants. Third sector organisations are set up to help a cause or provide a service to members. They aim to raise money and increase awareness for good causes.
What are the benefits of good customer service?
- Motivated and highly performing staff
- Customers return to the organisation
- Market share may increase
- Customers recommend the business to their friends
what are the costs of poor customer service?
- Decrease in profits
- Demotivated staff due to complaints
- customers don’t return
- customers won’t recommend the business and may sway other potential customers
ways in which the business can improve customer service
mystery shopper
market research
staff training
customer complaints procedure
mystery shoppers
they are employed by the business to act as customers in store. they will then report back on their experience. this feedback is then used to help improve the businesses service or product
market research
affective market research such as online surveys will allow a business to find out the needs and wants of its customers.
staff training
well trained staff will be knowledged about the business and will be able to deliver a higher standard of customer care
customer complaints procedure
this includes instructions on how employees should handle complaints such who should deal with a complaint and how it should be processed. if a complaint is handled well, the customer is more likely to return to the business.
why do people set up their own businesses?
- They want to be their own boss
- They may have been made redundant and are using their redundancy money to set up their own business
- They have an idea for a new Product or service
where do people get ideas for starting their own businesses?
- spotting a gap in the market
2. improving on an existing product
what is an Entrepreneur?
an entrepreneur is a person who sets up a business, taking on financial risks in the hope of profit
what is the role of an entrepreneur?
to develop an business idea
take risks
combine the factors of production
what skills and qualities make an entrepreneur successful?
Communicate well with people Make good decisions Problem solving Determination Leadership Creative Risk Taker
what is a sole trader?
a sole trader is a business owned and controlled by one person. financed by their own savings - examples would be hairdressers, butchers, and electricians
advantages and disadvantages of a sole trader
Advantages - Easy to set up - Sole trader retains all profits for him/herself - sole trader makes all the decisions disadvantages - can be difficult to raise finance - unlimited liability - heavy workload
what is a partnership?
a business owned by 2-20 people. They share the responsibilities of running and owning the business
what is the deed of partnership
the written agreement which outlines rules for example it states how much money each partner invested will receive
advantages and disadvantages of a partnership
Advantages
- More equity available to finance the business compared to a sole trader
- Different partners can bring different skills
- workload is shared
Disadvantages
- unlimited liability
- Profit is shared between the partners
- Partners may not always agree on decisions for the business
what is a private limited company?
a business owned by shareholders with limited liability but whose shares cannot be bought by or sold to the general public
advantages and disadvantages of a private limited company
Advantages
- Owner can retain control
- More able to raise money
- Limited liability
Disadvantages
- must be registered with the register of companies
- high set-up costs (legal and administrative)
- hard to motivate and control workers who don’t hold a share
what is the third sector?
the third sector is not about making profit but rather about making a difference to society.
charity
an organization set up to provide help and raise money for those in need.
It is owned by private individuals and is run by a board of trustees.
They are funded by money raised through sales in charity shops and public donations.
e.g. cancer research UK
advantages and disadvantages of a charity
Advantages
- raise awareness and funds for a particular cause
- generally don’t have to pay income/ tax
Disadvantages
- depend heavily on unpaid volunteers and workers
- depend heavily on the generosity of the community for finance
voluntary organisations
it is a non-profit organisation run by individuals who help to provide a service to people. Examples would include clubs and sporting activities in the local area
advantages and disadvantages of a voluntary organisations
Advantages
- provide opportunities
Disadvantages
- depend heavily on unpaid volunteers and workers
- depend heavily on the generosity of the community for finance
social enterprise
a social enterprise is an organisation that exists with a clear goal to help the community but runs like a business. social enterprises can be sole traders or partnerships. funded by grants and investments. profits are reinvested back into the organisation.
advantages and disadvantages of a social enterprise
Advantages
- provide an opportunity for local people to gain employment
- bring positive change to people and communities
Disadvantages
- they face the same challenges and risks common to all businesses
objectives - survival
Every business must make enough of a profit to keep operating or else it will fold. Some small businesses will continue to have this objective as they struggle against economic recession or face fierce competition.
growth
the business aims to expand and increase its market share eg they may choose to open more stores or hire more staff
profit maximisation
most private sector firms aim to make as much profit as possible. this can be done by selling in volume at low prices to encourage lots of customers to buy.
innovation
the business aims to gain a competitive advantage eg by developing products which are unique or using creative marketing
sales maximisation
the business aims to achieve as much sales revenue as possible. staff may receive bonuses or rewards according to targets met.
provide the best customer service
a firm will aim to ensure customers receive the best service or experience when in store or online. for example the business could train staff to know how to provide a high standard of customer service.
social responsibility
the business is concerned with its activities not causing damage to the environment or people. For example, some businesses use biodegradable packaging to reduce the harm it does to wildlife or the atmosphere.
internal factors
finance staff management information technology
human resources
expert and capable staff will be more productive in their work and will help the business to achieve more
finance
finance is crucial. a lack of money could mean the business has to consider cost cutting measures such as staff redundancies or closing branches of the business.
changes in costs, such as wage rises or increases in the cost of stock, could mean that the business has to take cut in profits.
technology
the use of ICT and robots means that goods or services can be produced more efficiently and more cost effectively.
management
a strong and capable management team will make good decisions - and this, in return will lead the business to success
political
factors controlled by the government e.g. legislation, taxation charges and the public budgets
impact on the business
government could introduce laws, the business must comply with laws or face a heavy fine
government could introduce a minimum wage which employers must pay this will affect their costs and profits.
economic
factors controlled by trade e.g. recession or changes in lifestyle
impact on the business
If there is a recession and unemployment is high, consumers will have less income, which will result in a loss of sales for the business.
The business might also have to cut down prices on products to encourage customers to keep buying from them. this will mean a cut in profits.
social
factors controlled by the population e.g. fashion trends
impact on the business
The business must take notes of changes in the economy such as trends are going out of fashion and changing, healthy eating is being encouraged more. This means the business must adapt by - lowering prices on products, market research, new products are launched
technological
factors controlled by advances in new tech e.g. developments in IT, more internet coverage globally
impact on the business
the business must keep up with changes in technology otherwise it could lead to a fall in sales and profits for example
- the business must become involved in e-commerce, buying and selling goods using the internet
- They must adopt technology for production - investing in robotics or automation to produce goods - failure to invest could result in reduced output quality and products
environmental
factors such as weather, climate, natural disasters
also concerned with sustainability and being ethical e.g. pressure to use recyclable packaging
impact on the business
there is now an increasing pressure for businesses to be environmentally friendly. for example many firms have introduced carrier bags to encourage people to stop using plastic bags.
Businesses can also be disrupted by extreme weather conditions like storms, floods and snow - this could slow down delivery
competitive
factors caused by the actions of a rival business (competitor)
impact on the business
all businesses face competition from other firms for example - if rival firms lowers selling price, this means sales drop as customers switch to rival frim to save money. The business might have have to lower prices, change the way they advertise.
what is a stakeholder
a stakeholder is a person or a group of people who have interest in a business or organisation and in the way which it is managed and run
employees
employees want job security, to be paid a fair wage and to be part of a successful, thriving business
influence of employees
employees can take industrial action, for example, strike, if they are unhappy with working condition - this could lead to a halt in production therefore the business cant make sales or profits
managers interests
managers are employed by the business and will sometimes have a special arrangement in place that will entitle them to additional pay.
influence of managers
they can decide on staffing levels and what new products the business will introduce
impact of managers
poor decision making can damage reputation of the firm e.g. not employing or training enough staff
owners interests
the owners have invested their own money, time and effort into the business. They want it to thrive and grow and make a profit
influences
the owner can decide to sell their shares.
they can also increase their drawings (withdrawing cash from the business).
impacts
- selling market shares can increase supply lowering share value
- drawing too much can result in liquidity problems (ability to pay short term debts/bills)
customers interests
the customer of a business want the business to provide them with a quality product or service at an affordable and reasonable price.
influences
if customers are not happy with the service offered by the business, they can go elsewhere, for example, to a rival business. - this can result in sales dropping
they can also complaint which can lead to high costs for the business to deal with the complaint.
local community interests
the local community wants the business to do well, so it can provide employment in the area, and support local projects. the community also wants to ensure that the business doesn’t create negative effects such as pollution or traffic.
influences
can protest and raise awareness if a business is polluting or damaging the environment. - this can result in fines and poor image/ reputation
banks interests
banks want to make sure that if they provide an organisation with a loan, the organisation will be able to pay it back with the terms and conditions of the loan agreement.
influences
The bank can make and change decisions such as withhold loans or not, change repayment periods shorter or longer and change interests rates
impacts
the bank can refuse a loan which could prevent growth for the business. They could also extend a repayment period this can aid cashflow for the business.
If the bank increases interests rates, a firms expenses with also increase.
suppliers interests
suppliers need to be guaranteed that if they supply the goods on credit to the business, then the company has the ability to pay them back.
influences
suppliers can change prices, credit arrangements and discount rates at short notice
impacts
- higher prices or revoked discount will increase the cost of sales.
- longer lead times may result in delays in production
government interests
the government needs to know how successful the business is to ensure that they collect and receive the correct amount of tax, that they can provide employment and if they are taking ethical actions
influences
- can issue grants
- legislation changes
- lower taxation
impacts
- a grant can allow a firm to grow and expand
- law changes may result in expensive equipment or training needed
- lower tax means firms can retain more profit
