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Business > Unit 1; Setting Up a Business > Flashcards

Unit 1; Setting Up a Business Flashcards

1
Q

What is a business?

A

Businesses are organisations that provide goods or services to customers.

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2
Q

What are the main reasons for starting up a business?

A
  • Financial reasons e.g making a profit
  • Personal reasons e.g the independance of being their own boss
  • To help others e.g charity
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3
Q

What are business aims?

A

Goals a business sets e.g to survive

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4
Q

What are business objectives?

A

A clear target that the business wants to achieve over time, an objective helps to achieve an aim. They can be used to measure the success of the business e.g to open a second shop.

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5
Q

What does SMART stand for?

A 
Specific
Measurable
Achievable
Realistic 
Time
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6
Q

What are some examples of objectives?

A
  • Increase sales
  • Survival
  • Making a profit
  • Customer satisfaction
  • Market share
  • Social objectives
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7
Q

What are private sector businesses?

A

Businesses owned by individuals and aim to make a profit e.g apple, topshop

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8
Q

What are public sector businesses?

A

Businesses owned by the government that usually provide a service rather than a product e.g police, bbc

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9
Q

What is the primary, secondary and the tertiary sector?

A

The primary sector is the first stage of production e.g farming
The second sector is where the products of the primary sector are turned into manufactured goods e.g a table as well as construction
The tertiary sector involves services rather than goods, this is where they sell the products to the public.

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10
Q

What is a sole trader?

A

The only owner of the business

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11
Q

What are the + of a sole trader?

A 
\+ Owner keeps all the profit
\+ Little money needed to start up
\+ Financial info kept private
\+ Easy and cheap to start
\+ Owner makes all decisions
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12
Q

What are the - of a sole trader?

A
  • Limited chance of getting a lot bigger
  • If the owner dies, businesses folds
  • If owner is ill, business stops running
  • Difficult to get a loan
  • Long hours
  • Owner might not have specialist skills
  • Unlimited liability
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13
Q

What is a partnership?

A

A group of 2-50 people who own a business together. All profits and contributions are shared, they all have different skills. Must sign a deed of partnerships.

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14
Q

What are the + of partnerships?

A 
\+ Easy and cheap to start
\+ More money can be put into the business
\+ Sleeping partners
\+ Workload is shared
\+ Different skills
\+ Financial information kept private
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15
Q

What are the - of partnerships?

A
  • Profit is shared between owners
  • Partners may disagree/argue
  • Personal possessions may have to be sold
  • Difficult to get loans
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16
Q

What are the + and - of private limited companies?

A

+ Limited liability

  • More expensive/time consuming to set up
  • Legally obligated to publish accounts every year
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17
Q

What is a franchise?

A

A franchise is a method of establishing a business, when an existing firm gives legal rights for someone else to use their name to sell the same products.

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18
Q

What are the + and - of setting up a franchise?

A 
\+ Less risk of failure
\+ Benefit from a wider marketing
\+ Franchisor might provide training
- Only able to sell certain products
- Have to follow the franchisor's rules
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19
Q

What is a stakeholder?

A

Anyone that has an interest in the business e.g customers, suppliers, employees, local community

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20
Q

What is a business plan?

A

A business plan is an outline of what a new business will do and how it aims to do that.

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21
Q

What are the 4 P’s?

A

Product, Price, Place, Promotion

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22
Q

Why do businesses develop marketing strategies?

A

To maximise their sales
Anaylse their strengths and weaknesses
Anaylse their market

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23
Q

What is ‘mapping the market’?

A

It helps a business understand its location within the market and the market’s key features.

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24
Q

What is a ‘gap in the market’?

A

A need that isn’t being met, the business needs to move quickly to fill the gap, this could be developing a new product or just in a different place or price.

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25
Q

What is market research?

A

The action or activity of gathering information about consumers’ needs and preferences.

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26
Q

What is primary research?

A

Research that you do yourself e.g questionnaires, customer/supplier feedback, focus groups

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27
Q

What is secondary research?

A

Looking at someone else’s research e.g internet

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28
Q

What does demand mean and what is the ‘law of demand’?

A

Demand means the quantity of a product that consumers are willing and able to buy, the ‘law of demand’ shows that as the price increase, the demand decreases.

29
Q

What is supply and ‘the law of supply’?

A

Supply is the quantity of a product producers are willing and able to make for sale and the ‘law of supply’ means as the price increases, the quantity of supplies increases.

30
Q

What is equilibrium?

A

Where the consumer and producers agree.

31
Q

How do firms promote their products?

A

By advertising e.g posters, magazines, radio, leaflets

32
Q

Why might a customer be prepared to pay a higher price than usual for a product?

A

The demand for the product is high, there are no other products like that so the customers are prepared to pay more money for it.

33
Q

Why is market research important?

A

You can find out customers demands, as well as the price they are willing to pay and also about their competitors.

34
Q

What is e-commerce?

A

Buying and selling products online.

35
Q

What are three examples of direct costs?

A

Labour, raw materials and machinery.

36
Q

What is meant by sales?

A

The action of selling something

37
Q

What is price?

A

The amount of money a business charges for a product?

38
Q

What is meant by revenue?

A

The amount of capital a business recieves from selling a product, before the costs are deducted

39
Q

What are costs?

A

Costs are things a businesses needs to pay for in order to make or sell the product.

40
Q

If a firms revenue is lower than its costs for a period of time will they make a profit or a loss?

A

A loss.

41
Q

What is venture capital?

A

Money invested by individuals who specialise in giving finance to new or expanding firms.

42
Q

Why might a new or small firm find it hard to raise finance?

A
  • Sources of finance e.g loan are not going to be given by banks as they are risky
  • Might find it hard to make a large profit as they are not established yet
43
Q

What does cash inflow mean?

A

The money a business gets from selling the product

44
Q

What does cash outflow mean?

A

When a business pays its costs e.g materials

45
Q

What is net cash flow?

A

The difference between cash inflow and outflow

46
Q

Why are cash flow forecasts useful?

A

They are a good way of predicting when a firm might face a liquidity problem, this can help a business get a source of finance.

47
Q

What are credit terms?

A

Agreement of the terms of the loan e.g interest that the creditor and you agree to.

48
Q

Explain how overtrading can lead to poor cash flow.

A

The firm takes too many orders and therefore it buys too many materials and staff and the customers don’t pay the price quick enough which leads to debt.

49
Q

How can a business improve its cash flow?

A
  • Give customers less generous credit terms to get the cash quicker
  • Reschedule payments to suppliers or negotiate better credit terms with them
  • Selling the stock of unsold products
50
Q

Why might a business want to employ staff part-time?

A
  • Less expensive if there’s not enough work to fill a full-time worker
  • May be more motivated
  • Flexible
51
Q

Why do some businesses employ staff that have been personally recommended?

A
  • Reduces costs of advertising

- That candidate is likely to fit in if they have been recommended

52
Q

What are the + and - of recruiting internally?

A

+ Already know the worker
+ Motivate them more
- Won’t motivate other workers as they will be annoyed
- Also have to fill in that previous position

53
Q

What are the 2 documents that people write to say that they’re the right person for the job?

A

A curriculum vitae ( CV )

Application form

54
Q

What are 3 things assessed in an interview?

A
  • Confidence
  • Verbal skills
  • General attitude
  • Whether they’ll fit in with existing workers
55
Q

What 4 tests might a firm might use to decide who to employ?

A
  • Skills tests
  • Aptitude tests
  • Personality tests
  • Group tests
56
Q

What is the name of the pay method when workers are paid by the hour and also what are some + and - of this?

A

Wages, time rate.
+ Encourages them to work more
- They work slower so get less work done but get paid more

57
Q

What is the piece rate method?

A

A worker is paid for each item them produce e.g somone sewing t-shirts.
+ Higher quantity of products
- Lower quality

58
Q

What is a + of a salary?

A

+ Fixed payment, can’t change

+ Both the employer and worker know this rate

59
Q

What is the difference between job enrichment and enlargement?

A

Job enlargement: means giving a productive member of staff more task to do, increase the size of job description. Should make the job more interesting and varied, as well as making the employee feel more valued.

Job enrichment: giving workers more responsibility e.g supervising more staff, the worker may need more training however they are more likely to be motivated and work harder.

60
Q

Why is having motivated staff important?

A
  • They perform better

- May stay with the firm for longer which reduces recruitment costs

61
Q

What are fringe benefits? + 3 examples?

A

A fringe benefit is any reward that is not part of the worker’s main income

  • Company car
  • Free health insurance
  • Daily meal allowance
62
Q

Why can non-monetary rewards be good in smaller firms?

A

They might not be able to afford to spend more money but giving them responsibility may motivate them more for free.

63
Q

What must ALL employees be given within 2 months of starting work?

A

A written contract of employment

64
Q

What is mean by efficiency?

A

To produce the maximum amount possible with the minimum input of people and raw materials. They will have low operating costs, meaning higher profits.

65
Q

What is job production and what are its features?

A

When a firm manufactures individual products, each product is unique, they are usually personalised.

  • It requires highly skilled labour
  • Products are usually more expensive
  • Products are usually of high quality
66
Q

What is batch production and its features?

A

They make a batch of identical products

  • Limited quantities for a limited time
  • e.g housing estate
67
Q

What is CAD and CAM

A

CAD: Computer Aided Design
CAM: Computer Aided Manufacture

68
Q

How does using computers increase efficiency?

A
  • Information is stored online and is easily accessible
  • Very accurate and little mistakes
  • Computers can crash and get out dated easily
69
Q

How does e-commerce reduce business costs?

A
  • Saves money on paper
  • Many firms employ staff to talk over the phone so they may make these people redundant
  • If things are sold online then there is not money spent on a shop
  • Wages may be lower as warehouse is in a remote area
  • Online sellers can sell prices lower than high-street shops because of these reasons

Business (2 decks)

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