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GCSE Business Studies AQA > Unit 1: Starting a Business > Flashcards

Unit 1: Starting a Business Flashcards

1
Q

Definition: Business

A

Organising recourses to achieve a reward.

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2
Q

What recourses are used in the running of a business?

A
  • Utilities (electricity, water etc.).
  • Advertising.
  • Workers.
  • Suppliers.
  • Money.
  • Raw materials.
  • Property.
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3
Q

Why do people start businesses?

A
  • Self-employed – own boss (make decisions) – work own hours – decide own wages.
  • Choose own job.
  • Follow ambition.
  • Earn more money.
  • They have a good idea.
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4
Q

Definition: Entrepreneur

A

Someone that starts a business.

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5
Q

What’s the Primary Sector?

A

Businesses that produce raw materials. For example, a coal miner or fisherman.

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6
Q

What’s the Secondary Sector?

A

Businesses that turn raw materials into products. For example, a builder, a dressmaker, or a factory.

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7
Q

What’s the Tertiary Sector?

A

Businesses that provide a service. For example, a grocery store, a cinema, or a car shop.

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8
Q

How do people come up with ideas for new businesses?

A
  • Personal experience.
  • Provide a solution for a problem.
  • Improvement on an existing product.
  • Gap in the market – no competition.
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9
Q

How does an entrepreneur come up with a completely new business idea?

A
  • Completing market research.
  • Solving a problem that they’ve noticed.
  • Noticing a trend or fashion.
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10
Q

How does an entrepreneur use an existing idea but differentiate it?

A
  • Selling an existing idea/product but cheaper.
  • Selling an existing idea/product but with better customer service.
  • Bringing an existing idea to a region or country that doesn’t yet have it.
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11
Q

Definition: Differentiation

A

Making a business stand out from rivals in some way.

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12
Q

Definition: Gap in the Market

A

A business opportunity that is either a completely new idea or adds something different to an existing product or service.

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13
Q

What’s a market map?

A

A market map is one way of identifying a gap in the market.

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14
Q

Definition: Niche Market

A

A small group of consumers that share a similar need. For example, left-handed people or lactose intolerant people.

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15
Q

Why might entrepreneurs be attracted to niche markets?

A
  • Low competition – guaranteed customers – charge high prices.
  • Products may be desirable due to rarity (e.g luxury cars).
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16
Q

Definition: Franchise

A

The legal right to use the name, logo and products of an existing business.

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17
Q

What’s the franchisor?

A

This is the business that is giving entrepreneurs permission to open a franchise of their company and use their business name, logo and sell their products.

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18
Q

What’s the franchisee?

A

This is the entrepreneur that is buying a franchise of somebody else’s business rather than opening their own independent business.

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19
Q

Why might an entrepreneur be attracted to franchising?

A
  • Good investment.
  • Higher profits.
  • Don’t want to think of their own idea.
  • New experience.
  • No risk – business already successful – have a trusted supplier.
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20
Q

What does the franchisor do?

A
  • Supplies franchisee with the products to sell.
  • Provides franchisee with training to help them run the franchise.
  • Available to offer support and advice to the franchisee.
  • Advertises the business on the franchisee’s behalf.
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21
Q

What does the franchisee do?

A
  • Agrees only to sell the products supplied by the franchisor.
  • Pays a fee to buy the franchise.
  • Pays a percentage of the sales revenue to the franchisor.
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22
Q

Advantages of franchising for the franchisee?

A
  • Already successful business.
  • Less risky option, already have a customer base.
  • Training provided.
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23
Q

Advantages of franchising for the franchisor?

A
  • Expand business quickly.
  • Franchise does all of the work.
  • Royalty fees from the franchisee.
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24
Q

Disadvantages of franchising for the franchisee?

A
  • Can’t change the products.
  • Other franchisee could ruin reputation.
  • Pays royalty fees.
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25
Q

Disadvantages of franchising for the franchisor?

A
  • Could lose control.
  • Other franchisee could ruin reputation.
  • The hire process could be risky.
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26
Q

What types of businesses make successful franchises and why?

A

Businesses in the tertiary sector. This allows for more stores to sell services/products and make more profits. Also, the startup cost in the tertiary sector is low.

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27
Q

Definition: Sole Trader

A

A business that is owned by just one person. The owner has unlimited liability.

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28
Q

Definition: Unlimited Liability

A

When the owners of a business are personally liable for its debts, the business and its owner are the same legal entity.

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29
Q

Advantages of being a sole trader?

A
  • Don’t share profits with anyone.
  • The owner has sole control over decisions.
  • The owner can work hours that suit them.
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30
Q

Disadvantages of being a sole trader?

A
  • The owner has unlimited liability.
  • Might not have enough experience to run the business.
  • There is only one person to invest finance into the business.
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31
Q

Definiton: Partnership

A

A business that has 2-20 owners. The owners still have unlimited liability.

32
Q

Advantages of being a partnership?

A
  • Multiple people to invest finance into the business.
  • Shared workload.
  • Shared expertise: people with different skills.
33
Q

Disadvantages of being a partnership?

A
  • The owners have unlimited liability.
  • Profits shared between partners.
  • Liable for actions of other partners.
34
Q

Definition: Private Limited Company (ltd.)

A

A business owner by shareholders that have limited liability.

35
Q

Definition: Limited Liability

A

When the shareholders can only lose the money they’ve invested in the business. Their personal wealth is protected. The shareholders and the business are separate legal entities.

36
Q

Advantages of being a Private Limited Company?

A
  • All shareholders are protected by limited liability.
  • There is no limit to the amount of shareholders in an Ltd.
  • New shareholders can be brought into the company, raising extra finance.
37
Q

Disadvantages of being a Private Limited Company?

A
  • Profits are split between more owners.
  • There are more laws that affect Ltd’s.
  • There is a potential for conflict and power struggles between shareholders.
38
Q

Definition: Incorporation

A

The legal process of forming a limited company.

39
Q

The requirements of a Private Limited Company?

A
  • Ltd’s have to send annual financial records to the government.
  • Ltd’s can only sell shares privately, they can’t sell them to the public on the stock exchange.
  • All shareholders have a say in the running of an Ltd’s.
40
Q

Definition: Business Objective

A

A target for the business to achieve by a set date.

41
Q

Typical objectives for new businesses?

A
  • Survive the first year of business.
  • Increase the number of sales each month by a certain percentage.
  • Achieve a target amount of profit by the end of the year.
  • Increase market share.
  • Develop a reputation for good customer service.
42
Q

Definition: Market Share

A

The percentage of total sales in a market made by a business (e.g. Nissan sell 18% of all cars sold in the UK each year).

43
Q

Why do entrepreneurs set business objectives?

A
  • To keep track of business’s progress.
  • Look for areas for growth (external).
  • Look for weaknesses (internal).
  • Motivation.
44
Q

Characteristics of a ‘good’ business objective?

A
  • Specific.
  • Measurable.
  • Achievable.
  • Realistic.
  • Timed.
45
Q

Definition: Stakeholders

A

Groups of people who are affected by the actions of a business.

46
Q

Internal stakeholders?

A
  • Employees.
  • Shareholders.
47
Q

External stakeholders?

A
  • Customers.
  • Rivals.
  • Nearby residents.
  • Suppliers.
  • Locals.
48
Q

How can employees influence the objectives of a business?

A
  • Might quit – work for rivals.
  • Motivation – quality of service – amount of sales – profits.
  • Leave job – less staff – time and money to replace.
49
Q

How can customers influence the objectives of a business?

A
  • Where they buy from.
  • What they buy.
  • Word of mouth (reputation).
  • Complaints.
50
Q

How can the local community influence the objectives of a business?

A
  • Protests.
  • Vandalism.
51
Q

Definition: Social Enterprise

A

A business that is run to help society.

52
Q

Why entrepreneur want to start social enterprise?

A
  • Personal experience - want to give something back.
  • Help the less fortunate.
53
Q

Definition: Business Plan

A

A document outlining how an entrepreneur plans to achieve their objectives.

54
Q

What’s included in a business plan?

A
  • Mission.
  • Business objectives.
  • Market environment.
  • Competition.
  • Products/services.
  • Funding.
  • Forecasts.
55
Q

Why the entrepreneur would look at the business plan?

A

Measure how their business is performing and help them to make decisions.

56
Q

Why a bank would look at a business plan?

A

Look at it before lending money to the business so they can decide if they think the business will be able to repay the loan.

57
Q

Why investors would look at a business plan?

A

See what risks they’re taking.

58
Q

Why a business plan is important?

A
  • Allows entrepreneur to make effective decisions.
  • Important to gain investors.
  • Allows entrepreneurs to spot the risks and dangers their business will face and devise a strategy to deal with them (contingency plan).
59
Q

Definition: Logistics

A

The process of assembling all the raw materials a business needs, and delivering products to customers.

60
Q

Factors that affect a business’s location?

A
  • Wealth/local economy.
  • Size of location.
  • Planning permission.
  • Good infrastructure.
  • Close to large population.
  • Cost.
  • Close to customers.
  • Avoid competition.
61
Q

Definition: A Market

A

A place where buyers and sellers come together to exchange goods or services for money.

62
Q

Definition: Mail Order

A

When goods are bought through catalogues or online and delivered directly to the customer.

63
Q

Location, advantages of a town centre?

A
  • High footfall.
  • Popular area.
  • Good infrastructure.
64
Q

Location, disadvantages of a town centre?

A
  • High rent.
  • Near competition.
  • Low access.
65
Q

Location, advantages of a village?

A
  • Regular local customers.
  • Away from rivals.
66
Q

Location, disadvantages of a village?

A
  • Harder to expand.
  • Not as many customers.
67
Q

Location, advantages of an industrial estate?

A
  • Lower rent.
  • Catch customers as they leave work.
  • Good infrastructure.
68
Q

Location, disadvantages of an industrial estate?

A
  • Low footfall.
  • Space not suitable.
69
Q

Location, advantages of a local market or fair?

A
  • High footfall.
  • Populated area.
  • Low rent.
70
Q

Location, disadvantages of a local market or fair?

A
  • Low accessibility.
  • Near rivals.
71
Q

Location, advantages of the entrepreneurs home (mail order)?

A
  • Work from home.
  • Cheap; low rent.
  • Business open 24/7.
72
Q

Location, disadvantages of the entrepreneurs home (mail order)?

A
  • Doesn’t have a professional space.
  • Can’t sell face to face.
  • Have to pick a suitable business.
73
Q

What entrepreneurs risk by starting a business?

A
  • Health (stress).
  • Steady income.
  • Loss in salary from quitting job.
  • Finance invested.
  • Personal wealth (if unlimited liability).
  • Reputation.
  • Relationships.
74
Q

Why new business might encounter difficulties?

A
  • Poor management, entrepreneur has little experience and skills.
  • Too much competition, already reputable competitors nearby.
  • Insufficient profits made, entrepreneur inexperienced or too confident.
  • Business located in wrong place, entrepreneur has insufficient funds.
  • Poor cash flow, not enough money to cover startup costs.
75
Q

Reduce risk of being in business?

A
  • Market research.
  • Profesional help and advice.
  • Save rather than loan.
  • Business plan.

GCSE Business Studies AQA (5 decks)

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