Unit 1- Understanding Business Flashcards
What is a Business?
A business is any activity that results in the provision of goods and services that satisfy human needs and wants.
What are the roles of a business?
Provide jobs Provide goods and services Provide choice to consumers Created competition = lower prices A source of innovation and ideas Develops infrastructure
The importance of a business
A business will only provide a good/service if enough people need or want it.
What is a good?
It is a thing we can go into a shop, pick up and buy.
- we can touch them
- a durable good is one which is expected to last 3 or more years
What is a service?
These are things that people do for us.
-we cannot touch them, this makes services intangible
State the factors of production.
Land - natural resources used by a business to produce a good or service.
Labour - refers to the employees of the organisation
Capital - the man-made resources that are used by the business to produce their good or service.
Enterprise - refers to the idea for the business. It also involves the ability to bring together the other factors of production.
State what the sectors of industry.
Primary Sector - involves businesses which extract natural resources from the Earth.
Secondary Sector - involves businesses whose activity involves manufacturing things.
Tertiary Sector - involves types of businesses who do not produce goods but provide a service.
Quarternary Sector - It can be described as the support sector. It is the knowledge based.
What are the sectors of economy.
Private sector
Public sector
Third sector
Describe the private sector
They are owned and controlled by private individuals.
It tends to focus on profit marketing
Private individuals will invest in their own money into the business when setting it up. Loans are also available.
Describe the public sectors
They are owned and controlled by the government.
Aims to provide vital services like healthcare, education, services and street lighting.
They are funded through taxation.
Describe the third sector
Consists of charities, voluntary groups and social enterprises.
No-one owns a third sector organisation so a board of trustees is nominated to run and control it.
Are funded by donations, fundraising and grants.
Tend to be set up with the aim of supporting a worthy cause or to provide service to a specific group of people.
What are the Advantages and Disadvantages of Operating Globally?
Advantages
- wages and production costs for raw materials are lower in host countries which reduces production costs.
- can take advantage of tax rates, reducing business costs
- more awareness of the company will increase profit
Disadvantages
- shower decision making as a result of a language barrier.
- difficult to maintain control across many countries, leading to inconsistency quality control of products.
- businesses need to be aware of the countries culture to anybody being offended .
What is a multinational?
It is a business that operates in more than one country.
To be an MNC, a business needs to have an office/factory at least another country than its host country.
What is liability?
The state of being legally responsible for something.
State the two types of liability
Unlimited liability
Limited liability
Describe unlimited liability
You are legally responsible for the business’ debt and paying its bills.
If the business fails you may need to use your own money to pay off their bills and debts.
Describe limited liability
You are only at risk of losing money that you have invested into the business.
The business is seen as a separate legal entity.
What is a shareholder?
A shareholder is an investor in a business.
They invest their money into the business in return for a share of the business.
Each share is a percentage ownership of the business.
The more shares they own, the larger the percentage of the business they own.
What are the characteristics of a private company?
And what are the advantages?
- They are owned by shareholder.
- Shareholders need to be invited to invest in the company.
- They have limited liability.
- They are led by a managing director
- 2 shareholders are needed to run the establishment
- shareholders have limited liability
- the business cannot be lost to outsiders
- easy to find through selling shares
- expertise are gained from experience from board directors.
What is franchising?
A business agreement that allows one business to operate under a trading name of another, and can sell all their products.
What is a franchiser?
The business that owns the name and sells the rights to use the name.
What is a franchisee?
The person/business that buys the trading right and runs the business.
What are the public sector organisations?
1) Central Government
2) Local Government
3) Public Corporations
Give details on the central government
Organisations that are controlled by the U.K. Government or by the Scottish parliament.
Provides national services to the public- defence, healthcare, transport
A department is set up to manage each of these key areas.
An elected government minister is put in charge of running/leading each department.
They are funded through taxation.
