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Business > Unit 1- Understanding Business > Flashcards

Unit 1- Understanding Business Flashcards

1
Q

What is a Business?

A

A business is any activity that results in the provision of goods and services that satisfy human needs and wants.

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2
Q

What are the roles of a business?

A 
Provide jobs 
Provide goods and services 
Provide choice to consumers 
Created competition = lower prices 
A source of innovation and ideas 
Develops infrastructure
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3
Q

The importance of a business

A

A business will only provide a good/service if enough people need or want it.

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4
Q

What is a good?

A

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
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5
Q

What is a service?

A

These are things that people do for us.

-we cannot touch them, this makes services intangible

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6
Q

State the factors of production.

A

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.

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7
Q

State what the sectors of industry.

A

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.

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8
Q

What are the sectors of economy.

A

Private sector

Public sector

Third sector

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9
Q

Describe the private sector

A

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.

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10
Q

Describe the public sectors

A

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.

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11
Q

Describe the third sector

A

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.

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12
Q

What are the Advantages and Disadvantages of Operating Globally?

A

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 .
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13
Q

What is a multinational?

A

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.

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14
Q

What is liability?

A

The state of being legally responsible for something.

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15
Q

State the two types of liability

A

Unlimited liability

Limited liability

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16
Q

Describe unlimited liability

A

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.

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17
Q

Describe limited liability

A

You are only at risk of losing money that you have invested into the business.

The business is seen as a separate legal entity.

18
Q

What is a shareholder?

A

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.

19
Q

What are the characteristics of a private company?

And what are the advantages?

A
  • 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.
20
Q

What is franchising?

A

A business agreement that allows one business to operate under a trading name of another, and can sell all their products.

21
Q

What is a franchiser?

A

The business that owns the name and sells the rights to use the name.

22
Q

What is a franchisee?

A

The person/business that buys the trading right and runs the business.

23
Q

What are the public sector organisations?

A

1) Central Government
2) Local Government
3) Public Corporations

24
Q

Give details on the central government

A

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.

25
Q

Give details on the local government.

A

In Scotland it is split up into local authorities such as South Lanarkshire Council.

They provide essential services to the public like schools, refuse collection, and street lighting.

Each council raises funds through council tax. They also receive an allocated budget from the central government.

Each local authority is controlled by elected councillors.

26
Q

Give details of public corporations.

A

They are organisations that are regulated by central government.

A chairperson and a board of directors are appointed to manage the organisation on behalf of the government.

27
Q

State public sector objectives.

A
  • to provide a basic, vital service that might not be able to be delivered by private organisations
  • make best use of their funds
  • stay within an allocated budget
  • provide a quality service
  • continually improve the quality of the service offered.
  • Cut costs and reduce spending
28
Q

What are the third sector organisations?

A

1) Charities
2) voluntary organisations
3) social enterprises

29
Q

Factors affecting an organisations objectives

A
  • the type of organisation
  • the size of the organisation
  • the type of good/services which the organisation produces
  • the competitive environment which it faces
  • the sector of the economy it operates in
30
Q

Talk about profit maximisation

A

This is the primary objective of most private sector organisations.
Means to bring in more money than they are spending on materials and other costs.

Means to make as much profit as possible.

31
Q

Talk about growth

A

Seems to grow the business.

Becoming larger may enable a business to take advantages of economies of scale and improve its efficiency.

32
Q

Talk about sales maximisation

A

To sell as many product/services as possible.

Often a managerial objective and come at the expense of the profit.

33
Q

Talk about increased market share

A

This objective seeks to increase the company’s share of the market.

34
Q

Talk about corporate social responsibility

A

CSR refers to the organisations aiming to act in an ethical way or in any way that benefits either society or the environment.

35
Q

State some conflicting objectives

A

Profit max vs sales max

Profit max vs CSR

Profit max vs growth

Growth vs customer service

36
Q

Public sector objectives

A
  • to provide a basic, vital service
  • to make the best use of their funds
  • to stay within a budget
  • to provide a quality service
  • to cut costs and reduce spending
37
Q

Third sector objectives

A
  • to help a specified cause
  • to raise funds to support a cause
  • to raise awareness
  • to be socially responsible
38
Q

What is an external factor?

A

These are things outside the business that can be positive or negative.
The business has no control over these factors.

P E S T E C

39
Q

What is an internal factor?

A

These are things within the business that have a positive of negative impact on the business.
The business has no control over these factors.

FINANCE
CORPORATE CULTURE
STAFF
CURRENT TECHNOLOGY

40
Q

What is a stakeholder?

A

A person or a group of people who have an interest in the success of the business but can also take actions to influence the success of the business.

41
Q

Internal stakeholders

A
  • owners
  • managers
  • shareholders
  • employees
42
Q

External stakeholders

A
  • customers
  • suppliers
  • banks
  • local community
  • government

Business (3 decks)

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