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IB business management HL > unit 3 > Flashcards

unit 3 Flashcards

1
Q

How to calculate profit

A

Revenue - Costs

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2
Q

Definition of revenue and how to calculate it

A
  • the total income received from the sale of a good or service
  • total revenue - price x quantity sold
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3
Q

Pros/cons of many revenue streams

A

PRO
- Allow the business to generate extra revenue and profit
- Don’t have to rely on one source of revenue as much

CON
- May distract the business from its core focus

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4
Q

Definition and examples of revenue streams

A

The income that a business gets from different business activities

  • selling goods and services
  • advertisements on website
  • merchandise (merch)
  • sponsorships (eg. football teams)
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5
Q

Fixed cost definition and example

A
  • doesn’t matter how much is produced - the costs stays the same no matter the level of production/sales
  • eg. rent, property tax, interest on a bank loan
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6
Q

Variable costs definition and examples

A
  • costs that increase as the output increases (as more goods are produced)
  • eg. raw materials, packaging
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7
Q

How to calculate total variable cost

A

Total variable cost = Quantity x variable cost per item

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8
Q

Formula for profit

A

Profit = Revenue - Fixed Costs - Total Variable Costs

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9
Q

Definition of Cashflow Forecast

A

A statement that shows the expected cash a business expects to receive and pay out over a period of time

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10
Q

Cashflow Forecast Structure

A

A. Opening balance
B. Cash inflows
C. Cash outflows
D. Net cash flow (B-C)
E. Closing balance (A+D)

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11
Q

Examples of cash inflows/outflows

A

inflows
- sales revenue
- owners capital
- sale of fixed assets
outflows
- rent
- wages
- purchase of inputs and materials

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12
Q

What is the difference between profit and cashflow?

A

In situations where trade credit is given (for example 30 days)
Revenue - added to chart immediately
Cashflow - added to chart after 30 days (when the money actually flows through)

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13
Q

Causes of Cash Flow problems (5)

A
  • Unprofitable business (business making a loss)
  • Giving too much trade credit to consumers
  • Expanding too quickly (have to pay to expand - profits come slower)
  • Having too much stock (pay suppliers - wait for cash to come in from sales)
  • Seasonal demand problems (eg. ski - higher sales during winter)
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14
Q

Strategies for dealing with cash flow problems

A

Improving cash inflows
- Improve credit terms (eg. trade credit from 60-30 days)
- Any sources of finance (bank loan, share capital etc.)
- Sell assets
- Short term promotion (eg. discounts)

Reducing cash outflows
- Find cheaper suppliers
- Delay payment to creditors (eg. longer trade credit)
- Reduce stock
- Cut unnecessary overheads

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15
Q

What is working capital?

A

Funds available for the day-to-day running of the business

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16
Q

Definition of Liquidity

A

How quickly an asset can be turned into cash

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17
Q

Working Capital Cycle components

A

A. Cash in
B. Payment to suppliers/employees/cash (cash out)
C. Goods produced
D. Goods sold

rate of B-D = shows successfulness

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18
Q

What is the relationship between investment, profit and cashflow

A

investment - large sum of money needed
profit - investment should lead to higher future profit
cash - large outflow to start with, followed by small cash inflows

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19
Q

Definition of business investment

A

committing money or resources to a idea with the expectation of generating profits or returns in the future.

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20
Q

How can business investments lead to cash flow problems in the short run

A

large outflow at first - large sum of money payed for investment

21
Q

What is market planning?

A
  • identifying the marketing goals of a business and what strategies they will use to achieve those goals
  • how are we going to get consumers to buy our product?
22
Q

What is in a marketing plan?

A

might include
- marketing objectives (eg. increase market share)
- marketing strategies (target new customer)
- target market
- market research competitors
- marketing budget

23
Q

3 roles of marketing planning

A
  1. set objectives
    - target market
    -increase market share
  2. marketing strategies
    - market research
    - implement strategies
  3. reflection and evaluation
    - did the strategies meet the objectives?
24
Q

definition of mass marketing

A

when’s business aims to sell a product to all consumers in the market
- an undifferentiated strategy (does not target anyone in particular)

25
Q

definition on niche marketing

A

when a business focuses on a specific and well-defined segment or part of the market
- a differentiated strategy (aimed at certain consumers)

26
Q

PROS of mass marketing

A
  • more potential customers - higher sales
  • higher brand recognition
  • lower costs as higher production leads to economies of scale
27
Q

PROS niche marketing

A
  • product is designed for its consumers so brand loyalty
  • less competition so can charge higher prices for specialised products
  • can specialise and focus on target customers
28
Q

generally - would a new company work in the mass market or niche market - why?

A

niche
- less competition

29
Q

what is product differentiation?

A
  • ways in which a business’ products are different to the competition
30
Q

what is a USP, examples?

A

UNIQUE SELLING POINT/PROPOSITION

  • any aspect of a business that makes it appear different to the competition in the mind of the consumers

eg.
- best/cheapest
- well known slogans/adverte
- first/original
- shopping experience
- home delivery

31
Q

pros / cons of product differentiation (having a usp)

A

PROS
- brand image
- increased brand loyalty
- can charge higher prices
- more resistant to changes in the market

CONS
- marketing costs
- can be copied by competitors
- might limit the potential audiemce

32
Q

What is a market segment

A
  • a part of a market where consumers share characteristics which are the same
    eg. clothing market
  • male youth
  • sportswear
33
Q

what is market segmentation?

A
  • breaking a market into different parts, where consumers in each segment have similar characteristics
34
Q

3 different types of market segmentation

A
  1. demographic segmentation
    2 geographic segmentation
  2. psychographic segmentation
35
Q

What is target marketing?

A

targeting your product towards a certain market segment

36
Q

examples of demographic segmentation

A
  • age
  • gender
  • race
  • religion
  • marital status
  • education
  • income
  • language
37
Q

examples of geographic segmentation

A
  • local tastes
  • local culture
  • climate
  • urban/rural
  • population density
38
Q

examples of psychographic segmentation

A
  • lifestyle
  • hobbies and interests
  • values
  • motivation
39
Q

what is a customer profile?

A

a system that identifies customers in each segments

  • able to tailor their marketing toward them through profiles and information on each persin
40
Q

What is a PPM?

A

Product positioning matrix

  • product perception map
  • 2 x 2 visual tool that shows customer perceptions of a product or brand compared to competitors

x and y axis - two key characteristics important to customers

41
Q

Why do businesses create PPMs?

A
  • gain information on the market
  • find gaps in the market (less competition - more successful)
  • repositioning
  • create a product portfolio - range of product that target different segments
42
Q

what is revenue expenditure

A

The cost of the day-to-day running of a business

43
Q

what is phsycographic segmentation?

A

a market research method used to divide a market or customer group based on their beliefs, values, lifestyle, social status etc.

44
Q

definition of direct costs

A
  • costs that can be clearly identified with production of each unit of production or a project
  • eg. cost of meat in hamburgers, cost of business teachers in business education
45
Q

what are indirect costs/overheads

A
  • costs that cannot be clearly identified with each unit of production
  • costs that don’t contribute to production but keep the company going
  • eg. costs of cleaning a school or business (but cannot be attributed to a single class) ceo salary
46
Q

CONS of mass marketing

A
  • limited personalisation
  • competition
    due to the many competitors - it could lead to a great competition at some points
  • waste of resources: Resources may be wasted on reaching individuals outside the target market.
47
Q

CONS mass marketing

A
  • Limited Personalization: Mass marketing may lack personalization, leading to a less targeted message.
  • Competition: Intense competition can arise in saturated markets.
  • Waste of Resources: Resources may be wasted on reaching individuals outside the target market.
    —————————-
    Since mass marketing aims to reach a broad audience, there is a risk of investing resources in advertising or promotional activities that do not effectively resonate with or attract the intended consumers
48
Q

CONS niche marketing

A
  • Limited Market Size: The size of the niche market may be smaller, limiting potential revenue.
  • Risk of Dependence: Dependence on a narrow market can pose risks if it becomes less profitable or experiences changes.
  • Higher Costs: Operating in a niche may involve higher production costs per unit due to lower economies of scale.

IB business management HL (12 decks)

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