Units 1.1-1.3

Question 1

[1.1] Business

Answer 1

An organization that brings together resources to produce goods and services that are sold to customers.

Question 2

[1.1] Resources (human, financial, physical)

Answer 2

• Human resources: the people aspect of the business i.e. direct labor, indirect labor, managers
• Financial resources: the funds that a business has to facilitate its organizations
  i. e. day-to-day funds, long-term finance, recordings of business profits and asset value
• Physical resources: the capital of the business
  i. e. buildings, equipment, fixtures and fittings

Question 3

[1.1] Business functions

Answer 3

The different aspects of business operations (four areas).

Question 4

[1.1] Human resource management

Answer 4

One of the four main business functions.

It is the way in which a business manages people in its organization.

Question 5

[1.1] Finance

Answer 5

One of the four main business functions.
It is the department of an organization that has to make sure the business has the funds to operate on a day-to-day basis as well as having the finance to invest in its future operations.

Question 6

[1.1] Marketing

Answer 6

One of the four main business functions.
It is the department of an organization that is responsible for discovering, predicting and satisfying the needs and desires of consumers in a profitable way.

Question 7

[1.1] Operations

Answer 7

One of the four main business functions.

It is the way that organizations manage physical resources.

Question 8

[1.1] Primary business sector

Answer 8

Businesses that are involved in agriculture, forestry, fishing and mining.

• The goods produced in this sector are sold to manufacturing firms in the secondary sector.
  i. e. mining company

Question 9

[1.1] Secondary business sector

Answer 9

Manufacturing organizations that make goods (out of the goods produced in the primary sector) to sell to other businesses and final consumers.
i.e. car manufacturer

Question 10

[1.1] Tertiary business sector

Answer 10

Firms that provide services to consumers and other businesses.
i.e. restaurant

Question 11

[1.1] Quaternary business sector

Answer 11

Businesses that are focused on information technology.

i. e. social media company
- The quaternary sector is often included with, or is considered part of, the tertiary sector.

Question 12

[1.1] Factors of production

Answer 12

The collective term for the resources used in the production process.
i.e. land, labour, capital and entrepreneurship

Question 13

[1.1] Value added

Answer 13

The numerical difference between the cost of factor inputs in the production process and the price that the final output is sold for.

Question 14

[1.1] Entrepreneur

Answer 14

An individual that sees a business opportunity in the form of consumer want and then brings together human, physical and financial resources to produce a product to satisfy that want.

Question 15

[1.1] Intrapreneur

Answer 15

An individual who works within a business in an entrepreneurial way to develop a firm’s products to attract new consumers.

Question 16

[1.1] Business plan

Answer 16

A formal document that describes the business, sets out its objectives and strategy, identifies its market and provides its financial forecasts.

Question 17

[1.2] Private sector

Answer 17

Businesses and organizations owned and controlled by individuals or groups of individuals that are not under state control; they usually aim to earn a profit.
i.e. for-profit organizations and not-for-profit organizations

Question 18

[1.2] For-profit organization

Answer 18

Commerical organization where the profits made by the business go to its owners or shareholders.

Question 19

[1.2] Not-for-profit organization

Answer 19

Organization that uses its surplus revenue over cost to finance its objectives or mission.

Question 20

[1.2] Public sector

Answer 20

Organizations that are primarily financed and controlled by a country’s government, with the main aim being to provide essential goods and services for the general public.

Question 21

[1.2] National organization

Answer 21

An organization in which the central government appoints managers and directors to run the organization.
- Often funded through government tax revenue.

Question 22

[1.2] Local organization

Answer 22

An organization often controlled and funded by regional governments.

Question 23

[1.2] Sole trader/sole proprietor

Answer 23

A for-profit organization owned and controlled by a single person.

Question 24

[1.2] Unlimited liability

Answer 24

Refers to the full legal responsibility that sole traders and (sometimes) partners assume for all business debts.

Question 25

[1.2] Partnership

Answer 25

A for-profit business where two or more individuals jointly own and take responsibility for the enterprise.

• In a general partnership each partner has unlimited liability for all of the partnership’s debts.
• In a limited partnership, limited partners have limited liability.

Different types of partners:

• Ordinary partnerships have 2 to 20 partners.
• Silent/sleeping partners are inactive owners of a partnership business, who provide additional capital without having any role in the actual running of the organization.

Question 26

[1.2] Deed of Partnership

Answer 26

A formal partnership agreement or contract between the owners, which includes legal agreements such as the formal responsibilities of each owner, their voting rights, and how profits are to be shared between the partners.

Question 27

[1.2] Company/Corporation

Answer 27

Any business organisation that is owned by its shareholders, who have limited liability.

Question 28

[1.2] Private company

Answer 28

A for-profit business that has shareholders who are invited to buy shares in the business by existing owners.

Question 29

[1.2] Public limited company

Answer 29

A private sector, for-profit business that sells its shares on a stock exchange to private investors.

Question 30

[1.2] Stock exchange

Answer 30

Any marketplace where the general public and other companies can buy and/or sell shares.

Question 31

[1.2] Cooperative

Answer 31

For-profit social enterprise jointly owned by its members who democratically run the organization to meet the needs and aspirations of its members.

Question 32

[1.2] Social enterprise

Answer 32

A revenue-generating businesses with community (social) objectives at the core of its operations in order to benefit the general public, rather than private shareholders.

Question 33

[1.2] Microfinance

Answer 33

Financial organizations that provide financial services to poor and low-income customers who do not have access to normal banking services.

Question 34

[1.2] Public-private partnership

Answer 34

An organization that is jointly established by a public sector and private sector organization (with a contract) to support the provision of a public service.

Question 35

[1.2] Non-governmental organization

Answer 35

A legally constituted, not-for-profit organization that supports issues in the public good.

Question 36

[1.2] Charity

Answer 36

A not-for-profit organization (usually operating in the private sector) set up to provide money and support to people in need.

Question 37

[1.3] Mission statement

Answer 37

A succinct and motivating declaration of an organization’s purpose of existence, who they are, and what they do; it formally sets out its core objectives.

Question 38

[1.3] Vision statement

Answer 38

An inspiring declaration of what an organization ultimately strives to be, or to achieve, in the distant future (long-term); based on its values.

Question 39

[1.3] Corporate aims

Answer 39

The long-term goals that a business wants to achieve in the future.

Question 40

[1.3] Objective

Answer 40

A target set by an organization to achieve its corporate aims.

Often set using SMART criteria:

• Specific
• Measurable
• Achievable
• Relevant
• Time

Question 41

[1.3] Strategy

Answer 41

The long-term plan that sets out the ways a business is going to achieve its corporate aims.

Question 42

[1.3] Tactics

Answer 42

The specific techniques used by a business to achieve its objectives.

Question 43

[1.3] Ethical objectives

Answer 43

Business objectives influenced by moral values.

Question 44

[1.3] Corporate social responsibility

Answer 44

An organization’s decisions and actions that impact society (which includes their customers, employees communities and the environment) in a positive way.

Question 45

[1.3] SWOT analysis

Answer 45

A strategic analysis tool that allows managers to assess the current situation facing an organization, including both internal factors and the external business environments.

It considers the following of a business:

• Strengths
• Weaknesses
• Opportunities
• Threats

Question 46

[1.3] Ansoff’s matrix

Answer 46

This is a strategic management tool, used to devise product and market growth strategies for an organization.

Question 47

[1.3] Market penetration

Answer 47

A growth strategy in the Ansoff matrix that focuses on developing existing markets with existing products to increase sales revenue and market share.

Question 48

[1.3] Market development

Answer 48

A growth strategy in the Ansoff matrix which focuses on marketing an existing product in a new market.

Question 49

[1.3] Product development

Answer 49

This growth strategy in the Ansoff matrix that involves introducing new products to existing customers by developing or replacing current products.

Question 50

[1.3] Diversification

Answer 50

A growth strategy in the Ansoff matrix, which involves a business launching new products in new markets.