useful extra knowledge theme 1

Question 1

Define business

Answer 1

An organisation that exists to provide goods and services on a commercial basis to customers

Question 2

Define goods

Answer 2

tangible products

Question 3

Define services

Answer 3

Intangible products

Question 4

What is competitive advantage

Answer 4

a feature of a business that allows it to perform more successfully than others in a market

Question 5

purpose of product differentiation

Answer 5

• to prevent direct competition

* enable business to increase price

Question 6

how products can be differentiated

Answer 6

• actual product differentiation
- unique function, design, performance

• psychological factors
- consumers ‘consume’ brand and product due to persuasive advertising (endorsements and sponsorships)

Question 7

define adding value to a product

Answer 7

• increasing the gap between cost of supplies and the price a product is sold at by creating an attractive image or quality product

Question 8

Benefits of business to society

Answer 8

• employment
• drive innovation through R&D
• pay taxes to government on profits
• create wealth among society (investment returns)

Question 9

Opportunity costs in developing a new business idea

Answer 9

Personal opportunity costs

• entrepreneur sacrifice their own regular income
• investment may be at expense of personal assets
• long hours may sacrifice social time

Opportunity costs of one business idea opposed to another

• miss out on potential sales of other
• cost of launch and investment restrict other investment opportunities