End Of Year Exam Flashcards
What is a private sector organisation?
A business financed and run by an individual/group of individuals
What does incorporated mean?
There is a separate legal identity between the business and the owner, the business can: own assets, owe money and the owner has limited liability
E.g. private and public limited companies
Define unlimited liability
The owner is liable for all the debts of the business
What is a public sector organisation
Organisations that are owned by the government at a national/regional or local level
They are financed by taxation
E.g NHS
What are the characteristics of a business owned by a sole trader?
Owned by one person
E.g. hairdressers
Advantages: quick + easy to set up, keep all profit, be own boss, minimal start up costs, no legal formalities, easier to make decisions, more privacy
Disadvantages: unlimited liability, hard to raise finance, stressful, lack of help, limited skills
What are the characteristics of a private limited company?
Usually run by a family or small group
Keeps affairs relatively private
Funded by shares that are not sold on the stock exchange
Advantages: more control, keep more profit, information is relatively private, limited liability, more opinions/skills and ideas
Disadvantages: harder to raise finance, have to share profits, more legal formalities than sole trader
What are the characteristics of a public limited company?
Owned by Shareholders
Shares are sold on the stock exchange
Advantages: easier to raise finance, limited liability, banks are more likely to invest as they are seen as more reliable
Disadvantages: risk of loss of control, information made public, more expensive to set up, share more profit, have to please other shareholders
What is the role of shareholders?
To provide financial support for the business
They invest to: make a profit, possible dividend, become involved and have a say in business activities
What is share capital?
Money raised by a company through selling shares
Also known as:
Risk capital
Equity capital
Ordinary share capital
What is a dividend?
Payment made by a company to its shareholders
Dividends are not guaranteed
What is market capitalisation?
The total value of issued shares of a plc
Often used to indicate investors’ opinions of a company’s net worth/ overall value
Market capitalisation= current market price x number of shares issued
What factors affect business ownership?
Size of business
Amount of finance required
Type of investment needed
Need for limited liability
Degree of control the owners want
Nature of the business
Business objectives
Level of risk involved
What are the four types of market segmentation?
Geographic
Psychographic
Demographic
Behavioural
What are the characteristics of geographic segmentation?
Concerns the location of the target audience e.g. country, city or postcode
Benefits: fewer data points, quick + easy route to personalised marketing, higher product relevancy, improved advertising effectiveness
Drawbacks: not consistent, can be inconvenient, only affects certain areas, may miss certain customers, information may be unavailable
What are the characteristics of demographic segmentation?
Concerns non- character traits
Examples: income, age, gender, race, ethnicity, religion, level of education, profession
Benefits: messaging is more personal, information is regularly available, age can help determine where consumers will be
Drawbacks: customers may not be willing to share this type of information
What are the characteristics of behavioural segmentation?
How consumers spend their money/ the behaviour when shopping
Examples: spending, purchasing and browsing habits
Benefits: requires little data, customers with similar buying habits can be grouped, aids understanding of consumer needs, helps build brand loyalty
Drawbacks: habits can change, customers may not share data or may not like being tracked
What is targeting?
The process through which an advertiser identifies its target audience and then advertises to them through a variety of channels
What is positioning?
What customers think of the brand/ business and how it compares to competitors, it links strongly with brand image
What are the characteristics of psychographic segmentation?
Personal traits of consumers
Examples: likes/dislikes, personality, interests, hobbies, life goals, values, beliefs and lifestyle
Benefits: makes the business more relatable, better understanding, targeted messaging, explains buyer behaviour, improves customer communication
Drawbacks: customers may not want to share information, interests may change, lack of trust in the business, may be offended
What is niche marketing?
A market targeted at a specific group of customers
What is mass marketing?
Aims to reach the largest audience possible, the idea is that everyone should be a consumer of the product
What are the influences of positioning?
Price
Competition and what alternatives they offer
Ethics
How the product/business meets customer expectations
What are the influences on choosing a target market?
Size of market, growth and stability
Competition
Where customers are based
The four segments of the market
How do you analyse operational performance?
By looking at:
Labour Productivity
Unit Costs
Capacity
Capacity Utilisation
What is Labour Productivity?
Output per worker
Labour productivity= output/ number of workers
How do you improve labour productivity?
Motivation through incentives
Training
Machinery
Employ more skilled staff
What are unit costs?
How much each unit costs to produce
Unit costs= total costs/ output
What is capacity and what does it depend on?
The maximum level of output or production that a business can produce in a given time period
Capacity depends on:
Level of demand
Flexibility of production lines
Seasonality of demand and output
Implications of failure to meet demand
Opportunities for subcontracted or outsourced production
What is capacity utilisation?
How much capacity is being used
Capacity utilisation= (actual output/ maximum output) x100
What is the ideal level of capacity?
90%
Businesses want to work at a high capacity so there is less waste however need room to respond to changes in demand
How do you decrease unit costs?
By increasing labour productivity, output or capacity utilisation
What happens to unit costs if there is an increase in output?
They will decrease because fixed costs are spread over more units
How does operational data affect decision making?
Labour productivity can affect what the business invests in e.g. training, rewards or how the work is undertaken
Unit costs can affect the suppliers that the business chooses
Capacity can affect decisions such as whether to expand or not
Capacity utilisation can affect the business’ efforts to increase demand (promotions) or downsize (close part of the facilities)
Why is efficiency important and how do you improve it?
Why it’s important:
Lower unit costs= lower prices/higher profits= match competitors= be more competitive
How to improve it:
Use capacity more efficiently
Increase labour productivity
Choose optimal mix of resources
Lean productivity
Technology
How is efficiency measured?
Efficiency is measured by the inputs used to generate outputs
How do you decrease capacity?
Lay off workers
Downsize location
Sell assets
Sell land
Reduce working hours
How do you increase capacity?
Employ more people
Get a bigger warehouse
Buy more or better equipment
Subcontract or outsource to another business
How is labour productivity measured and how do you increase it?
Labour productivity= output per worker
To increase it:
Training
Targets
Rewards
Employ more experienced workers
Get better management
Better equipment
New technology
Find a new way to work
Use more flexible operations