Paper 1 Flashcards
What is limted liability?
when the levels of risk is limited to the amont of money that has been invested in the nusiness or promised as an investment
what is unlimted liability?
where the level of risk goes beyond the amount invested in a business, so the personel assets of the business owner can be used to pay off the business’s debts
What are the positive implications of limited liablity?
with limited liability , investors only risk losing the money they have invested. Therefore they are more likley to invest in a company knwoing they will not lose their personal assests. This may help the business in raising finance through share capital in the future.
What are the negetive implications of limited liabilty?
- they take longer to set up
- they cost more
What are the negative implications of unlimited liability
with unlimited liability , investors risk losing more than the money they have invested. Therefore they less likely to invest in a company knwoing they will lose their personal assests. This means it may be harder for the business to raising finance through share capital in the future.
Or lack of confidence in business decisions
What is a sole trader?
A type of unincorporated business that is owned by one person who has unlimited liability
What is a partnership?
A business that is owned by a group of two or more people who share the financial risk, the decision-making and the profits.
What are the disadvantages and advantages of a sole trader?
❌unlimited liability (difficult to raise finance /expand business slower and harder)
✅financial information kept private, this means that no longer disadvantaged by competitors having access to their private information, allowing theme to keep a competitive edge
✅control/ independance over the business
✅all rewards / profits retained
✅quick to set up, more convenient for busy lifestyle
❌a lot of pressure on one person, business decisions
❌difficult for holidays / being ill
What is a franchisee?
An entrepreneur who pays a grew to trade using the name and products of an established business
What is a franchise?
When a business gives another business permission to trade using it’s names and products in return for a feee and a share of it’s products
What is a franchisor?
An established business that gives permission to an entrepreneur to trade using its name and products
Pros and cons of franchising (for franchisee)
✅lower risk , business model already successful
✅support and training provided by franchisor
✅business benefits from marketing campaigns
❌have to pay initially fee , as well as a percentage of the profits
❌cannot make independent decisions (products already selling )
What is meant by the dynamic nature of a business?
This means the business is in a dynamic market, dynamic means that it’s rapidly changing. This means they have to constantly adapt to respond to consumer’s wants and needs
How do changes in technology allow new businesses to come about?
3 points
🟣make expensive technology affordable, reducing manufacturing costs
🟣e- commerce , bring ideas straight to market place, do not have to rent a physical premises, decreasing the risk that entrepreneurs have to take
🟣social media, inexpensive promotional method, can interact with current and potential customers, encouraging them to make more sales
How can business identity changes in consumer demands?
data, analyse this data to to make their customers’s shopping experinece ebtter, rethink the way that they design produce and market their products.
Why should a business keep up to date with consumer wants?
As customer tastes change regularly, a business may require to adapt existing products to prevent them from coming obsolete. These adaptations can also allow businesses to keep up with trends, retaining current customers and attracting new ones
Why might a business fail
🟣drop in revenue , eg: increase in competition reducing the amount of sales , negative cash flow
What are the types of risks that can lead to financial loss?
🟣competitive risks: in fear of competition, may spend more on marketing, increasing costs
🟣financial risk: not enough investment to attract customers attention
How is lack of security a risk in starting up a business?
Lack of regular wage, job security, this may negatively impact the entrepreneur’s health , causing a lot of stress. This may result in bad decisions for the business
What is a reward of starting up a business?
Profit, reinvested into the business
Independence : making their own decisions, flexibility, satisfaction
Business success :
What is the purpose of business activity?
🟢provide a good/ service
🟢adding value
🟢meeting customer needs
What is the difference between a goods and service ?
A good is a tangible item that can be used /stored.
Services are intangible actions , that cannot be stored . Use set only have access to them for a small period of time
Why do businesses need to meet customer needs?
Meeting customer needs , develops a positive relationship with them. They are more likely to be satisfied, and loyal . Buying the product again
How could a business add value to it’s products?
Branding
Convenience
Quality and design
USP
What is the importance of branding?
🟢Can create an emotional connection with brand that they share same views & beliefs , more likely to buy those products
🟢increases customer loyalty protect businesses from competitors.
🟢helping the business increase it’s market share
What are the pros/cons of primary market research?
✅tailored to business needs specifically, analyse their current market, improvements to products/ promotional strategies, future products
✅up to date info
❌expensive
❌ time consuming
What are the pros/ cons of secondary market research ?
❌could be inaccurate, biased
❌not tailored to business specifically
❌outdated
✅quick and easy
✅cheap
What is the purpose of market research ?
Identity and understand customer needs
&
identifies gaps in the market, allowing one to make informed businesss decisions ,reduces risk of business failure/ product more likley to suceed
Quantities and qualities data :
Quantity: quick , easy to analysis
Quality: more depth and detail
What are the pros and cons of social media market research?
Importance of reliable market research ?
✅well informed decisions
✅reduces risk
✅higher chance of businesses successful
❌unwise decision
❌cost the business money
❌products that do not sell
❌failure
What is market segmentation?
And types
Easier to develop products aimed at certain people to help them target their marketing
🟣income segmentation (disposable)
🟣lifestyle segmentation (hobbies )
🟣behaviour segmentation (time of year they buy)🟣demographic segmentation (age, gender, race)
How does market mapping help a business?
identifying a gap in the market, analysing competitors , adapt their product or promotional stategy to give them a competitive edge.
Describe one way in which a business could adapt existing products
( 3 marker)
They could adapt the promotional strategy for of a particular service or brand. This could make the product more suitable to different customers or markets. As a result , the small business would perhaps make more sales , leading to larger profit.
Describe business failure (risk of a business)
🟢cash flow, customers slow in paying bills, (negative cash flow) , cannot buy supplies or pay employees , business having to borrow money
🟢drop in sales revenue, recession , lack of disposable income , less sales of non - essential items🟢
Describe financial loss
Describe the risk of the lack of security
No regular wage , financial insecurity, stress, affect business decisions negatively
Describe the reward of independence
Working for themselves, more likely to take risks and think of something new rather than conventional ideas, this may lead to future exciting products
Describe the reward of business success
Provides jobs for employees
Industry entrepreneur awards
What is the purpose of business activity (meeting peoples’s needs)
Eg: fast delivery
Things such as response to feedback ,Allows them to develop a positive relationship , satisfied customers are more likely to repeat their purchases and recommend to others , increasing sales
What is the point on feedback from consumers?
Gaining understanding of the consumer’d needs , Allows business to learn from consumer , use this information to improve existing products or develop new
How can branding add value ?
The branding of a product defines the aims and values of a business, when consumers shares these values and beliefs they are more likely to connect emotionally, more likely to buy the brand’s products.
- Could also induce customer loyalty , as the consumer’s emotional connection between the brand could protect a business from other competitors, This could potentially lead to an increase in market share
Convenience adding value
Eg: allowing them an easier method to pay or great customer experience
Great customer experience, encourages customers to be brand loyal , protects the business from competitors, allowing them to maintain their market share
Design adding value
More aesthetically pleasing, attracts more customers, more sales
Good entrepreneur
Minimises risk, knowledge ,data (market research)
Makes good business decisions , long term viability, short term stage
Organising resources (finance ), managing people effectively
What are consumer needs ?
🟢price
🟢convenience
🟢choice (a range of products)
🟢quality
How does choice (a range of products ) supply consumer needs
How does convenience supply consumer needs?
What are are pros and cons of qualitative data ?
Proximity regarding business location
What are the advantages and disadvantages of E - Commerce ?
What are the advantages and disadvantages of payment systems ?
What influence does technology have the marketing mix
Pros and cons on a business tie meeting legislation
How do low unemployment rates effect a business?
- however due to globalisation the employ rate of a specific country may nit affect then at all
How does consumer level of disposable income affect a business ?
How do changes in interest rates affect savers and borrowers ?
What are the different types of taxes ?
