Assessment 1 Flashcards
(49 cards)
Factors of production
Land …
The natural resources such as oil, water, and the land itself.
Factors of production
Labour…
the people employed by the business to make the product
Factors of production
Capital…
man-made resources that are needed to make products such as machines, tools and factories
Factors of production
Enterprise…
combining all the factors of production by the entrepreneur
Define an entrepreneur and name the skill and qualities of them
The entrepreneur is the person who brings together the workers, the natural and the man-made resources to produce goods and services
identifying a gap in the market – being able to spot where their product or services will fit and make a profit
risk-taking – all business start-ups come with an element of risk. Many people do not wish to take that gamble
leadership – entrepreneurs are not followers. They are the innovators who can take an idea and develop it. They also have to inspire other people to work and stay with them
Profit maximisation
The aim is to make as much money as possible out of the business.
This is the most obvious, but it is not always possible to achieve along with other objectives
Growth
To grow and increase market share, the business may have to accept lower profits as its costs will be higher and it may be selling at reduced prices.
Social Responsibility
Some businesses may wish to improve their public image by showing they are socially responsible.
They may give money to good causes or spend money to avoid damaging the environment
Stakeholders/Owners
Shareholders have invested money in the business and will want to see the price of their shares rise, and their share of the profit increased.
Owners such as sole traders or partners are stakeholders in their own business. They will want see the business achieving its objectives because their livelihoods depends on their business being successful
Managers
Will want job security, better pay and working conditions and good promotion prospects.
Customers
Will want low prices, high quality and good after-sales service
Government
Will want he business to keep within the law, pay their taxes, and provide employment
Internal factors that affect a business
Financial
This is the money the business has available. If there are funds within the company it can use these to help it develop. However if they don’t have money, they can miss out.
Not being to pay staff and employ more employees.
A machine cannot be bought
Loans have to be obtained from a bank
Internal factors that affect a business
Human Resource
Employees can affect how a business works by making decisions, carrying out their work to a poor standard and also by taking industrial action. Staff who are poorly trained might not have the skills to perform their jobs well.
Managers are promoted employees who are paid extra in return for extra responsibilities. The have more decision making powers than employees but in turn a higher risk of making the wrong decision and something going wrong
Internal factors that affect a business
Current technology
The technology that a business has can influence how the business operates. If the technology is out of date, this might mean the orders cant be processed as quickly as possible or things can go wrong eg machines can break down.
External factors that affect a business
POLITICAL
Changes made in local, national and European Union affect a business. For example, the minimum wage legislation brought many changes to firms in terms of who they employed and how much they had to pay. The EU has brought in a number of pieces of legislation which affect the rights of workers. For a business this mean increased costs and changes in their operations to comply with the laws.
External factors that affect a business
ECONOMIC
The government will change the levels of taxation and the exemption for tax each year, which will increase or decrease the costs of a business. For example if they increase the rate of VAT then prices will rise, meaning people will probably buy less. Changes in corporation tax will increase or decrease the business profits
External Factors that affect a business
Social
The UK now has a much older population than ever before
The average age for a first time mother is 29
The average family now has less than two children
All these factors means that firms’ customers have changed and they have to provide different goods and services. For example growth markets are now providing holidays for over 60s
External factors that affect a business
Technology
The growth of the internet and ownership of home PCs, coupled with a reduction in costs means that consumers can shop worldwide. For business this means they have to compete worldwide in what we call the global market. New inventions or improvements in processes in some industries mean that one firm will have an advantage over all the others. They have to work hard and fast to catch up or they wont survive .
External factors that affect a business
ENVIROMENTAL
It is important to realise that environmental changes will have many far-reaching effects on business activity for example the existence of out-of-town hypermarkets and one-stop shopping was made possible by the spread of car ownership[ and would be threatened if the use of cars was to be limited because of the pollution they cause. This gives an impetus to oil firms to try to find an environmentally friendly fuel, and to governments to finance alternative methods of transportation rather than build more motorways which destroy the environment
External factors that affect a business
COMPETITIVE
Every business want to stay ahead of their competitors and want better quality and new products, to produce more cheaply, to have a better reputation, and to sell more. Their long time survival depends on achieving at least one of these aims. The problem is competitors are always trying to take their customers away. The actions of competitors are the biggest single threat to any business. A business that achieves all of these aims will effectively push other out of the market. To survive the business must always be seeking ways to be better than competition.
Sources of finance for a business
GRANTS
Money available from governments, to help businesses set up
A source of finance from central or local government, the EU etc. It is often an incentive for a new business to set up in a particular area of high unemployment.
They are one-off payments that once received are not usually repeated.
Sometimes difficult to receive.
Sources of finance for a business
Hire purchase
Often used to obtain equipment and vehicles. The cost-plus interest is paid in equal instalments over a set period of time.
Item is easier to afford as the cost is spread
Fixed monthly repayment helps budgeting
The hire purchase company still owns the item until the final instalment is payed.
Sources of finance for a business
Overdraft
A short term facility at the bank to overdraw on your account.
Can be agreed in advanced, and for many firms a permanent facility can be available.
Interest rates can be quite high.
