business in the real world Flashcards
(34 cards)
what is the purpose of business
a busibess provides a good or service. successfully meet the needs or wants of the customer
reasons for starting a business, give 3
- want to be their own boss and flexibe hours
- want to receive profits
- in need of a job
- applying a hobby into a business
- see a gap in the market
- provide a service for people, non profitable
give characteristics of entrepeneurs
- risk taking
- determined
- motivated
- innovative
- organised
- hard working
give difference between goods and services, and examples
goods - tangible (can be touched)
eg food, computers, clothes
services - intangible
eg hairdressers, internet access, transport companies
list the factors of production
land - the physical land and site which the business is located on
labour - skills and employees in a business
capital - equipment used to provide a good or service
enterprise -The skills of the people involved
in the business to identify business
opportunities and bring together resources to
meet these opportunities.
what is opportunity cost
The opportunity cost is the sacrifice
we make whenever we decide to
do anything. There is always a
trade off when doing something.
For example this could be when a
business must choose between two
different office locations, they will
face opportunity costs for the
location they do not choose.
name and define business sectors and give examples
primary - businesses that produce or extract raw materials. first stage of the production process and includes fishing, farming and mining.
secondary - makes or manufactures goods. takes place in factories and includes food manufacturers such as Heinz and car manufacturers such as BMW.
tertiary - this sector provides services. This includes estate agents, hairdressers and restaurants.
dynamic nature of business
technological change - keep up with rapid changes in technology, advertising methods, production, e-commerce and m-commerce.
economic change – interest rates, inflation and GDP.
legal change – changes to laws such as minimum wage may increase the costs of the business or affect the demand for the product as workers now have more disposable income.
environmental expectations – aware of how their customers feel about environmental and other ethical issues. This will affect how they produce, package and transport their products as well as the resources they use.
define sole trader and give advantages and disadvantages
A sole trader is a business that is owned and run by one person.
advantages
- quick and easy to set up
- keeps profits
- makes own decisions
disadvantages
- unlimited liabilty
- long hours
- high responsibility
define partnership and give pros and cons
A partnership is a type of business that has between 2 and 20 owners. They decide to set up and run a business between them
pros
- there is shared decision-making/debt responsibility by the owners
- partners bring more skills and ideas
- there is more capital available to invest
cons
- profits have to be shared between the partners
- conflict amongst owners can occur
- unlimited liability
- one partner may let the others down by not upholding their responsibilities in the business
examples of sole traders
hairdressers, plumber, gardeners, freelancers
examples of partnerships
solicitors
dentists
gp
what is a deed of partnership
a document signed by the partners setting out the terms of the business
eg. each percentage owned/profits allocated, roles/responsibilities, debts
define private limited company and give pros and cons
a small or large business with limited liability and ltd after the name
pros
- limited liability
- any new shareholders need to be invited, which protects the business from outside influence
- shares in the business can be sold to raise money
cons
- more paperwork
- other people are able to view the business’ financial information
- time consuming to set up
- shareholders will expect to receive a percentage of the profits as dividends
define public limited company and give pros and cons
- shares are sold to the public on the stock market, small or large business with limited liability and plc after the name
pros - raise additional finance through share capital
- shareholders have limited liability
- increased negotiation opportunities with suppliers, larger businesses can achieve economies of scale
cons - it is expensive to set up, minimum of £50,000
- more complex accounting and reporting requirements
- risk of a hostile takeover by a rival company as the company cannot control who buys its shares
- shareholders receive dividends
- shareholders may clash when making decisions about the business
what is the purpose of a business having aims and objectives
businesses set aims and objectives to help with decision making. This allows businesses to decide what their main focus should be. Aims and objectives also show key stakeholders, such as investors and employees, the direction the business is planning to take.
name 3 business objectives/aims
- survival
- customer satisfaction
- increased market share
- profit
-ethics - growth
- efficiency
what is the SMART rule
S – Specific
M – Measurable
A – Agreed
R – Realistic
T – Time-bound
factors that affect a business’ aims and objectives
- the business’ size (eg sole trader start up or huge plc)
- type of business eg ltd, partnerships
- purpose of the business
- level of competition in the market
what factors may cause a business’ aims/objectives to change
- new government legislation – could impact on the costs of a business, adapt their profit objectives
- changes in the economy – during a recession, a firm may focus on survival rather than growth whereas during a period of boom, expansion might become the main focus
- changes in technology – more focused on new production methods, e-commerce or m-commerce or new payment systems such as contactless
- changes in environmental/ethics – customers become more concerned with their impact on the environment, businesses set environmental and ethical objectives to avoid losing customers
how do businesses measure their success
- number of employees
- customer satisfaction
- market share
- social media followers or engagement
- revenue and profit
- number of new stores opened
- share value
- environmental impact
define stakeholders and give some examples
- A stakeholder is any person/group of people that affects or is affected by the business
- shareholders and owners
- managers
- employees
- communities
- suppliers
- government
- pressure groups
give some of the objectives of stakeholders
- shareholders/owners - ensure the business is successful and profit
- managers - good salary/opportunities, further career progression/promotion
- employees - good levels of pay, job satisfaction and job security, career progression/promotion
- customers - good quality goods/service, reasonable prices, good ethics
- suppliers - receive payments on time and regular orders
- local community - employment
- pressure groups - increase knowledge of their cause, environment/ethics
- government - create more jobs/employment, raise more money from taxes
how are stakeholders affected by the business activity
- Shareholders/owners - grow the business and authorise opening new stores. expect to see sales increase over time. However, opening a new store will cost money, which may affect profits
- Managers - additional responsibilities and new targets .opportunities for career progression/promotion, demotivated if not given such opportunities.
- Employees - increased job security as a business grows. opportunities for promotion to new roles, could feel resentful if not offered opportunities.
- Customers - benefit from having more choice of where to shop, may remain loyal to existing businesses. good marketing activity tempts them to try new store.
Suppliers benefit from increased orders to equip and stock the new store, which might lead to an increase in their profits. If they are unable to cope with the extra demand, there is a risk that the business will use other suppliers.
The local community will benefit as a new store is likely to bring new jobs. However, they may be unhappy with increased traffic or noise.
Pressure groups may protest against the new store if they feel their cause is adversely affected, eg if the store would increase pollution. This could deter other businesses from coming to the area.
The government may be pleased to see new jobs being created and may expect to see increases in tax revenues as a result. However, other businesses could lose customers, which would reduce their profits and the tax they have to pay as a result.
