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Business In The Real World Flashcards

(63 cards)

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1
Q

Why do people want to start their own business?

A
  • Pursue an interest
  • Positive impact on society
  • Pursue a gap in the market
  • More flexible hours
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2
Q

Good

A

Item that is tangible

E.g. A product

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3
Q

Service

A

Something that is intangible

E.g. hairdresser

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4
Q

What are the four factors of production? (CELL)

A
  1. Labour
  2. Land
  3. Capital
  4. Entrepreneurship
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5
Q

Factors of production definition:

A

Inputs need to start a business

Input —> transform —> output —> Good/service

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6
Q

Capital

A

Investment in equipment required to produce/run a business such as factories and machinery

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7
Q

Enterprise

A

The skills of the people involved in a business to identify business opportunities and bring resources together.

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8
Q

Land

A

Physical site on which a business is based and the natural resources required

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9
Q

Labour

A

The skills available and number of workers employed by a business

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10
Q

Opportunity cost

A

A thing that is given up when you have to make a decision
E.g. If a business decides wether to invest in new product or marketing campaign
If they chosen new product, opportunity cost is marketing campaign

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11
Q

Entrepreneur

A

Someone willing to take a risk on a business idea

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12
Q

Characteristic of entrepreneur

A
  • Passionate
  • Hardworking
  • Resilient
  • Creative
  • Charismatic
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13
Q

Business environment

A

Factors that affect a business that they can’t control

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14
Q

What are the four factors of a business environment?

A
  • Technological
  • Legal
  • Economic
  • Environmental
  • Competitors
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15
Q

Technological

A

Tech developments

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16
Q

Legal

A

Government setting laws

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17
Q

Economic

A 
Economy - affects a business:
• GDP - growth
• Interest rates
• Tax 
• Exchange rate
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18
Q

Environmental

A

Things to do with the environment

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19
Q

Need

A

Essential, can’t live without.

E.g. Food, water

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20
Q

Want

A

Non-essential, something that is desirable

E.g. Holiday, phone

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21
Q

Aim

A

An overall goal or target a business hopes to reach.

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22
Q

Objective

A

A specific, measurable target that outlines how a business will achieve that aim.

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23
Q

Objective - SMART

A 
Specific
Measurable
Achievable
Realistic 
Time scale
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24
Q

Why do objectives change?

A
  • Priorities change - change as they increase in size
  • Grow - achieve them, new ones
  • External factors - cause objectives to change
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25
Example of objective: Survival
Where a business aims to exist and cover its costs of running the business.
26
Example of objective: Social/ethical
Doing the morally right thing and behaving in a way that impacts society positively.
27
Example of objective: Customer satisfaction
To increase loyalty, service and recommendation by ensuring these people are satisfied.
28
Sole trader
Business owned and run by 1 person • Unlimited liability • Self employed
29
Characteristics of a sole trader
* Self employed * Limited funding * Niche markets
30
Advantages and disadvantages of sole trader
Advantages: • The sole owner has total control • The sole owner keeps all the profit Disadvantages: • Few sources of finance available, risky • Often the owner has to do all the jobs in the business
31
Partnership
Business owned by 2-20 people • Unlimited liability • Dead of partnership • Different skills/expertise
32
Characteristics of partnership
* Wider skills | * Deed of parthership
33
Advantages and disadvantages of partnership
Advantages: • Workload can be shared • Extra skills brought in to the business Disadvantages: • Profit has to be split • Potential disagreements in business decision making
34
Unlimited liability
Owner is completely responsible for the business debts - Risk personal assets
35
Limited liability
Owner (shareholder) is only responsible for amount invested
36
Plc (public limited company)
Company where shares are sold in stock market to anyone
37
Plc | Pros and cons
* Limited liability * £50k minimum share capital * Publish accounts * Anyone can see share price
38
Ltd (private limited company)
Company where shares are sold to friends and family
39
Ltd | Pros and cons
* Limited liability * £2 minimum share capital * Publish accounts
40
Shareholders
People who have brought shares in a limited company.
41
Dividend
Payment made to shareholders.
42
Not for profit organisation
Businesses that have social and environmental objectives. They do not exist to make profit
43
Franchise
A business that sells rights to another business to use name, product, or process Franchisor - owns Franchisee - rents
44
Benefits and drawbacks for franchisor
Benefits: • Growth is paid by the franchisee paying fees to the existing business • Franchisor has fewer staff and fewer problems to manage Drawbacks: • A franchisee may not keep to their legal agreement, this could damage the image of the brand • If one franchisee attracts poor publicity the whole business could be damaged
45
Benefits and drawbacks for franchisee
Benefits: • Safe strategy for franchisees as only 6.7% of new franchisees fail • Most of the profits are kept by the franchisee Drawbacks: • The franchisor can end the franchisee without reason • Management problems of the outlet do not have to be dealt with by the original business
46
Business plans
Written document that sets out a businesses aims and objectives
47
Importance of business plan
* See if a business is viable * Gain sources of finance * Assess performance
48
Growth
Increase in size or status
49
Why do businesses want to grow?
* Appeal to wider target market * Increase market share * Help achieve profit maximisation * Economies of scale (bigger business have lower unit costs)
50
Organic
A business that grows from within using its own resources
51
Takeover
When one business purchases another to have control of it
52
Merger
When a business joins with another to become a larger business
53
Outsourcing
When a business subcontracts to another business to produce a product for them
54
E-commerce
The act of buying and selling a product/service using an electronic system
55
Types of organic growth
* Open more shops, offices, branches * Offer franchises to other businesses * E-commerce sales * Outsourcing
56
Types of inorganic growth
* Merger * Takeover * Acquisition
57
Positives and negatives of organic growth
Positives: • Easier to manage & control • Slow & steady (less risk) Negatives: • Market share could fall if others grow more quickly • No benefits from joining another business
58
Positives and negatives of inorganic growth
Positives: • Can share specialist skills and gain cost advantages • Quick method of growth Negatives: • Can be very expensive • It can be hard to integrate the two businesses
59
Economies of scale
Occur when average unit costs fall as output increases.
60
Diseconomies of scale
Occur when average unit costs rise as output decreases.
61
Types of economies of scale
* Bulk buying (purchasing) | * Use machinery (technical)
62
Types of diseconomies of scale
* Communication * Less motivation * Coordination / control
63
Inorganic
A businesses that grows by joining with or buying another business

Business (8 decks)

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