Business Paper 1 Flashcards
(136 cards)
1
Q
What effect does changing technology have on business products and services?
A
-makes them faster
-makes them smaller
-makes them cheaper
-makes them easier to use
-makes them safr
2
Q
What causes changes in consumer needs and wants?
A
-changes in technology
-changes in lifestyle
-changes in demographics
-changes in trends
-changes in economy
3
Q
What are some possible rewards of starting a business?
A
-business success
-profit
-independence
4
Q
What are some possible risks of starting a business?
A
-business failure
-financial loss
-lack of security
5
Q
How can risk be reduced?
A
-market research
-producing a business plan
-sufficient start-up finance
-ensure the business is competitive
6
Q
What are the 6 ways to add value to a product or service?
A
-increased convenience
-increased speed of service
-improved quality
-better design
-introducing a unique selling point
-branding
7
Q
What is an entrepreneur?
A
An entrepreneur is a person who runs and owns their own business. They are risk takers who have an initial idea and a confidence to see it through.
8
Q
What percentage of business fail within their first four years of trading?
A
40 percent
9
Q
What 2 methods do entrepreneurs do to create new products?
A
Invention and innovation
10
Q
What are the 4 customer needs?
A
-price
-choice
-convenience
-quality
11
Q
What are the purposes of market research?
A
-identify gaps in the market
-understand competitors
-understand trends
-informing business decisions
-viewing customer opinions
-identifying customer needs
12
Q
What is primary market research?
A
Primary research is collecting information that did not exist before.
13
Q
What are examples of primary market research?
A
-surveys
-focus groups
-observations
-experiments
-questionnaires
-social media
14
Q
What are the advantages and disadvantages of primary market research?
A
-accurate
-up to date
-specific to customer needs
-may be biased
-effective for qualitative data
15
Q
What are the advantages and disadvantages of secondary market research?
A
-more general
-less time consuming
-effective at collecting quantitative data
16
Q
What is secondary market research?
A
Secondary research is gathering data/information which already exists.
17
Q
What are examples of secondary market research?
A
-sales data
-government reports
-internet sites
-newspapers
-market reports
18
Q
What is qualitative data?
A
Information about peoples opinions, judgments and attitudes.
19
Q
What is quantitative data?
A
Data that can be expressed as numbers.
20
Q
What is a market segment?
A
A market segment is a group of buyers with similar characteristics and buying habits.
21
Q
How can a business segment a market?
A
-age
-demographics
-lifestyle
-location
-income
-gender
22
Q
What are the benefits of market segmentation?
A
-meet specific customer needs
-differentiate its products
-focus on a specific group
-develop a unique brand image
-build close customer relationships
23
Q
What are the limitations of market segmentation?
A
-targeting a range of customers with different products or services can be costly.
-focusing on one group can cause a business to miss another opportunity.
-customer characteristics can change over time.
24
Q
What is a market map?
A
A market map is a diagram that can be used to position and compare products in a market.
25
What are the benefits of market mapping?
-identity gaps in the market
-view saturated markets
-supports market segmentation
-helps to identify closest rivals
26
What are the limitations of market mapping?
-based on opinions rather than data
-compares businesses on only 2 variables
-can be difficult to identify most appropriate variables.
27
When does head-to-head competition work?
-if there is enough demand in the market.
-if the business is able to meet customer needs better than its competitors.
28
How can businesses compete?
-better designs
-lower prices
-wider product range
-better customer service
-stronger brand image
-higher quality
-more convenient location
29
What is product differentiation?
Product differentiation is about making a product different from others in some way. It helps businesses to target different market segments and gain a competitive advantage.
30
What decisions may a business make in a highly competitive market?
-improving efficiency
-differentiating products or services
-lowering prices
-cutting costs
31
What are the drawbacks of a highly competitive market?
-lower prices to compete
-cut back on expenditure
-accept lower profit margins
32
What is a business aim?
Aims are the general goals that a business sets. An aim can be the purpose for a businesses existence.
33
What are business objectives?
Objectives are more specific than aims but they contribute to a business achieving its aims. Objectives can be either financial or non financial.
34
What are examples of financial objectives?
-survival
-sales and revenue
-profit
-market share
-financial security
35
What are examples of non-financial objectives?
-personal satisfaction
-independence and control
-challenge
-social benefits
-customer satisfaction
36
What is revenue?
Revenue is the amount of income received from selling goods or service.
37
How do you calculate revenue?
Revenue=price x quantity
38
What is a fixed cost?
Fixed costs do not vary with business output.
39
What is a variable cost?
Variable costs change directly with the number of products made.
40
How do you calculate variable costs?
Variable costs = cost of one unit x quantity produced
41
What are total costs?
Total costs are all the costs of a business.
42
How do you calculate total costs?
Total costs = total fixed costs + total variable costs
43
What is profit?
Profit is when business revenue is greater than its total costs.
44
How do you calculate profit?
Profit = sales revenue - cost of sales
45
What does profit allow a business to do?
-survive
-expand
-reinvest
-provide security
-reward employees
46
How do you calculate interest on loans?
(Total repayment - borrowed amount) divided by borrowed amount) x 100
47
What is an interest rate?
The cost % of borrowing but the % reward of saving.
48
What is break-even?
Break-even is the level of output at which a businesses revenue covers its total costs. At this point, the business is making neither a loss or a profit.
49
What is the break-even point on a graph?
Where total costs and revenue meet.
50
How do you calculate the break-even point in units?
Fixed costs divided by (sales price-variable costs)
51
How do you calculate the break-even point in revenue/costs?
Break-even point in units x sales price
52
How do you calculate the margin of safety?
Margin of safety = actual/budgeted sales - break-even sales
53
What is cash flow?
Cash flow is the money flowing into and out of a business on a day-to-day basis.
54
What is a cash flow forecast?
A cash-flow forecast predicts how cash will flow through a business over time. A business can use it to identify times when there may be a cash flow problem.
55
On a cash-flow chart, how do you work out receipts?
Net cash flow + total payments
56
On a cash-flow chart, how do you work out net cash flow?
Receipts - total payments
57
On a cash-flow chart, how do you work out closing balance?
Net cash flow + opening balance
58
On a cash-flow chart, how do you work out opening balance?
This is always the previous months closing balance.
59
How do you calculate cash flow?
(Receipts - payments = net cash flow) + opening balance = closing balance
60
Without cash, a business will not be able to…
-pay suppliers
-pay debts
-repay bank loans
-pay employee wages
61
What is cash?
Cash is the given amount of money that is available for a business to use to pay its debts (not profit).
62
What factors impact cash flow?
-changing credit terms
-change in demand
-change in stock levels
-change in costs
-seasonality in sales
-business expansion or contraction
63
What is a short-term source of finance?
Finances which are repaid immediately or quite quickly.
64
What are examples of short term sources of finance?
-bank overdraft
-trade credit
65
What is a long-term source of finance?
Finance which is usually repaid over a long time period.
66
What are the disadvantages and advantages of trade credit?
-access to suppliers without immediate payment
-no interest
-could damage supplier relationships
-paid back quickly
67
What is trade credit?
Trade credit allows businesses to obtain raw materials and stock but pay for them at a later date.
68
What are the advantages and disadvantages of bank overdraft?
-quick
-high interest
69
What are examples of long-term sources of finance?
-personal savings
-venture capital (raising capital from investors)
-share capital (raising capital by selling equity in a ltd)
-loans
-retained profit (money within a business)
-crowd funding (raising small amounts of money from a large number of people)
70
What is crowd funding?
The process of raising small amounts of money from a large number of customers for a new project, products or start-up.
71
What is selling shares?
A share is a part-ownership in a business. A limited company can sell shares to potential investors to raise capital. These investors are then shareholders and are entitled to profits generated.
72
What does it mean if a business has unlimited liability?
The owner is legally responsible for any debts in the business. Therefore there is potential for the owner to lose their personal belongings to pay off debts.
73
What types of businesses have unlimited liability?
Sole traders (business owned by one person) have unlimited liability because owner and business are the same.
74
What does it mean if a business has limited liability?
Any debts incurred by the business belong to the business and the owners can only lose money up to the amount that they have invested. Their personal belongings are not liable.
75
What types of businesses have limited liability?
Private limited companies (Ltds) have limited liability as the owners and the businesses are separate legal identities.
76
What are the benefits and drawbacks of unlimited liability?
-more risk
-no loss of control
-owner keeps all profits
-accounts do not have to be made public
77
What are the benefits and drawbacks of limited liability?
-reduces risk
-loss of control (shares sold to shareholders)
-loss of profit (shared between shareholders)
-accounts can be viewed by anyone for a small fee
78
What is an advantage of a partnership?
-shared experience and expertise
-owners share the risk
-easier to raise finance
79
What is a disadvantage of a partnership?
-decisions made my one partner can affect all partners
-no longer exists if one partner leaves
-profits are shared
-partners may disagree
80
What is a franchise?
A franchise is the right given by one business to other businesses to sell goods or services using its name.
81
Who is a franchisor?
A franchisor is the business that gives the franchisee the right to sell its products or service.
82
What is a franchisee?
A franchisee is a business that agrees to manufacture, distribute or provide a branded product under licence from a franchisor.
83
What does a franchisee get when they buy a franchise?
-an established brand
-training
-equipment
-support and advice
-access to goods/services
-advertising and promotion
84
What are the benefits of running a franchise?
-brand and reputation already established
-access to tried-and-tested products
-may have an established customer base
-clear demand (reduces risk)
-higher chance of survival
85
What are the drawbacks of running a franchise?
-cost of initial investment can be high
-little freedom to make decisions
-have to pay a fee to franchisor
86
The businesses proximity to which factors influence its location?
-proximity to market (customers)
-proximity to transport (eg.docks)
-proximity to competitors
-proximity to materials
-proximity to labour (workers)
87
What impact does e-commerce have on business location?
-removes the significance of location
-allows them to save costs because premises does not need to be in busy city centre or close to market they serve
88
What are the 4ps of the marketing mix?
-product
-place
-price
-promotion
89
What is the purpose of the 4ps of the marketing mix?
To meet customer needs
90
The marketing mix: product
-product has to meet customer needs
-businesses will differentiate their products form competitors
91
The marketing mix: place
-the way in which the product is distributed (from producer to consumer)
-eg. either online or through retail stores
92
The marketing mix: promotion
-communication between the business and customer to make the customer aware of the products
-includes: advertising, promotions, PR, sponsorships
93
The marketing mix: price
-the price must reflect the value customers perceive the product to be
-price is very subjective and depends on lots of factors
94
How does a business adapt its marketing mix to meet changing customer needs?
-changing product features
-changing product price
-launching new advertising campaigns
-selling products through popular retailers
95
How does technology impact the marketing mix?
-demands that products are constantly innovated
-businesses switch to digital advertising such as through social media
-customers can easily compare prices online (businesses need to monitor rivals to remain competitive)
96
What is the purpose of a business plan?
-convince bank to loan money
-identify customer needs
-reduce risk
-provide information
97
Who uses a business plan?
-owners (as a guide)
-partners and employees
-investors (to asses the risk or investment within the business)
-lenders eg. Banks (want to investigate the likely success)
98
A business plan should contain:
-business idea
-aims and objectives
-market research
-financial forecasts
-sources of finance
-location
-marketing mix
-production
99
What is a stakeholder?
A stakeholder is an individual or group that has an interest and is affected by the activities of a business.
100
What is a shareholder?
Shareholders are part owners of a private or public limited company. They own shares in a company.
101
What are examples of stakeholders?
-owners and shareholders
-managers
-pressure groups
-employees
-customers
-local community
-government
-suppliers
102
What is a positive effect of a business on a stakeholder?
-shareholders receive a return on investment
-employees and managers receive income, security and status
-customers receive high quality products at reasonable prices
-the government collects income tax
103
What is a negative effect of a business on a stakeholder?
-local community can suffer due to pollution
-government needs to monitor business activities
-employees may work under poor conditions
-stakeholders lose their investment
104
What types of technology influence business activity?
-e-commerce
-social media
-digital communications
-electronic payment systems
105
What happens if a business fails to keep up with changing technology?
Can lead to loss of competitiveness and business failure
106
How does new technology influence business costs?
Can be a huge, expensive investments but helps the business to improve efficiency and reduce costs
107
How does new technology influence business sales?
Increasing demand with the latest technology means a business can also evolve through e-commerce and digital communications
108
How does new technology influence business marketing mix?
-lowers cost of products
-makes promotions easier through social media
-allowed customers to purchase anywhere at any time through e-commerce.
109
What are some examples of principles of consumer law?
Consumer rights act (2015)
-good quality products sold only
-full product information should be disclosed
-customers have the right to reject or return goods.
110
What are the drawbacks of consumer law?
-business must know the law and keep up to date
-laws can restrict the way businesses want to operate
-costly to comply with laws
-bad publicity by not complying
-consumers can take legal action when the law is not followed
111
What are the benefits of consumer law?
-compliant businesses are much less likely to be sued
-improved stakeholder relationships
-if followed, good publicity
112
What are examples of the principles of employment law?
-recruitment should be fair
-health and safety requirements should be met
-all employees wages should be fair and meet minimum requirements
-redundancy should be fair
113
What are the drawbacks of employment law?
-costly to meet health and safety requirements
-paying national living wage increases business costs
-dealing to comply may lead to low employee morale, productivity and legal action.
-appropriate training is time consuming
114
What are the benefits of employment law?
-compliant businesses are considered good employers
-fewer employees will be tempted to leave, reducing recruitment costs
-employees will be happier and more motivated, leading to higher productivity and therefore customer service and product quality
115
How do businesses meet the requirements of consumer and employment law?
-costs
-equipment
-licences
-pay
-administration
-training
116
What is the level of demand in the economy?
The level of demand in the economy refers to the level of spending that takes place in the economy. Demand can come from businesses, customers, governments or overseas.
117
What is the economic climate?
The economic climate is the level of demand and spending within the economy. Economic activity is measured in gross domestic product (GDP)
118
What factors change demand in the economy?
-level of economic activity (eg. In a recession, demand will fall)
-interest rates
-exchange rates
-consumer income
-changes in taxation
119
What are the impacts of high demand/ economic activity?
-consumer income rise
-inflation may rise
-unemployment may fall
-interest rates may rise
-the pound may become stronger
120
What are the impacts of low demand/ economic activity?
-consumer incomes fall
-inflation may fall
-unemployment may rise
-interest rates may fall
-the pound may become weaker
121
What is unemployment?
Unemployment exists when people who want to find work cannot do so.
122
How do high levels of unemployment impact a business?
-easier to recruit new employees for less pay
-lower demand due to less disposable income
-economic activity falls (businesses sales revenue also fall)
123
What is inflation?
Inflation is the change in the average level of prices in the economy’s it is measured using consumer price index (CPI)
124
How does inflation impact a business?
-cause costs to unexpectedly rise (direct impact on profits)
-consumers costs rise (less disposable income) leading to less sales therefore less revenue
125
What is an interest rate?
The percentage reward or payment over a period of time that is given to savers on savings or paid by borrowers on loans.
126
What is a fixed interest rate?
Fixed interest rates do not change over the life of a loan.
127
What is a variable interest rate?
Variable interest rates change over the life of a loan making it more risky and harder to plan against.
128
What is the affect of rising interest rates?
A rise in interest rates will increase the cost of borrowing.
-businesses on a variable rate may struggle to pay loans.
-businesses are less likely to borrow money.
-customers are less likely to spend money (consumer spending falls)
129
What is the affect of falling interest rates?
A fall in interest rates will lower the cost of borrowing.
-businesses have more money to spend.
-businesses may borrow money.
-customers are more likely to spend their money (consumer spending rises)
130
What is an exchange rate?
An exchange rate is the price of buying foreign currency. It tells UK people and businesses how much foreign money they get for every pound.
131
What affect does a fall in the value of the pound have?
-good for exporters of goods ( sales increase)
-good for tourism (cheaper prices for foreigners)
-people buy more uk goods as imports are more expensive.
132
What affect does a rise in the value of a pound have on a business?
-bad for exporters of uk goods ( sales fall)
-bad for uk tourism (expensive)
-bad for uk businesses (people buy fewer uk goods)
-good for uk importers (imports are cheaper)
133
What are examples of external business influences?
-economic climate
-legislation
-competition
-technology
-society
134
What are business opportunities?
Business opportunities can lead to growth.
-a rise in economic activity
-new legislation that increases demand for businesses safety products
-lower interest rates
135
What are business threats?
Businesses may have to respond to threats by adjusting their operations.
-new competitors entering markets
-new legislation that makes businesses products illegal
-a fall in economic activity
-a new technology which makes business products obsolete
136
How do businesses respond to external influences?
-cut investment
-invest in new technologies to gain a competitive advantage
-increase productivity
-stop producing an obsolete product line
-Change company policy to meet legislation
-lower prices
