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Business Unit 1 Flashcards

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1
Q

Define Scarcity

A

Scarcity is when there are a lack of products and services to fulfil the needs of the population

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2
Q

Define Opportunity Cost

A

Opportunity Cost is the value of the next best alternative given up by choosing another item.

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3
Q

Define Specialization

A

Specialization occurs when people and businesses concentrate on what they are best at

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4
Q

Define Division of Labour

A

Division of labour is when the production process is split into different tasks and each worker performs one of the specific tasks only

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5
Q

State 2 pros and 2 cons of division of labour/specialisation

A

Pros: 1.Workers are trained in one task and specialise in this > higher efficiency and output
Pros: 2. Less time moving between different workbenches

Cons: 1. Workers become bored doing one job only
Cons: 2. Dependency on others.

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6
Q

Define Added Value

A

Added Value is the difference between selling price and the cost of bought in materials

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7
Q

State two ways you can increase added value

A
  1. Increasing selling price 2. By reducing cost of bought in materials
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8
Q

Define Primary Sector

A

The Primary Sector is the sector of industry which extracts and uses the natural resources of earth to produce raw materials used by other businesses

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9
Q

Define Secondary Sector

A

The Secondary Sector involves the processing of raw materials obtained from the primary sector to manufacture finished goods

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10
Q

Define Tertiary Sector

A

The Tertiary Sector provides services to consumers and the other sectors of industry

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11
Q

Explain why the secondary sector is declining in developed countries

A

The secondary sector is declining due to increased automation and outsourcing to countries with lower labor costs.

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12
Q

Explain why the tertiary sector is increasing in developed countries

A

The tertiary sector is increasing due to higher demand for services and technological advancements.

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13
Q

Define Entrepreneur

A

An Entrepreneur is an individual that has a unique business idea and they create a business for this

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14
Q

State 5 characteristics of an entrepreneur

A
  1. Risk-taking 2. Hardworking 3. Creative 4. Self confident 5. Effective communicator
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15
Q

State 5 aspects included in a Business Plan

A
  • Description of business
  • Products and services they provide
  • Their target market
  • The location of the business
  • financial information (cash flow forecast, income statement)
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16
Q

State 2 reasons why entrepreneurs create a business plan

A
  • Forces entrepreneurs to look at their businesses objectives and think ahead to make decisions
  • They will need to produce one to show the back if they want to apply for a bank loan
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17
Q

State two reasons why the Government want to support small start-ups

A
  1. Increase the output to benefit the economy 2. Create jobs which reduces unemployment
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18
Q

State two ways the Government can support small startups.

A
  1. Providing grants and funding opportunities. 2. Offering training to entrepreneurs to develop skills
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19
Q

State 4 ways you can measure the size of a business and why each one may not be suitable.

A
  • Number of employees: some firms are capital intensive and use machinery
  • The value of output: Some firms may produce few products at very high value (yacht)
  • The value of sales revenue: not fair to compare a sweet shops SR to a designer hand bags SR
  • Capital employed: (amount of machinery) businesses may be labour intensive so dont need much capital
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20
Q

State 3 reasons why owners may want to expand their business.

A
  1. Increase profit 2.Benefit from economies of scale. 3. More status and prestige for owners
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21
Q

State the two ways a business can grow.

A
  • Internal growth: inside the business
  • External growth: Integration & Conglomerate
  • Integration (vertical, horizontal)
  • Vertical integration (forwards and backwards)

Conglomerate

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22
Q

State the examples of external growth.

A
  • Integration horizontal: business merges/ takes over another business in the same level of production
  • Vertical forwards: When a business merges with/takes over a business in the next sector
  • Vertical backwards: when a business merges with/takes over a business in the previous sector
  • Conglomerate: when one business merges with/ takes over another business in a completely different industry
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23
Q

State the Problems linked to business growth and how you can solve each problem.

A
  • Larger business are difficult to control due to diseconomies of scale
  • Communication in the business is now more challenging as the business is larger
  • expansion costs are very high meaning the business may struggle to get finance
  • Clashes with management/ conflicting management styles
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24
Q

State three reasons why businesses remain small.

A
  1. Don’t have to stress about running a large business 2. Owner prefers personal service 3. The size of the market may be small so limited customers
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25
State 4 reasons why businesses fail.
- Lack of management skills > bad decisions - Changes in the business environment > recession, COVID - Liquidity problems > Current ratio is below 1.5
26
Explain 4 reasons why new businesses are at a greater risk of failing.
- Less experience/ knowledge - Poor financial management -Lack of market research - Insufficient capital
27
Define unlimited liability
Businesses which have owners that hold responsibility for the debts of a business so their personal possessions are at risk
28
Define Incorporated
Businesses that have separate legal status from their owners
29
Define Unincorporated
A business when they DO NOT have separate legal status from their owners
30
Define Sole Trader
A business operated and owned by one person. They have unlimited liability
31
State two benefits of Sole trader
1. Owner is in complete control over business 2. Few legal requirements 3. Get to keep all the profit
32
State two drawbacks of a sole trader
1. Unlimited liability. 2. Limited access to capital/ finance
33
Define Partnership
A business in which two or more people agree to jointly own a business
34
State two benefits of a partnership
1. More finance can be invested into a business from all the partners 2. Less stress/ responsibility 3. More ideas/ decision making
35
State two drawbacks of a partnership
1. Profits have to be shared 2. Disagreements can stop focus on product 3. Unlimited liability
36
Define a private limited company
A business owned by shareholders but they cannot sell shares to the public
37
State two benefits of a Private Limited Company
1. Can raise more capital from selling shares 2. All owners have limited liability 3. Can still maintain control of business
38
State two drawbacks of a private limited company
1. Cannot sell shares to the public so limited ability to raise capital 2. Expensive as there are a lot of legalities and paperwork
39
Define a public limited company
A company owned by shareholders and shares can be sold to the public on the stock exchange
40
State two benefits of a Public Limited Company
1.Can raise more capital fro selling shares to public 2.Limited liability
41
State two drawbacks of a public limited company
1. Original owners may loose control of the business 2. Need to pay shareholders dividends > less profit 3. Expensive + legalities and paperwork
42
Define Franchise
A business with a strong brand name and the franchisor sells the rights to use the name to a franchisee
43
State two benefits of selling your franchise
1. The franchisor receives a portion of the profits of each brand known as royalties 2. Less stress as responsibilities are for franchisee not franchisor
44
State two drawbacks of selling your franchise
1. Poor management/ bad reputation on one branch can ruin entire brand reputation 2. Don’t get to keep 100% of the profit from every branch
45
Define Joint Venture
Where two or more businesses start a new project together, sharing risks and profits
46
State two benefits of a joint venture
1. Both businesses share the costs of the new project 2. Risk is shared 3. Each business may benefit from the knowledge and expertise of the other business
47
State two drawbacks of a joint venture
1. Profits will have to be shared 2. Disagreements may occur > distractions from making the products
48
What is a public corporation
A public Corporation is a business In the public sector that is owned and controlled by the Government.
49
Give two benefits of public corporations
1. Provide essential services to the public. 2. Funded by government, reducing financial risk.
50
Give two drawbacks of public corporations
1. No huge profit motive, they care more about providing a service, may not be efficient 2. Limited accountability to shareholders.
51
State 2 reasons why it is important for a business to have objectives
- They give workers and mangers a clear target to work towards, increasing their motivation - Can allow the business to compare against their performance to judge whether they have been successful or not
52
State 4 objectives of a business
1. Survival 2. Make profit 3. Growth 4. Increase in market share
53
What are the objectives of social enterprises
- Helping the community - Helping the environment
54
State three internal Stakeholders
1. Owners 2. Workers 3. Managers
55
State 4 External Stakeholders
1. Customers 2. Suppliers 3. Local community 4. Banks 5. Government
56
State an objective of Owners
They want the business to grow and gain profit
57
State an objective of workers
They want a fair salary and good working conditions, job satisfaction and job security
58
State an objective of Managers
They want job security and profits (as often they receive bonuses based on profit)
59
State an objective of customers
They want safe and reliable products with high quality and to pay a fair price
60
State an objective of the local community
They want to ensure the business doesn’t damage the environment/ local community
61
State an Objective of Banks
They want the business to be able to pay back bank loans, with interest
62
Explain two scenarios of stakeholder conflict
1. Owners wanting profit vs. Workers wanting higher wages. 2. Customers wanting lower prices vs. Owners wanting higher profits.
63
Explain the difference between public and private sector enterprise objectives
The public sector enterprises have an objective to provide services to the public, create employment and make profit in order to have a sustainable business The private sector enterprises have an objective to make profit

Business (6 decks)

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