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BUSINESS STUDIES > CHAPTER 1: Business activity > Flashcards

CHAPTER 1: Business activity Flashcards

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1
Q

what is added value?

A

the difference between selling price and the cost of production

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2
Q

how do you add value?

A

reduce the cost of production
increase price
increase quality
improve packaging

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3
Q

what are the factors of production?

A

land
labor
capital
enterprise

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4
Q

what is opportunity cost?

A

the next best alternative given up by choosing another item

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5
Q

what is division of labor?

A

when production process is split up into different tasks where each task is done by one person

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6
Q

what are the external factors that effect a business?

A

PEST

Political issues - laws by government
Economic issues - economic changes
Social issues - increase in population size
Technological issues - changes in technology

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7
Q

what is creating value?

A

increasing the difference between the cost of purchasing bought in materials and the price the finished goods are sold for

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8
Q

why do some businesses fail?

A

lack of power in the market - hard to survive
poor management skills
lack of finance - costs too high and not enough profit to survive
lack of record keeping - making it hard to pay taxes and debts

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9
Q

what is an entrepreneur?

A

a person willing to take the financial risk of starting and managing a new business venture

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10
Q

what are the characteristics of a successful entrepreneur?

A 
risk taker
creative
hard working
independent
multi-skilled
leader
confident
motivated
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11
Q

what is a social enterprise?

A

a business with mainly social objectives and aims to produce high quality goods and services that reinvests most of profits back into the business benefiting the society rather than maximizing returns to owners

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12
Q

what is the triple bottom line?

A

three objectives of a social enterprise, economic, social and environmental

Economic - profit to reinvest back into the business

Social - provide jobs or support local, often disadvantaged, communities

Environmental - manage the business in an environmentally sustainable way and protect the environment

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13
Q

how is the business environment dynamic?

A

internal environment: the operating environment of the business like the structure, leadership and management

external environment: dynamic changes that are hard to control: PEST

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14
Q

what is the primary sector? and what are examples?

A

involved in extracting natural resources

farming, fishing and oil extractions

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15
Q

what is the secondary sector? and what are examples?

A

involved in manufacturing and the process of producing a product using natural resources

construction, car manufacturing and baking

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16
Q

what is the tertiary sector? and what are examples?

A

provides services to consumers and other businesses

retail, hotels and banking

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17
Q

what is the private sector?

A

business owned and controlled by 1 or more person

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18
Q

what is the public sector?

A

organisations owned and controlled by the government and provide essential services

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19
Q

what is a mixed market?

A

a market with both private and public sector

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20
Q

what is a sole trader?

A

one person who provides the finance and has full control over the business

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21
Q

what are the advantages and disadvantages of a sole trader?

A 
advantages:
easy to set up
owner is their own boss
owner keeps all profits
owner has complete control

disadvantages:
unlimited liability
hard to raise additional capital
lacks continuity

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22
Q

what is a partnership?

A

when 2 or more people share the ownership, capital and responsibilities of a business

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23
Q

what are the advantages and disadvantages of a partnership?

A

advantages:
shared risk
more capital
shared loss

disadvantages:
unlimited liability
profit is shared
no continuity

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24
Q

what is a private limited company?

A

a small to medium-sized business that can sell its shares to family and friends, not to the public

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25
what are the advantages and disadvantages of a private limited company?
``` advantages: limited liability separate legal identity continuity high capital ``` disadvantages: cannot sell shares to public many legal formalities
26
what is a public limited company?
a large limited company that sells shares to the general public on the stock market
27
what are the advantages and disadvantages of a public limited company?
``` advantages: limited liability separate legal identity high capital continuity ease of buying and selling shares to the general public ``` disadvantages: risk of losing control and ownership many legal formalities have to share accounts and records to public
28
what is a cooperative?
a common from of organisation a group of people acting together to meet the common needs
29
what are the advantages and disadvantages of a cooperative?
advantages: buying in bulk team work good motivation for all workers disadvantages: poor management skills capital shortage as no sales of shares slow decision making
30
what is a franchise?
a business that uses the name, logo and trading systems of an already existing, successful business
31
what is a franchisee and franchiser?
franchisee: buys the license to operate the business from the franchiser franchiser: a business with a product or service who sells the license to allow franchisees to operate
32
what are the advantages and disadvantages of a franchise?
advantages: fewer chances of failure for new businesses training is offered by franchiser national advertising by franchiser supplies obtained from quality-checked suppliers disadvantages: shared profit with franchiser expensive to set up mistake from 1 franchise affects the reputation to all
33
what is a joint venture?
when two or more business agree to work together on a project
34
what are the advantages and disadvantages joint venture?
advantages: costs and risks are spread different strengths and ideas are shared could have major markets in different countries advantages: different management styles conflicts could occur failure of one partner would put the whole project at risk
35
what is a public corporation?
a business owned and controlled by the government and don't have the main objective of profit. health, education, water, electricity, transport and defense
36
what are the advantages and disadvantages of a public corporation?
advantages: managed with social objectives rather than profit finance raised by government disadvantages: inefficient due to lack of profit government may interfere in business decisions for political reasons
37
what are the ways a business measures its size?
number of employees - simplest measure, a business run by just the owner and and a few employees is small and a business with a large amount of employees is likely to be large. sales - total value of sales made by a business in a given time period is used as a measure of size. higher sales = larger , lower sales = smaller capital employed - total value of all long term finance invested in the business. the larger the business enterprise, the greater value of capital employed shares (market capitalization) - total value of a company's issued shares. more shares = larger, less shares = smaller. can only be used for business with their shares on the stock market market share - sales of the business in proportion of total market sales. high market share = larger, low market share = smaller
38
what are the advantages and disadvantages of a small business?
``` advantages: can be managed and controlled by owner adapts quickly to changes can offer personal services easier to make relationships ``` disadvantages: limited sources of finance large responsibility
39
what are the advantages and disadvantages of a large business?
``` advantages: benefits from economies of scale able to set low prices access to several sources of finance can afford to employ specialists ``` ``` disadvantages: difficult to manage costs increase due to large scale of production slow decision making poor communication ```
40
what are the advantages and disadvantages of small businesses to a country?
creates jobs brings new ideas and variety into markets creates competition in the market
41
how does the government help small businesses?
reduces profit taxes give loans give advice and support through agencies give grants
42
what is a family owned business?
a business owned and run by a family
43
what are the advantages and disadvantages of a family owned business?
advantages: commitment - as they show dedication in seeing their business grow continuity - the experience and skills are passed onto the next generation flexibility disadvantages: informality -
44
what is internal growth?
expansion of a business by opening new branches, shops or factories
45
what is external growth?
expansion achieved by merging with or taking over another business
46
what is limited liability?
when the losses of the owner are limited to a fixed amount that they invested
47
what is unlimited liability?
when there is no limit to the losses of the owner and they could lose their possessions and assets
48
what are the SMART business objectives?
``` Specific Measurable Achievable Realistic Time specific ```
49
what is the order of hierarchy of objectives?
``` aim mission corporate objectives divisional objectives departmental objectives individual targets ```
50
what is a mission statement?
the businesses core aims, phrased in a way to motivate employees and stimulate interest
51
what are the advantages and disadvantages of a mission statement?
advantages: quickly inform groups outside the business about the core aims of the business motivates employees by giving a sense of direction disadvantages: can be too vague and general
52
what is ethical code?
a document containing a businesses rules and guidelines on staff behavior
53
what is CSR?
a concept that applies to businesses that consider the interests of society by taking responsibility of the impact of their decisions
54
what are the advantages and disadvantages of CSR?
advantages: can attract new customers and customer loyalty keeps employees in the business (employee retention) attracting motivated employees becomes easier helps gain the goodwill of stakeholders disadvantages: short run costs could increase due to social responsibility, costs would increase which causes competitors to have lower prices for customers
55
how do objectives change over time?
internally: businesses may have new owners or managers who have different objectives externally: a change in economy competitors entered the market
56
what are examples of corporate objectives?
``` profit maximization profit satisfaction survival growth CSR increase market share ```
57
what is a stakeholder?
an individual or a a group of people who are affected by or interested in the business's actions
58
who are the internal stakeholders?
employees managers owners shareholders
59
who are the external stakeholders?
customers suppliers government banks
60
what are the roles, rights and responsibilities of the stakeholder: customers?
roles: purchase goods and services provide revenue from sales rights: to receive goods and services of high quality goods and services must meet health and safety laws responsibilities: to not steal to pay for goods bought to not make false claims
61
what are the roles, rights and responsibilities of the stakeholder: employees?
roles: provide labor services to allow goods and services to be produced and sold rights: to be treated by the limits set by the national law to be treated and paid as described in contract to be allowed to join a trade union responsibilities: to be honest to observe the ethical code of conduct to meet conditions of employment contract
62
what are the roles, rights and responsibilities of the stakeholder: local community?
roles: provide local services and infrastructure to the business rights: to be consulted about actions that affect them to be protected from harm from business actions responsibilities: to cooperate with the business to meet reasonable requests from the business
63
what are the roles, rights and responsibilities of the stakeholder: government?
roles: passes laws achieves economic stability rights: business must meet all legal constraints responsibilities: to treat business equally under the law to prevent unfair competition to establish good trading links with other countries
64
what is accountability?
the extent to which an individual or group is held responsible for a decision or policy
65
what is the business's accountability to stakeholders?
customers - quality/safe products, competitive pricing employees - job security, training, minimum wages suppliers - regular payments, fair treatments local community - secure jobs, environmental consideration government - pay taxes, observe laws, publish accounts shareholders - pay dividends
66
what is the stakeholder concept?
the view that businesses and their managers have responsibilities to a wide range of groups, not just shareholders
67
how can conflicts arise between two stakeholders?
shareholders could push for lower costs to increase their profit and that may lead to a lower pay to employees government may want to increase taxes paid from the business which could lead to lower profits and revenue to the owner

BUSINESS STUDIES (2 decks)

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