Intro: 1.1 to 1.6 Flashcards
(122 cards)
1
Q
What does a business do, essentially?
A
organize input to produce output, which must be more valuable
2
Q
What are the types of input?
A
land
labour
capital
entrepreneurship
3
Q
Goods
A
physical products
4
Q
Services
A
intangible products
5
Q
Profit
A
total revenue - total costs
6
Q
Revenue
A
price x quantity
7
Q
Expenses
A
everything that the business has had to pay to acquire the input and get the revenue
8
Q
Inventory/stock
A
what you have that you are able to sell
9
Q
Strategy
A
method used by a business to achieve its goals
10
Q
What is the primary sector?
A
extractive sector, extracts directly from nature
11
Q
What is the secondary sector?
A
manufacturing, turning raw materials into something else
12
Q
What is the tertiary sector?
A
provides services/intangible products
13
Q
What is the quaternary sector?
A
research and development
14
Q
What are opportunities of starting a business?
A
earn a living
financial reward prospect
control over life
work-life balance
innovative business idea
unfilled market niche
15
Q
What are reasons for business failure?
A
underfunding
neglecting marketing/sales
lack of planning
finding right people
time management
scaling up too quickly
16
Q
What is the difference between public and private businesses?
A
public - owned by government
private - owned by individuals/group of individuals
17
Q
What are the main features of sole traderships?
A
owners solely own everything of the company
no legal separation between company and owner
legally ‘confused’
if you want to sue, you sue the person not the company
unlimited liability
18
Q
What is a sole trader?
A
someone going into a productive activity without actually setting up a legal framework
19
Q
What are advantages of sole tradership?
A
ease of formation
might benefit from tax exemption if business is small
retention of control
20
Q
What are disadvantages of sole tradership?
A
unlimited liability
lack of permanence
limited financial resources
21
Q
What is a partnership?
A
like a sole tradership but with various owners
may even have contract between partners but still no legal framework
each partner responds to 100% of debts with personal assets - solidarity
22
Q
What is limited liability?
A
- owner of business can’t lose personal assets
- can only lose what was put into company
- even in bankruptcy, investors are safe
23
Q
What is a public limited company?
A
in the stock market
in the private sector
anyone can trade - needs to match higher standards
24
Q
What are advantages of partnership over a sole tradership?
A
easier to have a larger company + more money
more expertise
25
What is a private limited company?
privately traded, not in stock market
company chooses who participates
26
Shareholders
owners of an incorporation
27
What is an incorporation?
legal person of the company, separate from owners
28
IPO
initial public offering of shares
from private to public LTD companies
29
Directors
managers, may be shareholders
30
Liquidation
process of turning assets into cash
31
Dividends
profit divided among shareholders
32
Sleeping partners
shareholder that doesn't want to be active in running the business
33
What are advantages of private limited companies?
- more investors
- shareholders invest for long term
- you know who shareholders are - control
- limited liability
- financial records are private
34
What are disadvantages of private limited companies?
- shared profits
- lengthier decision making
- shares can't be traded publicly
- more expensive and time consuming
35
What are advantages of public limited companies?
- shared risks
- finances raised through stocks
- separate legal identity
- limited liability
36
What are disadvantages of public limited companies?
- shared profits between many shareholders
- expensive and time consuming to set up
- loss of control
- accounts are publicly available
37
What is a cooperative?
a business owned and operated equally by its members who share the profit equally
38
How are associates in cooperatives?
equal standing, votes with same weight, shared voice and ownership and profits
39
What are the goals of private sector companies?
usually profit
40
What are the goals of public sector companies?
social/government goals (which can also be profit)
41
What is the goal of co-ops?
associates (profit/wellbeing etc)
42
What are social enterprises?
businesses who are not only focused on profit (may be for marketing reasons)
43
What are the main features of NGOs?
wants to improve social/environmental outcomes
by law, any surplus must be reinvested into business
run by board of directors
44
What are advantages of non profits?
limited liability
no tax on surplus since it is all reinvested
volunteers mean low costs
grants and donations
45
What are challenges with non profits?
funding difficulties may persist more
time and energy raising funds
competition for donations intense
limited employee salaries
paperwork to set up
46
What are NGOs?
sub-category of non profit social enterprises
47
What is the vision statement?
long term goal/dream of what the future should look like with the business in it
48
What is the mission statement?
short term statement that defines what the organisation does in order to achieve vision
49
What are some common business objectives?
growth
profit
protecting shareholder value
ethical objectives
50
stakeholder
any individual or group that affects or is affected by an organisation
51
strategy
a plan that an organisation creates in order to reach a specific coal
52
business strategies
usually refer to significant decisions/actions
involve senior management
53
benefit of successful strategies
help a business respond effectively to changes in external environment
more agility and resilience
54
What are sociocultural factors? (STEEPLE)
all sociocultural characteristics of a region
demographics, lifestyle, beliefs, values
affects what people choose to buy
55
tactic
a smaller action that a business takes in order to reach its goals
smaller scale and shorter term
56
What are technological factors? (STEEPLE)
new technologies changes how a business operates and the products it makes
technological development
includes infrastructure
57
What are economic factors? (STEEPLE)
changes in economic conditions, GDP
cycles of GDP - business cycle
income increase/decrease changes what people want to buy
58
What are environmental factors? (STEEPLE)
natural disasters or conditions may affect products
businesses that rely on natural resources
climate change
increased protection of nature may be harmful to businesses
59
What are political factors? (STEEPLE)
may change laws
unstable government
Green parties
60
What are legal factors? (STEEPLE)
multinational companies - home country and host country laws
complying with laws
61
What are ethical factors? (STEEPLE)
conflict between growth/profit and social/environmental responsibilities
62
What is the difference between internal and external stakeholders?
internal: individual or group that affects or is affected by an organisation + is directly involved inside the organisation
external: individual or group that affects, or is affected by, an organisation, but not directly involved inside the organisation
63
What is financial sustainability?
ability of a business to sustain itself over time and survive
64
What are the benefits of CSR?
increased revenue
reduced energy/waste/materials expenses
increased productivity
reduced turnover
reduced risks
65
Give some examples of internal stakeholders.
managers, employees, shareholders
66
Give some examples of external stakeholders.
labour unions, banks, society
67
What is sociocultural sustainability?
distributing value to a wide range of stakeholders in order to have a positive impact on people
68
What is environmental sustainability?
positive impact on planet
69
What is the root of stakeholder conflict?
diverse interests
70
What are examples of stakeholder conflict?
- managers and employees
- shareholders and managers
- shareholders and government
- local community and shareholders
- managers and unions
- customers and suppliers
- pressure groups and employees
71
What is an economy of scale?
Cost reductions experienced by a business when it expands its output
72
What is a diseconomy of scale?
The increase in the per-unit production cost as a business grows
73
What is the difference between internal and external economies of scale?
Internal: achieved inside company
External: external factors in region/industry that business can't control
74
What are the types of internal economies of scale?
- purchasing
- marketing
- managerial
- technical
- financial
75
What are purchasing economies of scale?
buying input at a lower cost by purchasing larger amounts - buying in bulk
negotiation
76
What are marketing economies of scale?
cost of marketing spread over larger output, lowering average campaign cost
77
What are managerial economies of scale?
cost of hiring a manager spread over a larger output
lower costs due to expertised and efficient employees
78
What are technical economies of scale?
investment in equipment
efficiency and automation
79
What are financial economies of scale?
large loans have lower interest rates
80
What are the types of external economies of scale?
innovation
infrastructure
specialisation
81
What is innovation?
research and development
82
Why does infrastructure help businesses?
more efficient product delivery and commute
83
Why is specialisation good for a business?
companies/supplies/workers focus on an industry + specialised workers, less costs with training
84
What are the types of internal diseconomies of scale?
managerial issues: difficult for leader to lead + rivalries between divisions of large firms - cooperation issues lead to inefficiencies
increase in workforce size: difficult to control, hierarchy, overspecialisation leading to alienation
communication: complex hierarchy, inefficient communication
85
Difference between internal vs external diseconomies of scale?
internal: usually due to difficulty in managing internally large operations
external: expansion of business's industry
86
What are the types of external diseconomies of scale?
limited natural resources: industry-wide increased demand
limited infrastructure: slow down deliveries etc
increased regulation
pollution: climate change costs lives/natural resources/infrastructure
87
What is the difference between internal vs external growth?
internal: company grows alone
external: company grows together with other companies
88
What are reasons to grow?
- economies of scale
- market power
- shareholder returns
- lower risk from hostile takeover
- price of stock increases
- manager objectives
- synergy
- profit
- vision
- control
89
What are reasons for businesses to stay small?
- privacy - financial records
- retained ownership and control
- no pressure/control from shareholders
- individuality and not compromising quality
- easier and cheaper to set up and maintain
- less costs, risks and responsibilities
- niche markets, specialisation & limited competition
90
What are mergers and acquisitions?
merger: two companies of similar size join together to b become one
acquisition: A buys at least 50+1% of B's shares, companies become embedded
91
What are takeovers?
hostile acquisition
public limited companies only
acquisition but without approval of managers
expensive
92
What is a joint venture?
2 companies create a new company together
93
What is a strategic alliance?
two companies work together but remain separate
94
What is franchising?
company sells business model to interested parties
reduces risk for both parties
95
What are advantages of external growth?
- shared risks
- shared expertise
- faster growth
96
What are disadvantages of external growth?
- no full control
- shared expertise
- shared profits
97
What is market penetration?
- least risky
- increasing market share in existing market
- eg acquisition
98
What is market development?
different audience (maybe new country)
riskier
same product, different TA
can be finding new use for existing product
99
What is product development?
new products in existing markets
same TA
eg apple pencil
100
What is diversification?
riskiest but also highest chance of reward
new product to new people
can be related or unrelated - unrelated is riskier
101
What is the difference between strategy and tactic?
strategic - more long-term and relating to overarching goals
tactical - more short-term and may seem disconnected to the overarching goal
102
What are some examples of external diseconomies of scale?
Overcrowding leading to transportation problems
High costs of rent due to the high demand
Higher costs due to labour shortages
103
Benefits of a joint venture and disadvantages
split costs and risks
split control and profit
104
Disadvantages of a hostile takeover
only with public ltd. companies
expensive
105
Benefits of franchising
franchisor's need for financing reduced, franchisees usually finance
franchisees own and keep profits: more motivated
franchisees provide local knowledge
economies of scale
proven business model, less risky
106
Disadvantages of franchising
franchisor loses direct control over individual outlets
a single mistake at one outlet can damage the rep. of the company
107
What are multinationals?
companies that do not just export their goods, but actually have operations located in more than one country
108
Why do multinationals grow? (9)
- large customer base due to new (unsaturated) markets in other countries: increases sales and revenues
- brand recognition: more brand value and sales revenue
- technological progress: improved transport or communication
- tax incentives: low taxes from host countries due to their advantages
- avoiding trade barriers such as tarriffs
- labour costs may be lower in other countries
- economies of scale in selling to countries with growing demand
- lack of regulation for labour and environment
- spread out risks
109
What are positive impacts of MNCs? (7)
- employment opportunities (wages may be low, but good relatively)
- more trained workers, enriching the local economy
- opportunities for local businesses to become suppliers
- stimulated economy: employee's purchasing power
- infrastructure
- more product choices for consumers
- taxes and foreign currency earning
110
What are negative impacts of MNCs? (8)
- exploitation of labour, low regulation
- most qualified jobs not for the locals
- environmental damage
- using up local's resources
- demands of multinationals may drive up prices: harms consumers and local businesses
- local businesses harmed as they have less finance and influence - may be driven out
- may cause monopolies and dependence on abroad
- threatened culture and values
111
Why are business objectives important?
give employees and managers a sense of direction and purpose, increasing productivity and motivation
112
Strategic vs tactical objectives?
Strategic: long-term goals that the whole organization strives to achieve, used to achieve the overall strategic goal/vision/ mission
Tactical: short-term and specific goals of a business, with definitive timelines for specific functional areas of an organization
113
Key characteristics of strategic objectives
- longer term
- includes diversification, expansion, mergers... growth etc
- strategies decided by senior leadership or board
114
Key characteristics of tactical objectives
- shorter term approaches, usually less than a year, to achieving objectives
- methods to meet specific and measurable goals
- used by workforce to work towards strategic objectives
115
Strategies vs tactics
Strategies - actions required to achieve the long term objectives of an organization
Tactics - actions required to achieve the short term objectives of an organization
116
Strategic objectives vs strategy
strategic objectives: long term goals/aims that organisation strives to achieve
strategies: actions required to achieve strategic objectives
117
Tactical objectives vs tactics
Tactical objectives: short-term, specific goals of a business with definitive timelines for specific functional areas of an organization
Tactics: actions required to achieve the tactical objectives
118
What is the definition of a cooperative?
for-profit social enterprises that are owned and managed by their members
119
Main features of cooperatives?
- strive to provide a service for members instead of a certain level of profit
- any profit shared among members
- limited liability
- all member shareholders help run co-op, although it is overseen by an elected BoD
- all members have equal voting rights
- democratic culture
120
What is the role of a board of directors?
making long-term strategic decisions
121
Advantages of cooperatives?
- easy and cheap to set up
- tax exemption due to social focus on community
- all members expected to help run, more likely to succeed
- equal voting rights and democracy - harmonious working environment
- no external pressures
- often qualify for gvt financial support
- continuity in a cooperative
122
Disadvantages of cooperatives?
- not profit driven: difficult to attract investors and may lead to lack of motivation
- limited resources depending on members, leading as well to lack of specialist managers
- democracy may not be always effective
