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Business > Introduction To Business (steeds) ✔️ > Flashcards

Introduction To Business (steeds) ✔️ Flashcards

1
Q

What is an enterprise

A

-Another word for a business
-the actions of a risk taker starting their business;
Take initiative in trying to exploit a business opportunity, makes investment to set up the businesses, continue even with the risk of failure.

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2
Q

Characteristics of enterprise

A

-risk taker
-confidence
-creative
-leadership skills
-enthusiasm
-comfortable with risk

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3
Q

Assessing risk, questions to ask.

A

-do I have a clear image of the business
-can I afford to fail
-is my business plan realistic
-do I have the cash flow

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4
Q

4 Decision making processes:

A

-risks
-rewards
-uncertainty
-opportunity cost

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5
Q

Positive and negative impacts of entrepreneurial activity on the economy:

A

+job creation, reduction of unemployment, increase competition
-market saturation

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6
Q

What are the 4 factors of production:

A

Factors of production are the inputs available to supply goods and services in the economy.
-land: natural resources available for production
-labour: the human input into the production process
-enterprise: entrepreneurs organise factors of production and take risks
-capital: goods used in the supply of other products eg/ technology

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7
Q

What is adding value

A

-added value is equivalent to the increase in value that a business creates by undertaking the production process
Calculation: output - input

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8
Q

How to add value

A

-building a brand: a reputation for quality that customers are willing to pay for the higher priced product compared to competition
-delivering excellent service: high quality and attentive personal service can make the difference between achieving a high price or a medium one
-product features and benefits- additional functionality in different version eg/ phones
-offering convenience- customers will often pay a little more for a product that they can have straightaway or which saves them time

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9
Q

What is transformation process

A

What happens inside the business
Inputs - transformation process - output

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10
Q

Benefits of adding value

A

-charging a higher price
-creating a point of difference from the competition
-protecting from competitors trying to steal customers by charging lower prices
-focusing a business more closely on its target market segment

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11
Q

What are the constraints of a business succeeding

A

-employee skills
-competition
-finance available
-legislation
-the economy

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12
Q

What are primary, secondary and tertiary sectors:

A

Primary: activities under taken by directly using natural resources (farming)
Secondary: involves converting raw materials into finished goods
Tertiary: services

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13
Q

What are the different functions of a business: (6)

A

-accounting and finance (ensuring financial management)
-operations management (supervising/ managing the production of goods)
-marketing (distribution, market research, setting prices, finance, product management)
-human resources management (directing and organising company activity’s, utilisation of workforce, recruitment)
-customer service (support customers)
-sales and support services (managing correspondence between the sales team and clients)

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14
Q

What is a stakeholder

A

Any individual or organisations who have a vested interest in the activities and decision making or a business

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15
Q

Examples of business stakeholders

A

-employees
-owner
-suppliers
-customers
-government
-society

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16
Q

What is private sector organisations

A

-businesses are operated and owned by private individuals and companies (families and friends) have to be invited.
-limited liability for owners
-generally run for profit to earn returns for the business owner.

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17
Q

Public sector organisations

A

-businesses and other organisations are owned and run on behalf of the public either by the government itself, or by organisations who are funded by the public
-public sector businesses are generally not run for profit, but exits to provide goods and services to public using public funds (nhs)

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18
Q

What is unincorporated (sole traders and partnerships)

A

-the owner is the business
-no legal difference
-owner has unlimited liability for business actions
-most unincorporated businesses operate as sole traders

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19
Q

What is incorporated (private limited and public limited company)

A

-legal difference between the business and the owners
-owners have limited liability
-most incorporated businesses operate as private limited companies

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20
Q

What is a sole trader

A

-individual owning the business on their own.
-a sole trader can employ people
-sole traders own all the business assets personally and is personally responsible for the business debts
-unlimited liability

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21
Q

Advantages and disadvantages of sole traders

A

+ quick and easy to set up, simple to run, minimal paperwork, easy to close down.
-full personal liability “unlimited liability”, harder to raise finance, the businesses is the owner and if the owner becomes I’ll the business suffers, can pay a higher tax rate then a company

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22
Q

What are partnerships

A

-a business is started and owned by more then one person
-the legal partnership agreement sets out how the partnership is run, covering areas like;
How profits are to be shared, the investment made by each partner, how decision are made, what happens if a partner decides to leave.
-unlimited liability

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23
Q

Advantages and disadvantages of partnership

A

+simple, minimal paperwork, business benefits from expertise of more then one person, can provide specialist skills, easier to raise finance
-unlimited liability
-poor decision by one owner damages the interest of the other, hard to make decisions, complicated to sell/close

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24
Q

Limited liability partnerships (LLP)

A

-combine partnership with those of limited company
-separate legal entity (limited liability)
-required to file annual accounts to companies house

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25
Q

Advantages and disadvantages of a limited company

A

+limited liability, easier to raise finance, stable form of structure
-grater admin costs, public disclosure of company information, directors legal duties

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26
Q

Private limited company

A

-family and friends can buy into shares
-limited liability
-have to teh sister at companies house

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27
Q

Public limited companies

A

-can sell shares in stock market
-can be taken over
-require to have share capital of 50,000
-required to include more detail in its annual report.

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28
Q

Advantages of limited companies

A

-can be brought by people so new money invested
-east to expand business
-limited liability
-stable form of structure, business will continue even when shareholders change

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29
Q

Disadvantages of limited company

A

-greater admin costs
-public disclosure of company info
-greater threat of legal takeover
-can’t always control who is involved in the business

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30
Q

What is a franchiser and franchisee

A

-business with well know brand (franchiser)
-franchisee is the one who buys it

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31
Q

Advantages for the franchiser

A

-the firm may not have to spend larger amounts of money in order to expand
-products necessary for franchise to operate are under the franchisers control
-applicants can carefully be selected for suitability

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32
Q

Disadvantages for the franchiser

A

-control issues
-the cost of supporting the franchisees
-the possibility for conflict

33
Q

Advantages for the franchisee

A

-lower risk
-support advice and training
-marketing is national
-may be easier to obtain finance

34
Q

Disadvantages for the franchisee

A

-profit is shared
-franchisee fees
-suppliers have to be brought from the franchiser
-less control and independence
-the business cannot be sold without permission

35
Q

What is a cooperative

A

A business that is owned and run by its members (employees and customers) profits are shared between members rather then being distributed to share holders

36
Q

Advantages of cooperatives

A

-legally straightforward to establish
-liability for members is usually limited
-a higher quality of service is likely to be provided
-customers are usually supportive

37
Q

Disadvantages to cooperatives

A

-capital can be unlimited
-weak management (those selected may not have a grasp of business principles)
-slower decision making
-employees may want more

38
Q

What is a franchise

A

The right to sell a product

39
Q

What is a local business

A

-Concerned with customers clustered tightly around the marketer.
-as it is a local business they can learn a great deal about customers and make necessary changes quickly
-potential market is limited

40
Q

What is a national business

A

-distribute their product throughout a country. This may involve multiple manufacturing plants, a distribution system including warehouses and delivery vehicles.

41
Q

What is a international business

A

-operate in more then one country.
-legal and cultural differences alone can greatly affect a strategy’s outcome.

42
Q

What is a multinational company

A

-multinational corporation is one that has business offices and operations in two or more countries in the world
-sell in one country but have factories in more then one.

43
Q

Reasons for the growth of multinational companies

A

-emerging economies (cheaper prices for resources and labour)
-economies of scale is cheaper
-protectionism
-external growth through takeovers and mergers allows a company to grow internally abroad (factories)

44
Q

Benefits for multinational businesses

A

-significant employment and training to the labour force
-adds to the hosts country’s GDP
-increased competition and consumer choice
-increased tax revenues to host country

45
Q

Disadvantages to multinational businesses

A

-domestic business may not be able to compete
-tax avoidance
-could damage domestic business
-impose culture on a culturally different country

46
Q

What is the difference between international companies and multinationals

A

-international companies are importers and exporters, they have no investment outside of their home country. Multinational companies have operations in at least 2 other countries.

47
Q

Measuring businesses; small, medium, and large business’s.

A

-number of employees (50= small, 250+ large)
-number of factories, shops and offices
-turnover and profit levels
-stock market value
-capital employees (total value of assets)

48
Q

What factors influence the size of the business

A

-market size
-nature of product
-ability to access resources for expansion eg/ finance
-personal preference

49
Q

Why might a business want to grow

A

-entrepreneur wants a greater challenge
-owners want a higher return on investments
-growth into new markets can spread risk
-a bigger business is better placed to fight external threats
-opportunity to gain unit cost reduction through economies of scale

50
Q

The effects of a businesses size on its stakeholders: how does it affect employees

A

Advantages:
-greater job security, specialist HR department, trade union more likely to be recognised
Disadvantages:
-employees feel remote from those making the decisions leading to poor morale and motivation that may affect productivity

51
Q

The effects of a businesses size on its stakeholders: the effect it has on suppliers if it grows

A

Advantages:
-regular orders, larger orders, security
Disadvantages:
-may be offered a take it or leave it approach to contentions of supply and payment, over reliance on large suppliers

52
Q

The effects of a businesses size on its stakeholders:local community

A

Advantages:
-creation of jobs, boosts local economy
Disadvantages:
-pollution and congestion around the business, small and local firms maybe driven out of the market

53
Q

The effects of a businesses size on its stakeholders: shareholders

A

Advantages:
-market power (gained from economies of scale), greater market control
Disadvantages:
-large businesses that are failing can be hard to turn around, may suffer from diseconomies of scale, leading to reduced share price and off its effecting dividend payments

54
Q

The effects of a businesses size on its stakeholders: customers

A

Advantages:
-economies of scale lower costs and therefor prices, new innovation products developed, more likely to have a customer service department
Disadvantages:
-diseconomies of scale May rise costs and prices

55
Q

What is the importance and impact of small businesses

A

-they have individual contact with customers gaining valuable feedback
-small businesses may be less vulnerable from recession
-will not be affected by diseconomies of scale

56
Q

What are the 5 strategy options for growth

A

-innovation
-diversification
-international expansion
-cost leadership
-product development

57
Q

What is organic/ internal growth

A

-growth from within the business. Eg/ launch of new products, expansion into new markets, new distribution channels, exporting.

58
Q

What is external growth

A

-growth from outside the business. Eg/ takeover, merging with competition, acquiring a supplier or major customer, joint venture

59
Q

Organic growth advantages and disadvantages:

A

-lower risk
-builds on existing activities
-good for high growth markets
-rewards innovation and brand building
-slower

60
Q

External growth advantages and disadvantages:

A

-faster
-transformational
-popular in nature or declining markets
-can acquire missing technology and brands
-high risk

61
Q

What is a mission statement and aims

A

-the mission of a business is the overriding goal of the business and the reason for its existence. A mission provides strategic perspective for teh business and a vision for the future
-aim is the long term plan of teh businesses survival, growth, market share, and profit

62
Q

What is a stakeholders objectives

A

A specific target that the firm/ group wishes to achieve. Set at a corporate level and for each business function and each other stakeholders

63
Q

What does SMART stand for

A

-Specific
-Measurable
-Achievable
-Realistic
-Time

64
Q

What are strategic and tactical objectives

A

-strategic: how a business plans to achieve its aims and goals, often a long term approach
-tactical: the day to day (short term) objectives needed to ensure the strategic objectives are achieved

65
Q

Influences and constraints on objectives

A

-finance
-conflicts
-legislation
-economy
-competition

66
Q

What are the 3 types of external growths

A

-mergers and acquisitions
-joint venture
-strategic alliance

67
Q

What is a merger

A

-a merger is a combination of 2 previously separate firms which is achieved by forming a completely new firm into which the two organism firms are integrated

68
Q

Merger advantages

A

-more finance
-more opportunities and range of products
-economies of scale
-shared ideas/ responsibility

69
Q

Merger disadvantages

A

-less profits as they are split
-loss of control
-loss of original business
-chance of failure
-staff made redundant

70
Q

What is an Acquisition/ takeover

A

-involves one business acquiring control of another business

71
Q

Advantages of Acquisition

A

-increased market share
-new skills
-economies of scale
-better distribution
-less risk of takeover
-eliminate competition

72
Q

Different types of take over/ Acquisition

A

-forward
-backwards
-horizontal
-diversification

73
Q

Disadvantages of takeover/ Acquisition

A

-high costs
-risk of failure
-upset customers
-may reduce the quality of the suppliers
-problems with change of management

74
Q

What is a joint venture

A

Combination of 2 or more parties that seek the development of a single enterprise or project for profit. Work together to get the goal but are still 2 different identities of businesses

75
Q

Joint venture advantages

A

-access to new markets and distribution networks.
-increased capacity.
-sharing of risks and costs (ie liability) with a partner.
-access to new knowledge and expertise, including specialised staff.
-access to greater resources, for example, technology and finance.

76
Q

Joint venture disadvantages

A

-the objectives of the venture are unclear.
-the communication between partners is not great.
-the partners expect different things from the joint venture.
-the level of expertise and investment isn’t equally matched.
-the work and resources aren’t distributed equally.

77
Q

What is strategic alliance

A

An arrangement between two companies to undertake a mutually beneficial project while retaining its independence

78
Q

Disadvantages of strategic alliance

A

-may not be any benefits
-legal distributes over who owns what
-expensive and difficult to cooperate

79
Q

Advantages of strategic alliance

A

-sharing resources and expertise
-new market
-expand production
-drive innovation
-more affordable then expansion
-economies of scale

Business (9 decks)

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