Understanding business

Question 1

What is a need?

Answer 1

A need is something that is necessary for a human to survive, for example, water, food, shelter, clothing, Gus the cat.

Question 2

What is a want?

Answer 2

A want is something that a human can live without but makes life more enjoyable. For example, X-box, Phones, Netflix.

Question 3

What are goods?

Answer 3

Goods are an item we can see, touch or pick up. For example: clothing, magazines, televisions.

Question 4

What are the two types of goods and state the differences between them?

Answer 4

Durable goods: goods that can be used more than once and tend to last a long time like, phones, bicycles or fridges.

Non-durable goods: Goods that can only be used once or that only last a short period of time, like cake or a single journey bus ticket.

Question 5

What are services?

Answer 5

Services are something that is done for us to make life more convenient or because we don’t have the qualifications or knowledge to carry out a task. Example: Hairdresser, plumber, going out for dinner.

Question 6

What are the factors of production?

Answer 6

Capital, Enterprise, Land, Labour.

Question 7

What role does Capital play in the factors of production?

Answer 7

Capital is the money, tools and equipment invested into a business.

Question 8

What role does Enterprise play in the factors of production?

Answer 8

The idea behind a business (i.e. the entrepreneur who set it up)

Question 9

What role does Land play in the factors of production?

Answer 9

The natural resources a business will use.

Question 10

What role does Labour play in the factors of production?

Answer 10

The employees of a business.

Question 11

What is an Entrepreneur

Answer 11

An Entrepreneur is somebody who comes up with an idea for a business and combines all of the factors of production together to start up the business.

Question 12

What are some skills or qualities required for an entrepreneur? (6)

Answer 12

Skills: Leadership, communication, organisation, problem-solving
Qualities: determined, motivated, risk taking, innovative, confident.

Question 13

What are the sectors of industry?

Answer 13

Primary, secondary and tertiary.

Question 14

What is the primary sector?

Answer 14

The industry that is involved in extracting or growing raw materials from the environment, e.g. mining, farming.

Question 15

What is the secondary sector?

Answer 15

Industry involved in manufacturing products, e.g. factories.

Question 16

What is the tertiary sector?

Answer 16

The businesses that sell the products made or provide a service, e.g. McDonalds, gym, hotel.

Question 17

What are the types of business organisations?

Answer 17

Private, public and third sector.

Question 18

Describe who owns, controls and funds a business in the private sector

Answer 18

They are owned by private individuals
Controlled by owners or a board of directors
Funded through personal investment, loans and profits made by the business.

Question 19

What is a sole trader?

Answer 19

A sole trader is a business that is owned and controlled by one person, the owner will make decisions on how the business is run themselves. For example: hairdressers, cleaners, electricians.

Question 20

What are some advantages of being a sole trader?

Answer 20

-Its relatively easy to set up a sole trader business and doesn’t involve complicated legal documents.
-The owner doesn’t have to discuss or compromise about decisions meaning they can be made quickly and easily.
-The owner gets to keep all profits made to themselves.

Question 21

What are some disadvantages of being a sole trader?

Answer 21

-Being one can be stressful as you have no one to consult or share ideas with putting the pressure of making all the decisions on you.
-Owner may find it difficult to take holidays or days off sick.
-Owner has unlimited liability, meaning they’re legally responsible for paying the dept of the business.

Question 22

What is a partnership?

Answer 22

A partnership is a business that has between 2 and 20 owners. Owners of a partnership are referred to a partners. Partnerships are usually found in professional practices, for example, solicitors and dentists.

Question 23

What are some advantages of a partnership?

Answer 23

-Different partners bring different skills and experiences to a business.
-Workload and decision making can be shared amongst partners.
-More finance can be raise compared to a sole trader.

Question 24

What are some disadvantages of a partnership?

Answer 24

-Disagreements can occur when partners disagree on a decision.
-Profits are shared between partners.
-Partners have unlimited liability, meaning they are legally responsible for paying the debt of a business.

Question 25

What is a private limited company?

Answer 25

A private limited company is a company that is owned by many people, who own shares in the company (small or large percentages of the company). These people are known as shareholders. To become a shareholder you must be invited to buy shares in it, this is so control of the company is not lost to outsiders. Private limited companies also have limited liability meaning the business is seen as a separate legal entity, therefore shareholders are not responsible for paying debts of a business.

Question 26

Who is a private limited company run by?

Answer 26

A board of directors, this is a group appointed by the shareholders that have the task of running the business.

Question 27

What is the process in which profits are divided amongst shareholders in a company?

Answer 27

Dividends: a certain amount of profits is shared amongst all shareholders in a business depending on how many shares they own.

Question 28

Advantages of a private limited company?

Answer 28

-By selling shares the business can quickly make lots of money. -Control of the company cannot be lost to outsiders. -Shareholders have limited liability.

Question 29

Disadvantages of a private limited company?

Answer 29

-Setting up a private limited company is hard and very legally complicated compared to partnerships and sole traders. -Annual accounts must be produced and shared publicly. -Profits have to be shared amongst shareholders.

Question 30

Who are public sector organisations owned by, controlled by and funded by?

Answer 30

-They are owned by the government -Controlled by elected officials (MSPs and councillors) -The are funded primarily through taxation.

Question 31

Who are third sector organisations owned by, controlled by and funded by, what are the kinds of businesses in the third sector?

Answer 31

-They aren't owned by one particular individual. -They are controlled by a board of trustees. -They are funded by donations and fundraising activities. -The third sector is made up of charities and social enterprises.

Question 32

What is a charity?

Answer 32

A charity is an organisation that has been set up to help a particular cause. Charity examples: Oxfam, British heart foundation and Dogs trust. A charity will use donations and money raised from fundraising activities to help their chosen cause.

Question 33

What are social enterprises?

Answer 33

Social enterprises primarily have a social or environmental aim. They operate very similarly to a private sector business however all profits go towards a good cause. They are run by both paid employees and volunteers. An example of a social enterprise is social bite, which uses profits to invest into helping the homeless in Scotland.

Question 34

What are benefits of operating a social enterprise?

Answer 34

-They help a social and environmental cause. -They can apply for grants only available to social enterprises. -Helping a good cause gives the business a good reputation that attracts customers. -They may be able to charge more for products as customers are willing to pay because the money goes towards a good cause.

Question 35

Describe what steps you should go through while planing for a business.

Answer 35

-The business idea: what goods/services will the business provide? -The aims and objectives of the business -Projected cost and profit. -The target market for the business. -How will the business be funded? -The location of the business. -How the business and its products will be marketed.

Question 36

What are objectives of a private sector business?

Answer 36

-Survival -Profits and profit maximisation -Sales maximisation -Customer satisfaction -market share and the market leader -Corporate social responsibility -Enterprise and innovation

Question 37

What are objectives of a public sector company?

Answer 37

-Provide a vital service to the public, like healthcare and education. -Make the best of the funds it has been given by the government. -Cut costs and reduce spending as much as possible. -Corporate social responsibility. -Try to improve the service it offers. -Stay within a budget.

Question 38

What are some objectives of a third sector?

Answer 38

-Help their specified cause. -Raise as much money in funding as donations as possible to donate to their cause. -Raise and increase awareness of their cause. -Increase the number of volunteers helping them. -Provide a service to those in need. -Survive and be able to continue helping their cause. -Continually aim to improve the quality of services offered -Corporate social responsibility.

Question 39

What is customer service?

Answer 39

Customer service is the way that a business treats and looks after its customers. A business should aim to provide excellent customer service, during and after the customers purchase.

Question 40

Explain methods of maximising customer service.

Answer 40

-Providing training to staff on all customer service procedures. -Using recruitment methods to ensure that they are hiring helpful and polite staff. -Gathering customer feedback using surveys and comment cards, then using the feedback to improve service. -Implementing a customer complaints procedure to ensure all complaints are handled well. -Offering a great after purchase services like, return policies and helplines. -Offering a customer care policy showing staff how to correctly react to customers. -Keep staff morale and motivation up.

Question 41

What are some benefits of good customer service?

Answer 41

-Customer loyalty. -Image and reputation will improve. -The business may be able to charge higher products for products and service. -Happy customers will recommend the business to others. -Fewer complaints from customers -The business will increase its sales and profits. -Increased customer retention (they will come back).

Question 42

What are the three main internal factors?

Answer 42

-Finance -Human resources -Current technology

Question 43

What will a lack of finance result as in a business?

Answer 43

The business pay be unable to: -Pay its bills, e.g. electricity. -Purchase raw materials, leading to a halt in production. -Take on more staff. -Grow, e.g. open up a new store. -Carry out marketing activities.

Question 44

What is human resources in a business?

Answer 44

Human resources refers to all employees in a business. Human resources can provide good or bad services within a business which can lead to the failure or success of a business.

Question 45

What is current technology?

Answer 45

Technology that a business is currently using.

Question 46

If a businesses current technology is out of date what negative effects may this have?

Answer 46

-Money is spent fixing technology when it could be used elsewhere, e.g. advertising. -Productivity is slower that may delay customers orders. -Production may have to stop when machinery breaks down. -Staff may get annoyed working with with slow out of date technology.

Question 47

What are the External factors known as?

Answer 47

-Political -Economic -Social -Technological -Environmental -Competitive

Question 48

What are political factors?

Answer 48

They are the laws and legislation passed by the government that influence a business. The government also decides how much tax businesses and individuals have to pay.

Question 49

What are economic factors?

Answer 49

Anything which affects how much people are spending. E.g. Unemployment or poverty in areas meaning that people are spending less because of a lack in money.

Question 50

What are social factors?

Answer 50

This refers to people changing beliefs, values and lifestyles. This can be a result of changes in population due to people living longer due to medical advancements. Another example is woman now pursuing jobs and having children later in life. Changes in lifestyle like more people choosing to become vegan so businesses now have to offer vegan options.

Question 51

What are Technological factors.

Answer 51

This refers to the technology a business is not currently using.

Question 52

What are environmental factors

Answer 52

This refers to weather conditions like natural disasters, it also refers to how environmentally friendly a business is. Examples of this are bad snow or flooding may result in people being unable to receive deliveries from their supplier, also customers may not be able to reach the shop. A recent example of an environmental factor is COVID-19 which lead to many businesses having to close during the lock down periods.

Question 53

What are competitive factors?

Answer 53

This refers to activities carried out by a business that provides similar goods or services to one and other. An example of this is Tesco, Asda, Sainsburies and Morrisons (M&S is the best) who all compete with one and other as they all sell similar products and are all massive food stores.

Question 54

What is a stake holder?

Answer 54

A stakeholder is an individual, group or organisation that has an interest in the success of a business. They also take actions and make decisions that influences how a business operates or how successful a business may be.

Question 55

What is an owner/shareholder and what are their interests and influences in a business?

Answer 55

An owner/shareholder is a person or the people who have set up and or own a business. Interests: -To make a good return on the money that they have invested into a business. -They want the business to make a good level of profit because they will then receive more profit themselves. Influence: -By increasing or decreasing the amount of capital they invest into a business. -They are involved in making key decisions for a business, the quality of these decisions will impact the success of a business.

Question 56

What are employees and what are their interests and influences are on a business.

Answer 56

Employees are people payed by a business to perform a certain role within in it. Interests: -To receive a good rate of pay. -Job security, e.g. a permanent contract -Promotional opportunities to help them progress their career. Influences: -They influence a business through there level of productivity and the quality of service they provide to customers. -Industrial action, e.g. going on strike because they aren't happy with working conditions. Industrial action can damage the image and reputation of a business and also cease the production and selling process.

Question 57

What are customers and what are their interests and influences are on a business.

Answer 57

Customers are individuals who buy products and services from a business. Interests: -To get good value for their money. -To receive good customer service If they receive these then they are more likely to return to a business. Influences: -They decide what business to buy from, if a business doesn't receive customers then it wont be in business for long. -They can spread good or bad reviews about a business by talking or putting reviews on line, this can effect a businesses reputation.

Question 58

What are banks and what are their interests and influences are on a business.

Answer 58

Banks are an organisation that lends finance, e.g. loans and mortgages to individuals and businesses. Interests: -A bank wants to know that a business will be able to pay back the money it has borrowed on time and in full. Influences: -They can influence a business by deciding whether to lend finance or not, if the bank doesn't loan a business money the business may not be able to grow or start up. -The bank may change the interest charge on loans or change the loan requirement lengths. Both may impact the cash flow on a business.

Question 59

What are suppliers and what are their interests and influences are on a business.

Answer 59

A supplier is an organisation that a business buys their raw materials and inventory from. Interests: -They want the business they sell to to be successful because that will mean they continue to buy from their supplier. -They want the business they are supplying to, to pay for any materials ordered quickly. Influences: -Increasing or decreasing the price of materials they are selling. An increase in the cost of supplies will lead to a businesses decrease in profit unless the business increases the price of their good which could lead to a decrease in customers. -They can change the lead delivery time for their orders.

Question 60

What is the local community and what are their interests and influences are on a business.

Answer 60

They are the residents that live in the surrounding area of where a business is located. Not all members of the local community will be customers of a business, those that aren't may have different influences and interests in the business. Interests: -Residents will want the business to provide jobs for the locals. -They want a business to be socially responsible and contribute positively to the local environment and community. Influences: -They may protest or hold a petition against a business if they are unhappy about how its operating. -Residents may make formal complaints to the local council about a business. These factors may highly damage the reputation of a business.

Question 61

What is the government and what are their interests and influences are on a business.

Answer 61

Government are the elected MPs and MSPs who are appointed to run the country. Interests: -The government wants a business to be successful as this means they receive more corporation tax from them. -It also wants businesses to adhere any rules, laws or regulations set by the government. Influences: -It can raise or lower the rate of corporation tax, increasing the tax will mean a bigger proportion of profits from a business will go towards the government. -The government can also introduced new legislation or laws that businesses have to abide by.