Unit 1 - 1.1 What is a Business?

Question 1

Stages of the production process

Answer 1

Inputs → processes → outputs

Question 2

Types of inputs into production process

Answer 2

4 Factors of Production:
* Capital
* Enterprise
* Land
* Labour

Question 3

4 functions / processes of a business

Answer 3

• Human resources
• Finance and accounts
• Marketing
• Operations management

Question 4

Types of outputs

Answer 4

Goods and services

Question 5

Human resources

Answer 5

Manages the personnel of the organisation
* their concerns, flaws
* works on hirement, promotion and lay off

Question 6

Examples of HR work (name 3)

Answer 6

• workforce planning
• recruitment
• training
• appraisals
• dismissals
• rebundancies

Question 7

Finance and accounts

Answer 7

Manages the organisations money
* record and report financial documents
* concerned with spending and saving of financial reserve

Question 8

Why must finance and accounts record and report financial documents? (2)

Answer 8

• to comply with legal requirements (e.g. tax)
• to inform stakeholders such as shareholders and potential investors of the activity of the firm

Question 9

Marketing

Answer 9

Responsible for identifying and meeting the needs and wants of customers
* works on promoting the business and attracting customers

Question 10

The 7 Ps of marketing

Answer 10

• Product
• Price
• Place
• Promotion
• People
• Processes
• Physical evidence

Question 11

Operations management

Answer 11

Responsible for the process of converting raw materials into components and finished goods
* also applies to providing services

Question 12

Sectors of the economy

Answer 12

• Primary
• Secondary
• Tertiary
• Quaternary

Question 13

Primary sector (name 3 examples)

Answer 13

Involved in the extraction, harvesting and conversion of natural resources
* agriculture
* fishing
* mining
* oil extraction

Question 14

Secondary sector (name 3 examples)

Answer 14

Businesses involved in the manufacturing and construction of products
* breweries
* bottlers
* publishing firms

Question 15

Tertiary sector (name 3 examples)

Answer 15

Businesses specialise in providing services to the general population
* retailing
* transportation
* distribution
* healthcare

Question 16

Quaternary sector (name 3 examples)

Answer 16

Involved in intellectual, knowledge-based activities that generate and share information
* information communications technology
* research and development
* consultancy services

Question 17

The chain of production

Answer 17

Links all the production sectors by tracking the stages of an item’s production from the extraction of materials until it is being delivered
1. Extraction
2. Manufacturing
3. Services
4. Consumers

Question 18

Added value

Answer 18

The increased utility of a product which simultaneously increases its price

Question 19

Entrepreneurs

Answer 19

An individual who plans, organises and manages a business, taking on financial risks in doing so

Question 20

Characteristics of entrepreneurs (name 4)

Answer 20

• Taking substantial risk
• Having a vision for the business
• Rewarded with profit
• Responsibility for the employees
• Failure may result in personal costs

Question 21

Opportunities for starting up a business

Answer 21

GETCASH
* Growth
* Earnings
* Transference and inheritance
* Challenges
* Autonomy
* Security
* Hobbies

Question 22

How is growth an opportunity for a start up business?

Answer 22

There can be an appreciation in the value of the assets of the business (such as land or buildings) known as capital growth
* this has potential to be worth more than owner’s salaries

Question 23

How are earnings an opportunity to start up businesses?

Answer 23

Owners of businesses can earn excess salaries than from any other occupation they might pursue working for someone else

Question 24

How does transference and inheritance give opportunities to start up businesses?

Answer 24

Could be cultural norm for entrepreneurs to pass business to the next generation which secures the future of this younger generation

Question 25

How is challenge an opportunity for start up businesses?

Answer 25

Many people view the setting up and running of a business to be an enjoyable challenge that motivates them

Question 26

How is autonomy an opportunity for start up businesses?

Answer 26

Autonomy allows independence, freedom of choice and flexibility to the owner which to many is highly attractive as it allows control over their work

Question 27

How is security an opportunity for a start up business?

Answer 27

Self-employment offers more job security than working for an employer * it is easier to increase personal wealth for financial security in retirement

Question 28

How are hobbies opportunities for a start up business?

Answer 28

Some people want to pursue their passion and turn their hobby into a business

Question 29

Challenges for starting up a business? (10)

Answer 29

* Lack of finance * Unestablished customer base * Cash flow problems * Marketing problems * People management problems * Production problems * Legalities * High production costs * Poor location * External influences

Question 30

How is lack of finance a challnege to starting up businesses?

Answer 30

Most owners of new or small businesses do not have the credentials to secure sufficient funcding * may have to take loans which destabilise the security of the business in case of failure

Question 31

How does an unestablished customer base challenge a start up business?

Answer 31

It is difficult for new businesses to attract customers due to their foreignity and underdeveloped marketing in comparison to their competitors

Question 32

How do cash flow problems pose challenges to start up businesses?

Answer 32

When the amount of money going out of the business outweighs the cash coming in resulting in difficulties with liquidity

Question 33

How do marketing problems create challenges for starting up businesses?

Answer 33

The business may fail to meet consumer demand and satisfaction due to their inexperience in promotion and distribution. This can result in poor sales and profitability

Question 34

How can people management problems create challenges in start up businesses?

Answer 34

Lack of experience in hiring the correct people with the right skills can lead to poor levels of labou productivity * they may need to retain or rehire people which can be expensive and time consuming

Question 35

How are production problems challenges to start up businesses?

Answer 35

They may not be able to accurately forecast levels of demand and can under or overproduce * underproduce: dissatisfied customers, loss of potential sales * overproduce: stockpiling, wastage and increased costs

Question 36

How do legalities pose challenges for start up businesses?

Answer 36

They need to comply with necessary documentation (such as business registration procedures) * New businesses may not be familiar with such documentation and not be able to complete it

Question 37

Gymshark - case study (opportunities)

Answer 37

Made at 19 in 2017 * initially made website and did custom made products * marketing through influencers * made tracksuit that shot up business * did expo with lot of ppl * now an international business

Question 38

McDonald's - Iceland case study (challenges)

Answer 38

As a result of financial crisis in 2008 * collapse of major banks in Iceland = economic instability * fall in exchange rate led to huge increase in import prices * small population (300,000) meant limited customer base * to remain profitable = raised Big Mac prices by 20% * mismanagement of company = highly indebted due to loans from foreign banks * overtaken by competition from KFC

Question 39

Huda Kattan

Answer 39

* quit job in finance to become makeup artist * started business with sisters when she couldn't find false lashes * makes around $250 million annually from cosmetics

Question 40

Rihanna

Answer 40

* discovered by Jay-Z as a teenager * starte career as a musician before starting clothing and beauty line (Fenty) * became a billionaire in 2021