UNIT 1 - Business and its environment Flashcards
(83 cards)
1
Q
Chapter 1 - enterprise
What are the four factors of production?
A
- Land (land used and land affected)
- Labour
- capital (finance and resources used)
- Enterprise - the initiation of an entire business
2
Q
Chapter 1 - Enterprise
consumer goods
A
the physical and tangible goods sold to the general public
- durable consumer goods: eg. cars & washing machines
- Non-durable consumer goods: eg. food & drinks
3
Q
Chapter 1 - enterprise
consumer services
A
the non-tangible products sold to the general public
- eg. public transport, hotel accomodation
4
Q
Chapter 1 - enterprise
capital goods
A
The physical goods used by industry to aid in the production of other goods and services
- eg. machines and commercial vehicles
5
Q
Chapter 1 - enterprise
Creating value
A
increasing the difference between the cost of purchasing bought-in materials and the price the finished goods are sold for
the process
6
Q
Chapter 1 - enterprise
added value
A
The difference between the cost of purchasing bought-in materials and the price the finished goods are sold for
The result
7
Q
chapter 1: enterprise
What are the 7 business needs?
A
- land
- capital
- government
- enterprise
- labour
- suppliers
- customers
8
Q
Chapter 1: Enterprise
opportunity cost
A
The benefit of the next most desired option which is given up
9
Q
Chapter 1: Enterprise
Entrepreneur
A
Someone who takes the financial risk of starting and managing a new venture
10
Q
Chapter 1: Enterprise
characteristics of a successful entrepreneur
A
- innovation
- Commitment and self-motivation
- multi-skilled
- Leadership skills
- Self- confidence
- risk-taking
- motivated
11
Q
Chapter 1 - Enterprise
Challenges faced by entrepreneurs (5)
A
- Identifying successful business opportunities
- sourcing capital
- determining a location
- competition
- building a customer base
12
Q
Chapter 1 - Enterprise
Why do businesses often fail? (4)
A
- lack of record keeping
- lack of cash and working capital
- poor management skills
- changes in the business environment
13
Q
Chapter 1 - Enterprise
Impact of enterprise on a country’s economy (6)
A
- Employment creation
- Economic growth
- firms’ survival and growth
- innovation and technological change
- exports
- personal development
14
Q
Chapter 1 - Enterprise
Social enterprise
A
a business with mainly social objectives that reinvests most of its profits into benefiting society rather than maximizing returns to owners.
15
Q
Chapter 1 - Enterprise
Triple bottom line
A
The three objectives of social enterprises:
- economic
- Social
- Environmental
16
Q
Chapter 2 - Business structure
Primary sector business activity
A
Firms engaged in farming, fishing, oil extraction and all other industries that extract natural resources so that they can be used and processed by other firms
17
Q
Chapter 2 - business structure
Secondary sector business activity
A
Firms that manufacture and process products from natural resources, including computers, brewing, baking, clothes-making and construction.
18
Q
Chapter 2 - business structure
Tertiary business activity
A
Firms that provide services to consumers and other businesses, such as retailing, transport, insurance, banking and hotels
19
Q
Chapter 2 - business structure
What is industrialisation?
A
Industrialisation is the increased importance of secondary-sector businesses in developing countries
20
Q
Chapter 2 - business structure
What is deindustrialisation?
A
Deindustrialisation is the decreased importance in secondary-sector activity, and increased importance in the tertiary sector. This is often suited for more developed countries.
21
Q
Chapter 2 - Business structure
Public sector
A
Compromises organisations accountable to and controlled by the central or local government.
22
Q
Chapter 2 - Business structure
Private sector
A
Compromises businesses owned and controlled by individuals or groups of individuals
23
Q
Chapter 2 - Business structure
What comes under the private sector of businesses? (4)
A
- Sole traders
- Partnerships
- Limited companies (Private Ltd; Public PLC)
- Cooperatives
24
Q
Chapter 2 - Business structure
Command economy
A
economic resources are owned, planned and controlled by the state.
25
_Chapter 2 - Business structure_
## Footnote
**Free-market economy**
Economic resources are owned largely by the private sector with very little state intervention
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_Chapter 2 - Business structure_
## Footnote
**Mixed economy**
Economic resources are owned and controlled by both private and public sectors
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_Chapter 2 - Business structure_
## Footnote
**Sole trader**
a business in which one person provides the permanent finance, and, in return, has full control over the business and is able to keep all its' profits.
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_Chapter 2 - Business structure_
What are some advantages of being a sole trader? (4)
* Easy to set up
* Complete control of business and running
* personal relationships with staff
* Business can be based on own interests of the individual
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_Chapter 2 - business structure_
Disadvantages of being a sole trader (5)
* Unlimited liability
* competition of bigger firms
* difficulty raising additional capital
* long hours
* lack of continuity
30
_Chapter 2 - Business structure_
## Footnote
**Partnership**
A business formed by two or more people to carry on a business together, with shared capital investment and, usually, shared responsibilities.
31
_Chapter 2 - Business structure_
Advantages of a partnership (4)
* both people may specialise in different areas of management
* shared decision-making
* additional capital invested by both people
* losses shared between two+ people
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_Chapter 2 - business structure_
Disadvantages of a partnership (5)
* Unlimited liability
* profits must be shared
* no continuity of the business if it goes down or people die
* cannot gain equity finance through shares
* Not as much control in decisions as a sole trader
33
_Chapter 2 - business structure_
## Footnote
**limited liability**
* to do with shares
The only liability - or potential loss - a shareholder has if the company fails is the amount invested in the company, not the total wealth of the shareholder (unlimited liability)
34
_Chapter 2 - Business structure_
## Footnote
**Private limited company**
A _small - medium sized_ business that is owned by shareholders who are often members of the same family; this company cannot sell shares to the general public
35
_Chapter 2 - Business structure_
Advantages of a private limited company (6)
* limited liability
* separate legal personality
* continuity
* original owner still able to maintain control
* capital able to be raised through family and friends
* greater status than unincorporated businesses
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_Chapter 2 - business structure_
disadvantages of a private limited company (3)
* More legal formalities
* equity capital not able to be received by the public
* less secrecy over financial affairs than sole trader or partnership.
37
_Chapter 2 - business structure_
## Footnote
**Share**
A certificate confirming _part ownership_ of a company and entitling the shareholder owner to dividends and certain shareholder rights.
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_Chapter 2 - business structure_
## Footnote
**Shareholder**
A person or institution owning shares in a _limited_ company
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_Chapter 2 - Business structure_
## Footnote
**Public limited company**
a limited company, often a large business, with the legal right to _sell shares to the general public_. - Share prices are quoted on the national stock exchange
40
_Chapter 2 - Business structure_
## Footnote
**Memorandum of association**
States the:
* name of the company
* Address of the head office through which it can be contacted
* Max share capital
* declared aims of the business
_Helpful for potential shareholders_
41
_Chapter 2 - business structure_
## Footnote
**Articles of association**
Covers the internal workings and control of the business. eg.
* names of directors
* procedures to be followed at meetings
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_Chapter 2 - Business structure_
What are the 4 other forms of business organisation?
* Franchises
* Cooperatives
* Joint ventures
* Holding companies
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_Chapter 2 - Business structure_
## Footnote
**Franchise**
A business that uses the _name_, _logo_ and _trading systems_ of an existing successful business
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_Chapter 2 - Business structure_
Advantages of a franchise (5)
* fewer chances of a new business failing
* Advice and training offered by franchiser
* National advertising paid for by franchiser
* Supplies obtained from established and quality-checked suppliers
* Franchiser unlikely to open another branch in same local area
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_Chapter 2 - Business structure_
Disadvantages of a franchise (4)
* Share of profits and revenue to be paid to franchiser each year
* Initial franchise license can be pricey
* No choices of supply or suppliers
* Strict rules over pricing and workings of the business
46
_Chapter 2 - Business structure_
What are cooperatives?
* all members contribute to running of the business, decision making, workload and responsibilities
* Profits shared equally
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_Chapter 2 - business structure_
Advantages of a cooperative business (3)
* Buying in bulk and increased economies of scale
* teamwork
* motivation from all members with shared profits
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_Chapter 2 - business structure_
disadvantages of cooperative businesses
* Slow decision making
* Capital shortages due to no sales of shares to general public
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_Chapter 2 - Business structure_
## Footnote
**Joint venture**
Two or more businesses agree to work closely together on a particular project and create a _separate business division_ to do so.
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_Chapter 2 - Business structure_
Advantages of a joint venture (3)
* costs and risks of a new venture are shared
* Different companies can put their strengths together
* May be able to attract major markets in different countries
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_Chapter 2 - Business structure_
Disadvantages of a joint venture (3)
* Styles of management and culture may clash
* blame for errors and mistakes
* Failure of one partner could lead to danger for the whole product
52
_Chapter 2 - Business structure_
## Footnote
**Holding company**
A business organisation that owns and controls a number of separate businesses, but does not unite them into one uified company
eg. Meta
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_Chapter 2 - Business structure_
## Footnote
**Public corporation**
A business enterprise owned and controlled by the state - also known as _nationalised industry_
54
_Chapter 2 - Business structure_
Advantages of a public corporation (2)
* Social objectives rather than purely for profits
* Finance raised mainly from the government
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_Chapter 2 - Business structure_
disadvantages of a public corporation (2)
* government interference for political reason
* potential inefficiency due to lack of strict profit targets
56
_Chapter 3 - Size of business_
What are the 6 ways to measure a business?
* revenue
* Number of employees
* Capital employed
* Market capital
* Market share
* Business specific measures
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_Chapter 3 - Size of business_
## Footnote
**Revenue**
Total number of sales made by a business in a given time period
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_Chapter 3 - Size of business_
## Footnote
**Capital employed**
Total value of all long-term finance invested
59
_Chapter 3 - Size of business_
## Footnote
**Market capitalisation**
Total value of a company's issued shares
*Current share price x total number shares issued*
60
_Chapter 3 - size of business_
## Footnote
**Market share**
sales of a business as a proportion to total market sales
* total sales of a business / Total sales in the market*
* x100*
61
_Chapter 3 - size of business_
What is the importance of small businesses? (6)
* Job creation
* Dynamic entrepreneurs with new ideas
* Competition for larger businesses
* Supply of specialist goods
* All businesses start off small
* Lower average costs
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_Chapter 3 - size of business_
How can the government assist smaller businesses? (3)
* reduce profits tax
* Loan guarantee
* Information
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_Chapter 3 - size of business_
Strengths of family businesses (3)
* Commitment
* reliability & pride
* Knowledge & Continuity
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_Chapter 3 - size of business_
Weaknesses of family businesses (4)
* may have lack of continuation down generations
* informality
* Traditions - may make it difficult to evolve & change
* Conflict
65
_Chapter 3 - size of business_
Why might a business want to grow? (5)
* increased profits
* increased market share
* Increased economies of scale
* Increased power & status
* Reduced risk of being a take-over target
66
_Chapter 3 - Size of business_
## Footnote
**Internal growth**
Expansion of business by means of opening new branches, shops or factories (also known as organic growth)
67
_Chapter 4 - Business objectives_
SMART
S - Specific
M - Measurable
A - Achievable
R - Realistic and Relevant
T - Time specific
68
_Chapter 4 - Business objectives_
What is the order of the hierarchy of objectives?
* Aim
* Mission (statement)
* Corporate objectives
* Divisional objectives
* Departmental objectives
* Individual Objectives
AMCDDI
69
_Chapter 4 - Business objectives_
What are corporate aims?
* Long term goals that a business hopes to achieve. - The core central purpose of a business will be expressed in its corporate aim(s)
70
_Chapter 4 - Business objectives_
## Footnote
**Mission statement**
A statement of the business's core aims, phrased in a way to motivate employees and to stimulate interest by outside groups
71
_Chapter 4 - Business objectives_
Advantages and disadvantages of mission statements
**Advantages**
* Inform outside groups
* Motivate employees
* Helps establish ‘what the business is about’
**Disadvantages**
* very general, so not very specific
* Impossible to analyse
* Often very general, so hard to make completely unique
72
_Chapter 4 - Business objectives_
What are corporate objectives?
Goals or targets for a business - shorter term than a corporate aim. More specific and broken down
73
_Chapter 4 - Business objectives_
Common corporate objectives (7)
* Profit maximisation
* Profit satisficing
* Survival
* Growth
* Increased market share
* Maximising Shareholder value
* Corporate social responsibility (CSR)
74
_Chapter 4 - Business objectives_
## Footnote
**corporate social responsibility (CSR)**
This concept applies to those businesses that consider the interests of society by *taking responsibility for the impact of their decisions* and activities on customers, employees, communities and the environment
75
_Chapter 4 - Business objectives_
What are some reasons a corporate objective may change? (3)
* A new business may have satisfied the “survival” stage
* Change in competition - may lead to growth down to survival
* Short term objective may want to transition into a longer-term objective
76
_Chapter 4 - Business objectives_
Factors that determine the corporate objectives of a business
* Corporate culture
* Size & legal form of business
* Public or private sector business
* How many years business has been operating
* Divisional, departmental, and individual objectives
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_Chapter 4 - Business objectives_
## Footnote
**Management by objectives (MBO)**
A method of coordinating and motivating all staff in an organisation by *dividing its overall aim into specific targets for each department, manager and employee.*
78
_Chapter 4 - Business objectives_
## Footnote
**Ethical code of conduct**
A document detailing a company's *rules and guidelines on staff behaviour that must be followed by all employees*
79
_Chapter 5 - Stakeholders in a business_
## Footnote
**stakeholders**
People or groups of people who can be affected by - and therefore have an interest in - any action by an organisation
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_Chapter 5 - Stakeholders in a business_
## Footnote
**Stakeholder concept**
The view that businesses and their managers have responsibilities to a wide range of groups, not just shareholders
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_Chapter 5 - Stakeholders in a business_
Internal stakeholders examples (4)
* Suppliers
* owners/management
* employees
* shareholders
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_Chapter 5 - Stakeholders in a business_
External stakeholders examples (5)
* customers
* employees' families
* local communities
* Government
* Lenders
83
_Chapter 5 - stakeholders in a business_
Explain *compromise* for businesses and it's stakeholders
Meeting as many stakeholder objectives as possible, or meeting the needs of the most important ones. This may have to be put in place, as not all business decisions will appeal to all stakeholder groups.
