What is business? Flashcards
(40 cards)
What is the difference between customer needs and wants?
Customer needs are essential goods/services required by the customer as a necessity while customer wants are goods/services that an individual would like to purchase.
Why do customer wants change?
Changes in consumer taste
Social media influence
Trends
Changes in household/personal income
What is the definition of business?
An organisation that exists to provide goods and services on a commercial basis to customers.
What are the benefits of businesses?
1) Creates employment and develops human capital
2)Drive innovation through R&D and new products
3)Pay taxes on profits earned and collect taxes for the Government
4)Create wealth by providing returns on investment
what is a start-up?
A new business enterprise, formed by one or more entrepreneurs.
What are the roles of the entrepreneur?
Spot business opportunities
Takes (calculated) risks in order to gain possible future returns
Acts as a catalyst for the creation and growth of new business enterprises
What are the 4 main business sectors (outputs)?
Primary- extraction of natural resources
Secondary- production of finished good & components
Tertiary- providing services to consumers and businesses
Quaternary- providing information and ICT
What are the small business aims?
To survive
Market share
Increase profit
To be more ethical and sustainable
To grow or expand
Customer satisfaction
What are business objectives?
Specific intended outcomes of business strategy
The anticipated end results of a program of activities
Targets which the business adapts in order to achieve its primary aims
How can objectives be used?
Implement the mission
Provide a clear focus for decision-making
motivate employees
What are corporate objectives often stated in terms of?
Profit (value, margin)
Return on investment (ROCE)
Growth (profit, earnings per share)
market share
cash flow
sales revenue
what are some factors influencing business objectives?
Age of the business
Size and legal status
Ownership
Views of owners and managers
Market conditions
Competition
Legislation
How is profit calculated?
Total sales revenue - Total costs
How is total sales revenue calculated?
Price per unit x output (number of units sold)
How is total costs calculated?
Total fixed costs + Total variable costs
What is total sales revenue?
Revenue is money made directly from sales and so the total amount of money made from sales depends on the demand for the product.
How can a business influence its sales revenue?
Quality of products and services
Promote products and services
Offer fair prices (prices should reflect the perceived value of the product/service)
Increase output
What are fixed costs?
Costs that do not change according to the level of output therefore meaning that costs remain the same, regardless of how many products are sold/made.
This is also known as overheads which are payments that will be made, regardless of business activity. e.g. rent, tax
What are variable costs?
Costs that change according to the level of output.
Variable costs often have a direct link to products/services e.g. raw materials, fuel costs, and components required for products/services.
What are examples of fixed and variable costs?
Wages are variable while salaries are fixed costs.
What is average cost?
Total costs of production / Level of production or output = costs of producing a single unit of output
How can average cost of production be reduced?
Change suppliers ( cheaper raw materials)
Buy in bulk
Pricing strategies
Which stakeholder groups will be interested in profit?
Directors- group of level (board of directors)
CEO
Customers- it would affect the price of the product
Rivals
Government- taxes
Employees- how much they are going to get paid, job security.
Why are profits so important?
Measures success
Encourages people to invest
Larger return for investors
Attract customers- desirable products
