Business Unit 1 and 3.1

needs

things that are required in order to live

wants

things that add comfort and pleasure to your life that are not needed for survival

factors of production

Land, labor, and capital; the three groups of resources that are used to make all goods and services

land

all natural resources used to produce goods and services

capital

tools needed for factors of production

Enterprise

An undertaking or business organization; industrious

scarcity

Limited quantities of resources to meet unlimited wants

Opportunity cost

Cost of the next best alternative use of money, time, or resources when one choice is made rather than another

Specialisation

Occurs when people and businesses concentrate on what they are best at

division of labour

The specialisation of workers on specific tasks in the production process

adding value

A process through which a business increases the worth of the resources included in production so that customers perceive the product to be worth more than the cost of the inputs

primary sector

the part of the economy that draws raw materials from the natural environment

secondary sector

The portion of the economy concerned with manufacturing useful products through processing, transforming, and assembling raw materials.

Tertiary sector

The portion of the economy concerned with transportation, communications, and utilities, sometimes extended to the provision of all goods and services to people in exchange for payment.

Industrialisation

The process experienced by a country that moves away from primary production towards manufacturing as its principal sector for national output and employment

De-industrialisation

Occurs when there is a decline in the importance of the secondary, manufacturing sector of industry in a country.

private sector

the part of the economy that involves the transactions of individuals and businesses

public sector

the part of the economy that involves the transactions of the government

market share

the portion of a market controlled by a particular company or product.

internal growth

Occurs when a business expands its existing operations

external growth

Business expansion achieved by means of merging with or taking over another business, from either the same or a different industry

Horizontal Integration

Absorption into a single firm of several firms involved in the same level of production and sharing resources at that level

forward integration

takes information entered into a given system and sends it automatically to all downstream systems and processes

Backward integration

firm merging with another firm in the same type of business at earlier stage of production

conglomerate integration

When a merger or takeover occurs between two firms from unrelated areas of business.

Unincorporated business

A business that does not have legal identity separate from its owners. The owners have unlimited liability for business debts.

unlimited liability

The owner is personally and fully responsible for all losses and debts of the business

limited liability

the liability of a firm's owners for no more than the capital they have invested in the firm

sole trader

business owned and operated by one person

Parnership

a business organization owned by two or more persons who agree on a specific division of responsibilities and profits

limited company

A business organisation which has a separate legal identity from that of its owners.

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

private limited company

A business owned by shareholders with limited liability but whose shares cannot be bought by or sold to the general public.

joint venture

an agreement between two or more companies to share a business project

franchise

A business established or operated under an authorization to sell or distribute a company's goods or services in a particular area

Franchisor

A company that develops a product concept and sells others the rights to make and sell the products.

franchisee

an individual or business that is granted the right to sell another party's product

stake holder

a person or group that has an interest or concern in an organization

social enterprise

A business with mainly social objectives that reinvests most of its profits into benefiting society rather than maximising returns to owners

marketing

the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large

target market

a set of buyers sharing common needs or characteristics that the company decides to serve

consumer market

all the individuals and households that buy or acquire goods and services for personal consumption

Industrial market

Businesses that buy products to use in their operations; also called the business-to-business market.

niche market

A smaller part of a larger market in which customers have more specific needs and wants

mass market

all possible customers in a market, regardless of the differences in their specific needs and wants

niche marketing

the process of finding small but profitable market segments and designing or finding products for them

mass marketing

use of a single marketing plan to reach all customers

market segment

a group of consumers who respond in a similar way to a given set of marketing efforts

market segmentation

the process of dividing a market into meaningful, relatively similar, and identifiable segments or groups

market research

The activity of gathering information about consumers' needs and preferences.

Market orintated

Firms that research into what the market needs and wants, and then develops products and services as a result of findings.

Product orintated

Firms that have a product idea and try to launch it, rather than finding out whether customers actuality want it.

primary research

research done firsthand for the first time

secondary research

past research which has already been performed and often already published

focus groups

A strategy to obtain data from a small group of people using interview questions

observation

the action or process of observing something or someone carefully or in order to gain information.

test market

offering a product in a limited market for a limited time

survey

the collection of data by having people answer a series of questions

sampling

The process of selecting representative units from a total population

Benefits of primary research

more accurate, up to date, specific to needs, effective at collecting qualitative data, direct customer contact

Disadvantages of Primary Data

expensive and time consuming

Benefits of secondary research

Often free and easy to obtain

Good source of market insights

Quick to access and use

Disadvantages of Secondary Data

May not give adequate detailed information

May not be on target with the research problem

Quality and accuracy of data may pose a problem

benefits of sole trader

Simple and quick to set up

Inexpensive to set up

Profit kept by owner

Owner has complete control of business

Working hours can be tailored

disadvantages of sole trader

Unlimited liability

Long hours, no cover for holidays/sickness

Capital may come from savings

Needs business skills

Business ends on death

advantages of surveys

Quick

Inexpensive

Efficient

Accurate

Disadvantages of surveys

Generally limited to scale or check listed questions.

No control over response rate.

Provides information more than understanding.

Difficult to explore in depth issues.

Advantages of test marketing

Test marketing allows for the most accurate method of forecasting future sales, and it allows firms the opportunity to pretest marketing-mix variables.

Disadvantages of test marketing

-cost

-time

-loss of secrecy

Advantages of Partnership

Two or more owners

More capital available

Relatively easy to start

Income taxed once as personal income

disadvantages of partnership

Unlimited liability

Management disagreements

Lack of continuity

Frozen investment

Advantages of niche marketing

prices are higher than in mass markets

demand is more price inelastic

product is distributed through specialist retailers or directly to the consumer