GCSE Business

Entrepreneur

A person who organizes, manages, and takes on the risks of a business.

enterprise

A business organization in such areas as shipping, mining, railroads, or factories.

Dynamic nature of business

The idea that businesses ever-changing because external factors, such as technology, are always changing.

venture capital

Money that is invested in new or emerging companies that are perceived as having great profit potential.

Wants

Desires that can be satisfied by consuming a good or service.

Needs

things that are required in order to live.

qualities

traits; distinguishing characteristics

Skills

The ability to do something well, usually gained through training or experience.

competitive advantage

an advantage over competitors gained by offering greater customer value, either by having lower prices or providing more benefits that justify higher prices.

Demand

Consumer willingness and ability to buy products

Obselete

out-of-date, no longer in use

Consumer Tastes

Trends and fashions that are highly desirable to the consumer.

Combating Obsolescence

Researching to improve and create products.
Ask customers what they want in products to prepare for obsolete products.

Examples of New Technology

3D Printing and Global Positioning,Electric Cars

Business success

Shows how original and revelation the idea is.Looking at other businesses and see what you are going to do to stand out.Loyal Customes increase business success and having a bigger risk should lead to bigger rewards.

3 Fundamental Roles In Business
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To provide a good or a service.
To meet the needs of the customer.
To add value.

e-commerce

Using the internet to carry out business transactions

M-commerce

purchasing goods through mobile devices.

social media

websites and applications that enable users to create and share content or to participate in social networking.

Payment platforms

Enable businesses to take online payments from customers. They are usually free for the customer to use, but take a small amount of commission from the seller.

MarketPlace

The activities involved in buying and selling particular types of goods and services, in competition with other companies

original idea

an idea that is completely new and different from anything that anyone has thought of before

Benefits of adapting products to social trends

Reducing waste means they will use fewer resources, lower costs and higher profits
More popular, sell in greater quantities
higher revenue
USP
market their products more effectively
avoid criticism for operating ethically

Methods of adding value

Branding, product features, convenience, excellent customer service.

Product Life Cycle

introduction, growth, maturity, decline

money to start and operate a business

Write a business plan
Use a Venture Capital
Get money from family/friends
Use a loan from a bank

Risk

a situation involving exposure to danger.

Reward

The benefit or return gained from an investment.

Lack of financial security

Uncertainty for a business owner about day-to-day family income and assets.

business failure

the situation when a business is unable to repay its lenders or meet the expectations of its investors because of economic or business conditions.

independence

self-reliance and freedom from outside control.

Primary research

research done firsthand for the first time

Primary Research Methods

Ad tracking, buyer decision process, concept testing, customer satisfaction research, marketing effectiveness and analytics, sales forecasting, segmentation research, test marketing

Secondary Research

collection of data from second-hand sources

Secondary Research Methods

Online searches

Public and proprietary database searches

Data published by industry associations, chambers of commerce, and public agencies

Review of books and records

Competitor Web sites

quantative research

research that collects and reports data primarily in numerical form

Qualitative Research

informal research methods, including observation, following social media sites, in-depth interviews, focus groups, and projective techniques

Observations/Data

The act of making notations about the objects or events involved in the experiment using your senses

Focus Groups

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

Focus Groups Advantages

speedy collection of data, low cost, interaction flexibility

Focus Groups Disadvantages

- time wasting
- costly
- some people may talk off topic
- if a poor interviewer then answer may not be great

internal sources

the company's own formal research and development, management and staff, and intrapreneurial programs

Government report

a description of something or information about it given by the government

Market Reports

Businesses such as Mintel who collect information about market trends and sell them on. (Secondary).

Internet Research

Using information that has already been published on the internet to gather information about the market for a firm's products or services.

Surveys/Questionnaires

forms that contain sets of questions designed to gather specific information from a targeted population. They gather data from a potentially large number of respondents. Often they are the only feasible way to reach a number of reviewers large enough to allow statistical analysis of the results.
typically designed to collect information from a random sample of respondents.

Surveys Advantages

-mass survey increases generalizability (sample = population)
-lends itself to non-intrusiveness

Surveys Disadvantages

wording effect causes great bias. poorly constructed questions can result in answers that aren't clear.

Test Marketing

the stage of new product development in which the product and its proposed marketing program are tested in realistic market settings

4 customer needs

price, quality, choice, convenience

Why businesses conduct research

- Help gain a better understanding to their customers
- Help improve their products/services
-Improves chance of success
-Help measure progress over time
-Inform a business decision

Purpose of market research

- To identify consumer needs and wants
- To assist a business in predicting what is likely to happen in the future
- To reduce the risk of product failure
- To measure the effectiveness of a marketing strategy
- To provide current or latest information regarding activity in the market

Quantitative data advantages

Easy to analyse/complete descriptive statistics on. Easy to present graphically.

Quantitative data disadvantages

Can't explain findings and excludes unexplained behaviours.

Qualitative data advantages

Can explain findings. Includes unexpected behaviours.

qualitative data disadvantages

Difficult to analyse and present data graphically.

Market Segmentation

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

Ways to segment the market

Age, gender, income,location,hobbies

revenue

income

Revenue formula

Price x Quantity

Profit

total revenue minus total cost

cash flow

the total amount of money being transferred into and out of a business, especially as affecting liquidity.

Cash inflows

Payments in cash received by a business, such as those from customers (*debtors*) or from the bank; e.g. receiving a loan

Cash outflows

expenses, or items for which you must spend money

Cash

Money in the form of bills or coins

Net cash flow

cash inflows - cash outflows

break-even point

the point at which the costs of producing a product equal the revenue made from selling the product.

Break Even Formula

BEP=FC/SP-VC

break-even analysis

a method of determining what sales volume must be reached before total revenue equals total costs

Margin of Safety

difference between your actual or expected profitability and the break even point.

Margin of Safety Formula

actual sales - break even sales

Financial aims and objectives

Survival, profit, market share, sales, financial security

Non-financial aims and objectives

Social objectives, personal satisfaction, challenge, independence and control

The importance of cash to a business

pay suppliers, overheads and employees
prevent business failure (insolvency)

Closing balance formula

Opening balance + net cash flow

Sources of finance

Where the businesses get money from internally or externally and whether it's needed for the short term or long term.

Short term sources of finance

overdraft and trade credit

Long term sources of finance

Personal savings
Venture capital
Share capital
Loans
Retained profit
Crowd funding

Overdraft

Occurs when money is withdrawn from a bank account and the available balance goes below zero.

Overdraft advantages

Easy to arrange
Flexible
Only pay interest on what is used

Overdraft disadvantages

Higher interest rate than bank loan
May be a fixed charge
Cannot be used for large borrowing
Bank can change limit at any time or ask for money to be paid back sooner than expected

Cash flow forecast

Predicts the cash inflows and outflows in future periods, usually months or quarters.

trade credit

a type of short-term financing extended by a seller who does not require immediate payment after delivery of merchandise.

Trade credit advantages

Delays the need to pay for goods and services purchased, therefore aiding cash flow
No loss of ownership or control

Trade credit disadvantages

Lose good suppliers if they fail to pay their bill on time
Force a business to take a debt factor service

Loans

amounts of money borrowed which will accumulate interest

Loans advantages

Quick and easy to secure
Fixed interest rates allow firms to budget
Improved cash flow
The borrower retains ownership of the company.

Loans disadvantages

-Interest must be paid regardless of financial performance
-A firm that is highly geared may be seen as high risk
-A firm normally provides security known as collateral
-Often more expensive than other forms of finance
-Can be charged a penalty for early payment

Share capital

The total value of capital raised from shareholders by the issue of shares.

Share capital advantages

- only need to pay dividends if a profit is being made and the amount of dividend is not fixed
- possible to raise large amounts of finance
- no interest repayments

Share capital disadvantages

- Loss of ownership as shareholders are part owners
- Potential risk of loss of control for a Plc with a threat of hostile takeovers
- Complex and costly process of issuing shares, especially for a Plc

Personal Savings

money saved through work or business investments

Personal Savings Advantage

-Low Risk option as there's no interest or additional fees
- Shows owner's commitment to banks and potential investors

Personal Savings disadvantages

- Owner can lose all the money they invest

venture capital

money provided by large investors to finance new products and new businesses that have a good chance to be very profitable

Venture Capital Advantages

Allows finance to be raised for risky ventures
Venture capitalist will often provide advice to ensure their investment is successful.

Venture Capital Disadvantages

- great risk of the successfulness of a business placed in the venture capitalists hands
- loss of control (if the capitalist make wrong suggestions or conflict arises this can harm the performance of the business)

Retained profit

Profit which is kept back in the business and used to pay for investment in the business.

Retained profit advantages

No interest charges
Available immediately
Only available up to the amount already accumulated by the business and therefore avoids debt
No loss of ownership (control)

Retained profit disadvantages

- newly formed businesses may not be able to do this
- may have lowered working capital to pay short term debts (poor liquidity)
- don't get new ideas from new shareholders