business revision

1.1 - 2.1

outline

make two main points, link them together

explain

state a fact, give two points, expand on these and give reasons

analyse

talk about the main features, explain how they collectively affect the business

discuss

long answer, describe and explain

justify

use the info given to recommend one of the two options given

evaluate

discuss and analyse both sides of the issue conclude and make a final judgement

enterprise

the process of identifying new business opportunities and taking advantage of them

add value

improve a product so people are willing to pay more

how to add value

convenience, branding, design, quality, USP

why new business ideas come about

changes in tech, customer wants/needs, other products becoming obsolete

new business ideas can be

original or an adaptation of an existing product

what does an entrepreneur do

take risks, organise resources, makes business decisions

risks

financial loss, lack of security, business failure

rewards

success, profit, independence

marketing mix

place, product, promotion, price

strengths and weaknesses

price, customer service, quality, product range, location

what does market research help with

making informed decisions, spotting gaps in the market, reducing risk

primary research examples

questionaires, surveys, focus groups, observation

advantages of primary research

up to date, relevant, specific

disadvantages of primary research

expensive, time consuming

examples of secondary research

market research reports, government reports, newspapers, magazines, internet

secondary research advantages

cheap, easily found, instantly available

secondary research disadvantages

not always relevant, not specific, out of date

business aims

survival, maximise profit, increase market share, maximise sales, achieve financial security

market share

the percentage of a markets total sales a company or product has made.

non financial aims for starting a business

personal challenge, satisfaction, independence and control, doing whats right for society

factors that affect the aims and objectives

the size and age of business, who owns it, the level of competition

the margin of safety

the gap between the current level of output and the break even output

credit terms

tell you how long after agreeing to buy a product the customer has to pay. This can affect the timings of a businesses cash flow

why do firms need finance

start up, cash flow, additional finance, delay payment, day-to-day running costs, expansion

short term sources of finance

trade credit, overdrafts

long term sources of finance

loans, personal savings, share capital, venture capital, retained profit, crowd funding

advantages of a sole trader

easy to set up, get to be your own boss, get to decide what happens to profits

disadvantages of a sole trader

work long hours, unincorporated, unlimited liability, hard to raise money

advantages of partnerships

more owners -more ideas, more skills + expertise, people share the work, more capital so business grows faster

disadvantages of partnerships

partners are legally responsible for each others actions, most have unlimited liability, disagreements are common, profits are shared

what limited companies owned by

shareholders

what are the two types of limited companies

private and public

private limited companies

shares can only be sold if all shareholders agree, often family members, have ‘Ltd’ after their name

Ltd. advantages

limited liability, easier to get a loan or mortgage

Ltd. disadvantages

more expensive, legally obliged to publish accounts every year

franchising advantages

recognition, trust, less risk of failing, easier to get a loan, provided with training, management and accounting

franchising disadvantages

limited freedom, franchisee has to pay a lot to startup, then make regular payments

what influences location

location of raw materials, labour supply, competition, using the internet, location of the market

factors that affect the marketing mix

technology, customer needs, competition

who are business plans made for

the owner and financial backers

what is a business plan

an outline of what a business will do and how it aims to do it

what does a business plan help with

makes owner think carefully about what the business will do, the organisation and resources required, convince financial backers, reduce risk, prioritising objectives

what should a business plan contain

how the business will be run, the idea, USP, aims and objectives, target market, marketing mix, location, finance

who are stakeholders

owners, employees, suppliers, local communities, customers, government, pressure groups

what is e-commerce

buying and selling online

who has to be paid the National Minimum Wage

22 and under

who has to be paid the National Living Wage

23+

which act states that recruitment procedures can’t discriminate against people

Equality act 2010

What do businesses have to do to be safe

risks are properly controlled, risk assessments, staff have training

pros and cons of health and safety legislation

fewer accidents, more productive, less time off work, expensive, have to pay compensation is anyone is injured

what does the Consumers Rights Act cover

how goods and services can be sold

what are the three criteria of the Consumers Rights Act

the product should be fit for its purpose, it should match its description, it should be of satisfactory quality. If these are not followed, the customer can ask for money back, repair or replacement.

how do consumer laws affect businesses

if they break it, they are faced with costs and inconvenience, they could end up in court, harm their reputation, have to train staff properly.

what does unemployment mean for the economy

the economy produces less output than if everyone was employed, everyone suffers

how does unemployment help businesses

lower wages, fill jobs easily, gov could give grants to firms who open and provide jobs

how does unemployment cause issues for businesses

less disposable income, lack of demand

what do tax rates determine

the percentage of a businesses profits have to be paid to the government

how does income tax affect spending

if it falls, they have more disposable income, consumer spending increases

what is inflation

the increase in price of goods and services

how does inflation impact businesses

consumer spending, cost of labour, global competition

methods of internal growth

targeting new markets (selling to new people) and developing new products

external growth is…

faster but more risky

methods of external growth

merger or a takeover

4 ways to merge/take over other firms

join with a supplier, join with a competitor, join with a customer, join with and unrelated firm

downsides of mergers and takeovers

less than half are successful, lack of motivation, clashing management, cost-cutting, tension

what is an economy of scale

when a business expands and the average costs or a product are cheaper

why do economies of scale happen

larger firms need more supplies so buy them in bulk, they can afford to buy and operate more advanced machinery

diseconomies of scale

areas where the growth can lead to increase in average unit costs

larger business funds

retained profit, fixed assets, loan capital, share capital

why do business objectives change

new legislation, changes in market conditions, changes in tech, performance, internal changes

what is globalisation

the process by which businesses and countries around the world become more connected

how globalisation impacts businesses

imports, exports, business location, multinationals

barriers to international trade

tariffs, trade blocs

trade blocs

groups of countries with few or no trade barriers