Studied by 39 people
business definition
a decision making organisation that aims to meet the wants and needs of individuals or organisations
what do businesses do?
businesses add value to inputs and are rewarded by gaining revenue or gaining recognition
resource inputs categories of a business
human, physical, financial and enterprise
human resource inputs definition
the right quality and quantity of people required to make the product or provide the service
physical resource inputs definition
the right quality and quantity of materials, machinery and land to make the product or provide the service
financial resource inputs definition
the right quality and quantity of cash and other forms of finance required to make the product or provide the service
enterprise resource inputs definition
the business idea and the will to see the other elements becoming a thriving and functioning business
consumer goods definition
goods sold to customers that can be further split to durable and non durable
capital goods definition with example
the products used in the production process of other goods, not for consumption e.g. wheat to make bread
business functions definition
human resources, finance, marketing and operations management
what is the role of human resources?
employ and recruit people, train them and help with employee issues
what is the role of finance?
records inflows and outflows of money
manages businesses money
must comply with legal requirements and inform those interested
what is the role of marketing?
manages branding and target audience and does market research
what is the role of operations management?
determines best methods of production
control quantity and flow of stock
quality management
what are the sectors of a business?
primary, secondary, tertiary and quaternary
what happens in the primary sector? with examples
raw materials are acquired e.g. mining, farming, fishing
what happens in the secondary sector? with example
raw materials are processed by manufacturing e.g. making furniture
what happens in the tertiarty sector? with examples
services are provided e.g. transportation, hairdresser
what happens in the quanternary sector? with examples
provides services focuses on knowledge, subgroup of tertiary sector e.g. IT, media services
what are the reasons for starting a business?
rewards
necessity
interest (passion)
independence
challenge
finding a gap
sharing an idea
what is the process of starting a business?
organising basics
research the market
planning
establish legal requirements
raising finance
testing the market
what are the challenges for a new business?
organisation
structure
market research
competitive market
business plan
legal requirements
financing
what is the public sector? with example
government owned, funded or controlled e.g. NS
what is the private sector? with examples
not government owned or controlled e.g. private banks, hotels
how to calculate net profit
net profit = total revenue - total costs
sole trader definition
a business owned and run by one individual, is unincorporated meaning owner is same legal entity as business
what are the characteristics of a sole trader?
limited finance, privacy, flexible working hourse
advantages of a sole trader
flexible working hours
control over decisions
easy to register
minimal paperwork
more personal financial gains
disadvantages of a sole trader
finance is limited
unlimited liability (accountable for financial loss)
higher tax rate
suffers if owner is ill etc
definition of a partnership
a profit seeking business owned by two to twenty people, does not create a different legal entity
what are the characteristics of a partnership?
raises money from personal funds
can raise money from silent partner
decisions of partners are made jointly
silent partner
individuals who invest in the business but don’t take part in the running
what does a deed of partnership contract include for a partnership?
amount of finance each partner contributes, roles and responsibilities and how profits or losses will be shared
advantages of a partnership
more stable
easier to get funding
safer
more skills and qualities
disadvantages of a partnership
unlimited liability
more complex
conflict between partners
less individual profit
purpose of unlimited liability
it exists to prevent businesses (sole traders and partnerships) from making careless decisions when managing
what does it mean if you have limited liabilty?
the only loss a shareholder has is the amount they have invested
company definition
business owned by their shareholders and managed by a board of directors
public limited company with example
a large business with the legal rights to sell shares to the general public, its share price is quoted on the national stock exchange e.g. apple
advantages of a public limited company
limited liability
finance is more available
continuity of company
possibilities for expansion
ability to raise capital
private limited company with example
a small business that is owned by shareholders who are often family members, they cannot sell shares to the public e.g. Chanel
advantages of a private limited company
limited liability
enhanced status
no minimum capital
possibilities for expansion
continuity
disadvantages of a private limited company
division of ownership
limited stock exchange access
privacy loss
disadvantages of a public limited company
lots of time and money needed to meet legal requirements
privacy loss
owners risk loss of control
social enterprise definition
a business with mainly social objectives that reinvests most of its profits into benefiting society rather than maximising returns to owners
what are the aims of a social enterprise?
for total revenue to be greater than total costs
to achieve social objectives
what are the main objectives of social enterprises (the triple bottom line)?
economic - to make profit or surplus to reinvest into business and provide return to the owners
social - to provide jobs or support for local disadvantaged communities
environmental - to protect environment and run sustainably
what are the three types of for profit social enterprises?
private sector companies, public sector companies and cooperatives
private sector companies definition with example, how do they operate?
operate in the private sector, use ethical practices e.g. TOMs shoes
surplus → donated/reinvested → create positive social change
public sector companies definition with example
state owned, earn revenue and provide services not provided by private sector e.g. food banks
cooperatives definition
for profit social enterprises owned by a group of people acting together to meet the common needs and aspirations of their members by operating socially responsibly
advantages of cooperatives
favourable legal status
strong community identity
social benefits
disadvantages of cooperatives
decision making is complex
limited finances and financial strength
slower decision making
what is a type of not for profit social enterprise?
non governmental organisation (NGO)
NGO definition
private organisations that pursue activities to help poverty, protect the environment, provide social services or help community development
operational NGOs definition with example
are established from given objectives or purpose e.g. Unicef
advocacy NGOs definition with example
take a more aggressive approach to promote/defend a cause to raise awareness through direct action e.g. Greenpeace
vision statement definition
a statement of what the organisation would like to achieve or accomplish in the long term
mission statement definition
a declaration of the underlying purpose of an organisations existence and its core values, an intermediate step on the way to the vision which provides a sense of direction
strategic objectives definition with examples
medium to long term objective set by the senior managers to achieve aims e.g. profit max, growth, market standing, image and reputation
tactical objectives definition with examples
medium to short term objectives set by middle managers to achieve strategic objectives e.g. survival, sales
operational objectives definition
day to day objectives set by floor managers
what are internal reasons for objective changes?
leadership change
finances e.g. overseas growth
HR actions taken by unions
corporate culture
type and size of organisation change e.g. legal structure
what are external reasons for objective changes?
state of the economy
government constraints
new technology
ethical changes
social changes e.g. demographic change
culture change
participation of women
what is the SWOT analysis?
a form of strategic analysis that identifies and analyses the main internal strength and weaknesses and the external opportunities and threats that will influence the future direction and success of a business
advantages of using SWOT analysis
simple an quick
wide range of applications
determines organisations position in the market
encourages foresight and proactive thinking
Ansoff matrix definition
a marketing planning tool used to help an organisation select its market and product growth strategy
four strategy quadrants of the Ansoff matrix
market penetration, market development, product development and diversification
what is market penetration, what can it lead to?
where an organisation focuses on selling existing products into existing markets, this enables an organisation to increase its market share and potentially grow organically to achieve a monopoly, leads to increased economies of scale and brand loyalty
what are common business objectives?
strategic, tactical and operational objectives
what is market development? what is the difference of it from market penetration?
where an organisation focuses on selling their existing products in new markets
e.g. new geographical markets or new distribution channels
it is more risky than market penetration as it involves expenditure in ensuring that you meet the needs of the new market that you are entering
product development definition with example
where an organisation focuses on selling a new product in an existing market
e.g. the investment in research and development to improve the features of the product or service
diversification definition, what are its downside and upside?
where an organisation focuses on developing a new product and selling it in a new market
most risky but potentially rewarding strategy
expensive and requires extensive market research
what is corporate social responsibility?
the idea that corporations should do positive good for society, socially responsible businesses are those that act morally towards their stakeholders
what do firms need to do to meet their corporate social responsibilities?
provide accurate information and labelling, follow fair employment practices, have consideration for the environment and do active community work
advantages of being a big business
survival
economies of scale
higher status (market leader)
large market share
can determine prices and decide industry standards
advantages of being a small business
greater focus
competitive advantages (less competition)
flexible and personalised service
greater cachet (indication of approval)
what is internal organic growth and how does it occur? what is external growth?
internal organic growth
growth that out of existing operations of the business
occurs slowly
is low risk
most growth is self financed using retained profit
external growth
a quick but riskier method, businesses can increase market share and decrease competition quickly
external growth definition
a quick but riskier method, businesses can increase market share and decrease competition quickly
what are the sources of external growth?
mergers and acquisitions
joint ventures
strategic alliances
franchises and takeovers
costs calculation
costs = fixed costs + variable costs
what are fixed costs? with example
if their is no output, you still have to pay it e.g. rent
what are variable costs? with example
paid only when there is output e.g. electricity
average total costs calculation
average total costs = total costs/quantity
economies of scale definition
when a firm faces a reduction in average cost as it increases its size
diseconomies of scale definition
when a firm faces an increase in average cost as it increases its size
2 examples of external economies of scale
the development of research facilities in local universities that businesses in an area can benefit from
the spending by a local authority on improving the transport network in an area
what are the internal economies of scale?
technical, marketing, managerial, purchasing, financial and risk bearing
STEEPLE
social, technological, economic, environmental, political, legal, and ethical
globalisation definition
the process by which the world’s economies are becoming more integrated
what is the aim of globalisation?
free movement of capital, goods and people
multinational corporation definition
when a company operates in two or more countries
advantages for host countries of multinational corporations
economic growth
skills transfer
higher employment
new ideas
greater choice of products
disadvantages for host countries of multinational corporations
loss of cultural identity
brain drain (skilled workers leave)
loss of market share
stakeholder definition
someone who is effected by the performance of an organisation
internal stakeholders definition with examples, who are they?
individuals or groups that work within the business e.g. directors, employees that hold shares
external stakeholder definition
individuals or groups that are outside the business, those who own shares but are not involved in daily running
what are the interests of different stakeholders, what do they want?
shareholders: return on their investments
owners: making profit
workers: better working conditions and higher income, government: improve standard of living
local community: tax revenue and employment
what are the two types of stakeholder analysis that large businesses can perform?
stakeholder rank, stakeholder mapping
what are the stakeholder ranks?
core stakeholders, internal but indirect stakeholders, external and indirect stakeholders
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Flashcard (100)