business year 1

how to work out sales revenue

price x quantity

what’s a purpose of a business

to create goods or services to meet consumer needs while generating profit.

define profit maximisation

reinvesting in new equipment, attracts new investors and shows bank they can repay loans

define sales growth

lower costs per unit

define survival

cut prices to keep customers and reduce staff numbers

define cash flow

pay suppliers on time

define social and ethical

reducing environmental impact, paying fair wages to all workers

which objectives would have issues if clashed

growth vs cash flow

profit vs ethics

why is the linking to objectives beneficial

ensures everyone in th organisation is working towards the same goals

why businesses set objectives

direction and coordination

measurement and control

motivation

define strategic drift

business gradually moved away form its mission

without profit businesses would struggle to …

reinvest

pay dividends

build savings

formula for total costs

FC + VC

ways to increase revenue

raises price

enter new markets or spend more money on advertising

ways to reduce costs

find cheaper suppliers

make operations more efficient

define unlimited liability

owners belongings can be taken to pay business debts

4 advantages of sole trader

complete control

quick and cheap to set up

keep all the profits

business finances stay private

3 disadvantage of sole trader

limited to personal savings

unlimited liability

all responsibility

3 advantages of private limited

more professional image with suppliers

limited liability

easier to raise money

3 disadvantaged of private limited

more complex

more expensive

cannot sell shares to the public

3 advantages of public limited

shares easily sold and bought

limited liability

large amount of money through sales

3 disadvantages of public limited

expensive

constant pressure from shareholders

owners may loose control

4 reasons for changing business forms

need for more money

reducing personal risk

cashing in

planning for future

define flotation

when a company sells shares to the public for the first time on a stock exchange

define share capital

money raised by selling shares to investors

formula for market capitalisation

current share price x number of shares issued

why shareholders invest

income

capital growth

influence

control

internal factors

financial performance

strategic decions

management changes

cooperate actions

unexpected events

external factors

economic conditions

interest rate changes

currency movements

industry trends

market segiment

define agency problem

potential conflict o interest between owners and managers

how to create brand loyalty

research and development

customer service

advertising and marketing

how an aging population will increase demand

for healthcare, financial services, mobility aids

how an aging population will reduce demand

for products aimed at young people such s first time buyer homes

what impact will migration have

changes in labour supply, may ease skill shortages or increase competition for jobs

impacts of fair trade

higher input costs

premium price opportunities

access to new markets

managers job

planning

organising

directing

controlling

leaders job

vision creation

lignment

culture building

innovation and change

a leader who ignores management disciplines risks …

loosing focus, overspending and breaking regulations

a manager who ignores leadership behaviours may create a

a culture where staff just follow rules without thinking creatively or feeling engaged

define autocratic

eager has complete control over decision making, with little or no input from others

define lassiez faire

leader takes a hands off approach and allows their team to manage their own work

define paternalistic

leader take on a parental role making decisions in the best interest of their staff

define democratic

leader involved their team in the decision making process

when a autocratic best suited

natural disasters, military, inexperienced team

disadvantage of autocratic

reduced employee morale

limited creativity

advantages of autocratic

leader takes responsibility for welfare of their employees

create a sense of security and support

disadvantages of paternalistic

controlling, limits creativity and innovation

advantages of democratic

encourages participation and involvement from employees in decision making

disadvantages of democratic

decision are made through majority agreement, which can be time consuming

define opportunity cost

refers to the value of the next best alternative that you give up when making a choice

define decision making

this method lowers the risk good data costs money and numbers never tell the whole story

how the scientific approach is used

set the objective

collect data

analyse data and select an option

implement the decision

review and learn

benefits of scientific decision making

reduces risk

justifies investment

supports continuous investment

limitations of scientific decision making

cost and time

data quality issues

benefits of Intuition

speed

creativity

uses deep expertise

limitations of intuition

bias

hard to justify

riskier on big bets

decision tree benefits

may reveal options that haven’t previously been considered

managers need to focus on considering the risks associated with their choices

deep research to be carried out

limitations of decision trees

constructing decision tree needs skill

significant time to gather reliable data

doesn’t include external factors

squares meaning in decision tree

decision points

nodes meaning In decision tree

different outcomes

how to work out expected value

(expected success x prob) + (expected failure x prob)

key external influences

competition

economic conditions

social change

technological change

on the stakeholder how needs managing closely

high power and high interest high

which stakeholders will need to be satisfied

high power and high interest

which stakeholder will need to be monitored

low power and low interest

which stakeholder will need to be informed

low power and high interest

define sales volume

increasing the volume of goods sold

define sales value

increasing revenue generated through the sale of goods and services

define market size

increasing the size of the market so that a business can try and increase its sales

define brand loyalty

retaining customers and ensuring repeat customers

define market growth

when an Industry grows in terms of either volume or value

define sales growth

occurs when a business increases its sales in terms of volume or value

define market share

proportion of a market that a business controls in order to satisfy customer needs

qualitative meaning

collects info about opinions and views

define quantitative

collects factual info on things that can be quantified and recorded easily

why is market mapping significant

to identify a gap in the market by looking at what competitors offer

define primary research

process of gathering new information directly from consumers using methods like surveys, interviews

advantages of using surveys

completed easily

competitors don’t have access

disadvantages of using surveys

bias as poorly conducted will lead to poor results

advantages of primary market

information gathering is focused on the needs of the business, rivals don’t have access

in depth information

more up to date

disadvantages of primary market

sample size too small, unrepresentative of all customers = unreliable results

bias

expensive and time consuming

random definition

every member of the population has an equal chance of selection

stratified definition

a random selection of participants from subgroups of the population

quota definition

specific proportions of each group of the population are selected

advantages of random

simple to interpret

anyone in the population can be asked

disadvantages of random

sample ay not be representative on the market as a whole

advantages of stratified

focuses on people from the key subgroup, likely highly relevant

disadvantages of stratified

setting up is more complex

advantages of quota

quick and easy

disadvantages of quota

not random, so risk of bias

define secondary market research

involves the collection, compilation and analysis of data that already exists

advantages of secondary

info already available

cheap to collect

suitable for small business

disadvantage of secondary

lack relevance, not factually correct

out of date

define price elasticity of demand

how reposnisv demand for a product is to a change in price

formula for PED

% change in quantity demanded / % change in price

PED value greater than 1

price elastic

PED value lower than 1

price inelastic

if demand is price inelastic

a rise in price should lift revenue

if demand is elastic

businesses often cut prices

define market segmentation

process in which a single market is divided into submarkets or segments