GCSE Business Edexcel Paper 1

What is the role of an entrepreneur?

-organise resources -take risks -make business decisions

Why do new business ideas come about?

-changes in consumer wants -changes in technology -products and services becoming obsolete

How do new businesses come about?

-adapting existing products/services/ideas -original ideas

What is the risk of business activity?

-business failure -lack of security -financial loss

What is the reward of busniess activity?

-profit -independence -business success

What is the role of business enterprise and the purpose of business activity?

-to meet customer needs -to produce goods or services -to add value: convenience, branding, quality, design, usp

What are the strengths and weaknesses of a competitor based on?

-price -quality -location -product range -customer service

How do businesses use market segmentation to target customers?

-demographics -location -lifestyle -income -age

What are the methods of secondary research?

-internet -market reports -government reports

What are the methods of primary research?

-surveys -questionnaires -focus groups -observations

What is the purpose of market research?

-to identify and understand customer needs -to reduce risk -to inform business decisions -to identify gaps in the market

What are some examples of customer needs?

-price -quality -choice -convenience

Why is it important to identify and understand customers?

-to generate sales -for business survival

What is a lease?

money commonly used to finance land, equipment, vehicles etc for a specific period of time -asset is returned to the lessor

What is a hire purchase?

- money commonly used to finance land, equipment, vehicles etc for a specific period of time, the asset is retained by the business

breakeven chart instructions

-output (units) on the x-axis -costs and revenue on the y-axis

what is the formula for the margin of safety?

actual sales - break even sales

examples of long-term source of finance

-loans -mortgage -hire -grant -share capital

what does breakeven analysis assume?

that the external environment is stable

how can loses be reduced or turned into profit?

-cutting costs -increasing revenue

what is profit the reward of?

risk-taking

what can profit be used for?

-to reward owners -to invest in growth -to save for the future

what is a mortgage?

a long-term loan for buying buildings

what are total costs?

the money spent by the firm on producing a given level of output

example of short-term sources of finance

-overdraft -trade credit

three reasons why a business needs finance

-to start up -to run the business -to expand the business

what are overheads?

another term for costs

what is revenue?

the income earned by a business over a period of time

• depends on the number of items sold and their selling price

what is the formula for revenue?

price per unit x quantity

what are costs?

expenses paid out to run the business

what are fixed costs?

costs that don't change with output

examples of fixed costs

-rent -salaries -utilities -insurance

what are variable costs?

costs that change with output

examples of variable costs

-wages -raw materials -machinery costs (ongoing)

what is the formula for fixed costs?

total costs - variable costs

when does the breakeven point fall?

when costs go down

what makes a business solvent?

when it has enough working capital

what is the formula for total costs?

fixed costs + variable costs

what is a bank loan?

an amount of money provided by a back to be paid back with interest, over a set period of time

-banks often have to approve business plans for startups

what is net cash flow?

the difference between cash inflow and cash outflow over a period of time

what is cash flow?

the physical movement of cash in and out of a business

what is a grant?

money provided by the government or a charity

when is the breakeven point reached?

when the total revenue exactly matches the total costs and the business is not making a profit or a loss

what is the formula for profit?

total revenue - total costs

what is trade credit?

when suppliers deliver goods now and are willing to wait for a set period of time before they receive the money

what is an overdraft?

where a bank allows a firm to take out more money than it has in it's bank account

what is the formula for calculating breakeven?

fixed costs/selling price - variable costs

what is the formula fro contribution?

selling price - variable costs

why is it important that market research data is reliable?

-for consistency -incorrect market research could lead to a lack of demand -decrease in sales

what is the purpose of planning business activity?

-minimises risks -helps obtain finance

what is the role of a business plan?

-to identify business ideas -to identify aims and objectives -to identify their target market -to forecast revenue -to forecast profits -to forecast losses -to forecast costs -to forecast cash-flow -to identify sources of finance -to identify location -explain the use of the marketing mix

what are advantages of using social media to collect market data?

-low cost -quick -easy to set up

what are disadvantages of using social media to collect market data?

-potential small sample size of customers

what is the impact of technology on the marketing mix?

-introducing opportunities such as social media, machinery -introduces threat -allows competitors to be better

what is the impact of changing consumer needs?

-by introducing e-commerce, it is more convenient for consumers -by changing prices due to economic conditions (disposable incomes)

how can businesses balance the marketing mix?

-change prices to undercut competitors -increase the number of places that a product is sold

what is the purpose of promotion in the marketing mix?

to raise awareness of a product through advertising -offering discounts -on television or billboards -on social media -through sponserships

The Marketing Mix - PLACE

-where a product is being sold and how it is delivered

• online, retailer , from the manufacturer

The Marketing Mix - PRODUCT

the good or service that the business is selling

The Marketing Mix - PRICE

-the amount that a consumer has to pay for a good or service -the amount of competition for other businesses -customers opinions about the products value -cost to produce

How are products different?

-name -design -ingredients -packaging -price -target market -quality

What is the product range?

a set of variations of a specific products made to appeal to different market segments

Advantages of e-commerce

-lower operating costs -wider audience -trade 24/7 -respond to changing consumer buying habits

What is the impact on the business on location decisions?

-consider e-commerce or m-commerce -cost effective -convenient for customers

What is the nature of business activity?

-imports and exports (close to airport) -tourists -type of raw material -inertia - keeping things how they have always been

How does proximity to competitors affect a business?

-may choose to be the only supplier in a local area -may choose to be close to competition to offer choice

How does proximity to materials affect a business?

-business may want to consider the transportation of materials -impact on carbon footprint

How does proximity to labour affect a business?

The business should consider where potential employees may work or how they could get to work eg) public transport

How does proximity to market affect a business?

-business should consider the location of the potential customers before they consider the business location -research footfall of the area

What are the disadvantages of franchising?

-royalties can be very high -brand reputation may be damaged if they do not maintain reputation

What are the advantages of franchising?

-lower risk than setting up independently -benefits from the major marketing campaigns support and training is provided by the franchisee

What are royalties?

Percentage of sales revenue to be paid to the franchisor to the franchisee

What is a Franchisor?

An established business that gives permission to an entrepreneur to trade using it's branding and products

What is a franchisee?

An entrepreneur who pays a fee to trade using the branding and products of an established business

What is a franchise?

When one business gives another business permission to sell its goods and services using its name/brand

What are the disadvantages of a partnership?

-conflicting ideas -shared profits

What are the advantages of a partnership?

-business owners may have more ideas -risk is shared -easy to set up -financial information is kept private

What is a partnership?

A business where 2-20 people run a business: -share financial risk -share decision making -share the profits

What are the disadvantages of a sole trader?

-unlimited liability -difficult to raise enough money to expand -lots of pressure on the one owner -not flexible because if the owner isn't working, no money is being made

What are the advantages of a sole trader?

-complete control of the business -quick and easy to set up -keeps all profits -financial information is private

What is a sole trader?

A type of unincorporated business that is just owned by one person -unlimited liability

What are the disadvantages of public liability companies?

-limited liability -can be easier to raise finance to establish or grow the business -continues to trade even if shareholders change

What are the disadvantages of public limited companies?

-complex to set up -disagreements between shareholders -financial information is published

What are shareholders?

Investors who are part-owners of the company

What is a private limited company (PLC)?

An incorporated business that is owned by shareholders that have limited liability

What is unlimited liability?

The level of risk goes beyond the amount of money invested so personal assets would have to be sold to pay of the businesses debt

What is limited liability?

The level of risk is limited to the amount of money that has been invested into the business

What is qualitative data?

Data that can be specified with numbers

What is the formula for sales revenue?

quantity sold x selling price per unit

In what TWO ways does technology impact ways of working today?

-more efficient -remote working: less office space needed, employee satisfaction, lack of conflict

How does the marketing mix integrate?

-different products can be sold in different places

-if a business uses high volume margin pricing strategy, it is likely that there will be very little budget available for promotion

-a product targeted at a premium market must be promoted using appropriate channels to ensure that the message reaches its target audience

What does technology have an affect on?

-flexibility -cost -productivity -quality

How can an integrated marketing mix influence competitive advantage?

PLACE - if the location of your business is more competitive than your competitors then consumers are more likely to purchase from your store

PRICE - customers want a reasonable price - high or low

PROMOTION - marketing campaigns etc

PRODUCT - USP, quality

What are the 4 P's?

PRICE

PRODUCT

PLACE

PROMOTION

what is the formula for interest?

(total repayment - borrowed amount/borrowed repayment)x100 = %

what is a business aim?

what a business strives to achieve

what is a business objective?

steps in order to achieve their aims

what are examples of financial aims and objectives?

survival, profit, sales, market share, financial security

what are examples of non-financial aims and objectives?

social objectives, personal satisfaction, challenge, independence, control

why is cash important to a business?

-to pay suppliers -to prevent business failure