Studied by 2 people
Need
A good or service that is essential for people's living
Want
A good or service which people want to have, not essential
Economic problem
When wants exceed the resource available to make scarcity
Scarcity
when there are unlimited wants but limited resources
Factors of Production (4)
Land, labor, capital, enterprise
Opportunity cost
The next best alternative choice given up as another was chosen
Specialization
When workers specialize in one task which they do, best at
Division of labor
When labor force is divided into sections in which people at those sections are specialized in one particular job
Purpose of business activity
Combine 4 factors of production and make products/services
Added value
Selling price - cost of making products
Primary sector
Where people extract natural resources from earth and turn them into raw materials
Secondary sector
Turn raw materials into products
Tertiary sector
Provide services to customers and sell products
De-industrialization
Decline of importance for secondary sector
Mixed economy
Has private and public sector businesses
Private sector
Businesses own by individuals
Public sector
Businesses own by the government
Capital
Money (invested into a business)
Entrepreneur
A person who combines all 4 factors of production together
Qualities of an entrepreneur
Risk-taking, confident, patient, optimistic, creative, hard-working
Business plan
A plan which outlines a business' objectives, name of organization, finance and owners of business
Capital employed
Amount of money invested into a business
Comparing the size of businesses (4)
Number of employees, output, sales and capital employed
Why owners want business to grow
More profit, status, lower average costs, more market share
Expansion problems (4)
Bad communication, management, increase expansion costs
Why business want to stay small
Nature of product/service, owner wants, market size
Why business fail
Poor management (finance), communication, rapid expansion, failure plan to change, risks when start up
Internal growth
Growth within the business (more branches, expansion)
External growth
Growth outside of the business (integration, etc.)
Merger
When two businesses agree upon joining together into one
Takeover
When a business buys another business firm and make into one
Horizontal integration
Joining with another business in the same sector
Vertical integration
Joining with another business in a different sector (forward, backward vertical integration)
Conglomeration integration
When a business merge with another of a different industry
Diversification
Sole trader
When a business is owned by one single person
Limited liability
There is a limitation in the liabilities of shareholders
Unlimited liability
There are no limitations in the liabilities of shareholders
Partnership
When a business is owned by two or more people
Partnership agreement
A document which shows the agreement of people within a partnership company
Unincorporated business
A business which does not have a separate legal identity (sole)
Incorporated businesses
A business which has a separate legal identity
Shareholders
People who have shares in a business, usually owners
Limited company
Type of business in private sector where shares may be issued
Private limited company (Ltd)
Private sector business with no more than 25 owners who may buy and sell shares
Public limited company (plc)
Private sector business which can sell shares to the public
Annual general meeting
An annual meeting held for shareholders of plc
Dividends
Money pay back to shareholders when profit is made
Joint ventures
When two or more businesses agree to do a project together
Franchising
When the brand name and operations of a certain business is bought by another business
Public corporation
Businesses which are owned and operated by the government
Business objective (6)
Make profit 2. Survival in industry 3. Increase market share 4. Pay back to shareholders 5. Growth 6. Service to community
Profit
Income of a business
Social enterprises
Business with social objectives as an aim to make profit
Market share
proportion of product/service in the total market
Why business objectives change
Business facing economic problems 2. Want to earn more market share and return to shareholders 3. Owners aim to expand business
Stakeholder (7)
Banks, investors, employees, entrepreneurs, people
Motivation
The reason why employees work hard and efficiently
Motivation theories:
F.W Taylor
Workers work mainly for money (motivation factor)
Maslow (6)
Hierarchy of needs: psychological needs, health and safety, social needs, esteem (recognition), self-actualization (promoted)
Herzberg (motivators, hygiene)
Has motivators (promotion, recognition) and hygiene (mandatory to satisfy before motivators: health and safety, relationships, salary, statues, etc.)
Financial rewards:
Wages Payment for work, usually weekly - time rate Paid based on number of hours worked - piece rate Paid based on number of products made - salaries (rewards: commission, profit sharing, bonus, performance-related pay, share ownership) Payment for work, paid monthly - commission: extra money given based on sales made, hoa hồng - profit sharing: get money which comes from the business profit - bonus: extra money paid as reward at the end of the year - performance-related pay: extra pay based on how well worked, used appraisal to access performance - share ownership: employees may own shares of the company
Non-financial rewards:
fringe benefits Non-financial rewards given to employees (cars, house, school for children, healthcare, holidays) - job satisfaction (job rotation, job enlargement, job enrichment, team working) The good feeling derived from doing the job well - job rotation: switch stations with different jobs around at specific times, then change back - job enlargement: give more tasks to do at the same level - job enrichment: give more tasks to do at a higher level - team working: work together as a group to complete a product
Organizational structure
Refers to the levels of employees in a business organization
Chain of command
A structure which outlines the path of communication
Span of control
The amount of subordinates under a level of management
Role of management (5)
Planning, organizing, coordinating, commanding, controlling
Delegation
Giving a task to a subordinate + less work on shoulder - work may not be done well + subordinate feels trusted - subordinate may do a better job
Autocratic leadership
Type of leadership which the managers assign employees specific tasks to do and they have no involvement in decisions
Democratic leadership
Type of leadership which employees are involved in decision making
Lasseiz-faire leadership
Type of leadership which managers give employees the business objective and they are given the choice of choosing how they want to complete the task
Trade union
A group of people gathered together to fight for fairness in a business
Recruitment and selection process (8)
Job vacancy arises 2. Job analysis 3. Job description 4. Job specification 5. Advertisement 6. Applications short-listing 7. Interviews and final selection 8. Vacancy filled
Job analysis
Analyze and list out the responsibilities and tasks of that job
Job description
Make a description of all of the responsibilities, tasks for that job
Job specification
Make a document with requirements and qualifications for job
Internal recruitment
Recruit employees within the business structure, ~promotion
External recruitment
Recruit employees outside of the business
Part time workers
Workers who work only for a certain amount of time, 30-35h
Full time worker
Workers who work full working time set by a business, 35h/week
Induction training
Training which informs the new employee about the organizational structure of the business, activities, employees
On the job training
Training given on the spot by current employees, such as demonstrating how the job is done
Off the job training
Training given away from workplace, often by a specialist
Workforce planning
Planning out the number of workers need for the business
Redundancy
Dismissal of employees not because of bad work but because they are no longer needed
Industrial tribunal
A meeting where workers' complaints are considered because of unfair dismissal or discrimination at work
Contract of employment
A contract which shows that the employee is working for a company, legal agreement also listing the rights and responsibilities of workers
What is effective communication
When a message is passed to another person and the sender receives a response from or understood by receiver
Internal communication
Communication within a business organization
External communication
Communication outside of business organization with another
Process of effective communication
The sender sends the message through appropriate medium to receiver and receiver sends back a response show understanding
One way communication
Communication in one direction, no reply
Two way communication
Communication in which a reply is expected
Choosing appropriate communication method (7)
Who is sending 2. Who is receiving 3. Content of message 4. Speed 5. Costs 6. Importance of response 7. Importance of written record
Communication methods (3)
Verbal a. Meeting, talks, video conferencing 2. Written a. Emails, reports, memos, business letters, notice, text 3. Visual a. PPT presentation, video clips, posters, photo
Market share
Proportion/share of the company on the total market
The role of marketing (4)
Identify customer needs 2. Satisfy customer needs 3. Anticipation changes in customer needs 4. Gain relationships with customers
Why customer spending pattern change (4)
Advancement in technology 2. Taste in fashion/trend changes 3. Change in income 4. Aging populations
Why some markets become more competitive (3)
globalization 2. transportation improvements 3. e-commerce
Note 
Flashcard (24)