business
organisation that produces goods and services
goods
physical products
services
non-physical products
output
amount of goods or work produced by a person, machine or factory
consumer goods
goods and services sold to consumers rather than businesses
producer goods
goods and services produced by one business for another
private sector
business organisations owned by individuals or groups of individuals
public sector
owned by central or local government
entrepreneur
person who takes risks and sets up businesses
objectives
goals or targets set by a business
financial objectives
survival
profit
increase market share
financial security
non-financial objectives
social objectives
personal satisfaction
challenge
independence and control
profit satisficing
making enough profit to satisfy the needs of the business owner
dividends
share of the profit paid to the shareholders of a company
large business
business that employs more than 250 people
small business
business that employs fewer than 50 people
revenue
money from the sale of goods and services
unincorporated
business where there is no legal difference between the owner and the business
incorporated
business that has a separate legal identity from that of its owners
sole trader
business owned by a single person
unlimited liability
owner of a business is personally liable for all business debts
advantages of a sole trader
owner keeps all profit
independence
simple to set up
may qualify for government help
disadvantages of a sole trader
unlimited liability
struggle to raise finance
no continuity
too small to exploit economies of scale
partnership
business owned by between 2 and 20 people
deed of partnership
binding legal document that states formal rights of partners
advantages of partnerships
easy to set up
specialisation
more capital raised
financial information not published
disadvantages of partnerships
unlimited liability
profit shared
partners may fall out
legally binding
limited partnership
partnership where some partners contribute capital and enjoy a share of profit but do not take part in running the business
limited liability
business owner is only liable for the original amount invested in the business
franchise
structure in which a business allows another operator to trade under their name
advantages to franchisee
less risk
back-up support
predictable set-up costs
national marketing
disadvantages to franchisee
profit shared with franchisor
strict contracts
lack of independence
can be expensive
advantages to franchisor
fast method of growth
cheap method of growth
franchisees take some risk
franchisees more motivated
disadvantages to franchisor
potential profit shared
reputation may be damaged
cost of support may be high
social enterprise
business that aims to improve human or environmental wellbeing
venture capitalists
specialist investors who provide money for business purposes
limited companies
business organisations that have a separate legal identity from that of their owners
limited liability
shareholders are legally responsible for the debts of a company according to how many shares they own
advantages of private limited companies
limited liability
more capital
control cannot be lost
continuity
disadvantages of private limited companies
financial information is made public
profit shared
shares take time to transfer
cannot raise huge amounts of money
public limited company
a limited company who’s shares are freely sold and traded, with a minimum share capital of £50 000
advantages of public limited companies
large amounts of capital raised
limited liability
exploit economies of scale
shares can be bought and sold easily
disadvantages of public limited companies
expensive set up costs
control can be lost
financial information made public
managers may take control
multinational company
large business with production in at least 2 countries
features of a multinational company
huge assets
experienced executives and managers
powerful advertising
highly advanced technology
high influential economically and politically
exploit huge economies of scale
ownership and control entered in host country
productivity
rate at which goods are produced and the amount produced
public corporations
business organisations owned and controlled by the government
features of public corporations
state owned
created by law
incorporation
state funded
public services
public accountability
natural monopoly
market where it is more efficient to have just one organisation meeting total market demand
reasons for public ownership of businesses
avoid wasteful duplication
maintain control of strategic industries
save jobs
fill gaps left by private sector
serve unprofitable regions
reasons against public ownership of businesses
cost to government
inefficiency
political interference
difficult to control
privatisation
transfer of public sector resources to the private sector
factors affecting location
proximity to market
proximity to labour
proximity to materials
proximity to competitors
trade bloc
group of countries situated in the same region that join together and enjoy trade free of barriers
globalisation
growing integration of world’s economies
features of globalisation
goods and services are traded freely across international borders
people are free to live and work in any country
high levels of interdependence
capital can flow freely between different countries
free exchange of technology and intellectual property
intellectual property
people’s knowledge or creative ideas that have commercial value and are protectable under different forms of copyright
saturate
to offer so much of a product for sale that there is more than people want to buy
visible trade
trade in physical goods
invisible trade
trade in services
exports
goods and services sold overseas
imports
goods and services bought from overseas
exchange rate
value of one currency in terms of another
fiscal policy
using changes in taxation and government expenditure to manage economy
external factors
PEST - political, economical, social, technological
measures of success of a business
revenue
profit
growth
marketshare
customer satisfaction
employee satisfaction
shareholder satisfaction
overtrading
taking on more work than a business can afford to fund effectively
inventory
stocks of goods
reasons for business failure
cash-flow problems
lack of finance
not competitive
failure to adapt to changes in the market
average total cost
Where unit costs fall when output increases
brand
having a unique name/logo/identity
Current liabilities
Debts that the company must pay in the short term (in less than a year)
market segment
part of a market where consumers have similar characteristics
revenue
income from sales
variable costs
costs that change when output changes
above the line promotion
The use of mass media methods to promote a large audience
branding
A name/symbol/design that identifies and differentiates a product from other products
break-even
When total costs are the same as total sales
capital intensive production
Production methods that make more use of machinery than labour
commission
payment made to an employee linked to the number of sales made
crowdfunding
raising money from many people for a new project via the internet
delegation
the passing of responsibility to a subordinate
demographics
A particular section of the population
Diseconomies of scale
an increase in average costs per units
e-tailers
the use of electronic systems to sell goods or services
Economies of scale
When average costs fall as a result of business increasing in size
Fixed costs
Costs that do not vary with level of output
fringe benefits
Additional benefits over and above the normal wage or salary
Globalisation
Companies operating internationally across the world
Hierarchical structure
A structure with many levels
Insolvency
When a business can no longer meet its debts
Inventory
Inventory is the goods a business has for sale
Job production
A method of production that involves completing one unit of output at a time
Job share
Two part time employees share a single job
Multinational business
A business that is operational in more than one country
Liquidity
How easily a business can change its assets into cash
Non current assets
An investment owned for longer than a year
Non current liabilities
Debts that are payable after 12 months
Overdraft
An agreement to draw more money from a bank account that it has in it
Person specification
Details of the qualifications experience in the person appointed