Studied by 145 peopleWhat 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
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