mutant business flashcards

A set of flashcards of terms, disadvantages, advantages of topics I cannot remember.

Importance of Marketing

satisfying customer needs, building customer relationships, keeping customer loyalty, market orientation and product orientation, market share and analysis, niche and mass marketing

importance of cash

be able to pay suppliers, employees, overheads and prevent business failure

what is cash?

miney available in the business to pay the bills, cash may not come in the same month as it goes out.

importance of cashflow forecasts

helps with setting up the business, is required by bank manager when the business applies for a loan, managing cash going in and out of the business

limitation of cashflow forecasts

its a forecast not an actual figure, may not include all of the costs and cash inflows properly

importance of breakeven chart

helps business anticipate how many goods/services to produce to cover their fixed and variable costs, helps business decide what price to set their good/services at, allows business to identify margin of safety, Helps businesses track the break-even point of each product or service yearly to monitor cost changes.

limitations of breakeven analysis

shown as straight line so it could change, it is a prediction so it may be inaccurate, assumes that all output is sold, business might end up with extra raw materials, depend on the quantity and quality of data

what is an asset?

something you own

what is equity?

money invested into the business

Benefits of using statement of financial position (balance sheet)

assessing financial health, whether if its financially strong/struggling, help with investment, loans from bank and investors, compares assets to liabilities

Importance of Income Statement

acquire funding (loans) by showing financial stability, measure success of firms in relation to competitors & previous years, enable future planning and encourage investments

Drawbacks of using statement of financial position

only a snapshot in time, balance sheet shows financial position on a specific day, but there may be some problems that comes up soon. Doesnt show how well a bsuiness is making sales/managing costs. some values may change over time and mightn’t reflect the market value

advantages of using cost plus pricing

easy to apply, ifferent profit mark ups could be used in different markets based on level of competitiveness and customer’s willingness to pay, each product earns a profit for the business

disadvantages of using cost plus pricing

could lose sales if selling price is higher than competitior’s, If sales are too low, the markup may not generate enough total revenue to cover fixed costs, leading to losses. any increase in costs is passed onto customers in higher prices

advantages of using competitive pricing

Sales likely to be high - price is at realistic level, Avoids price competition which can negatively affect all businesses in an industry, Can help customers distinguish between products

disadvantages of using competitive pricing

A high cost of production could result in losses, You may undervalue premium features, missing out on potential profits. Research needed for accurate pricing - costly and time consuming

advantages of penetration pricing

Can help newly-launched products make an impact amongst customers, Should ensure sales are made and the product can enter the market successfully, Market share should increase quickly

disadvantages of penetration pricing

Low profit per unit due to the price being low and unable to account for costs, Customers may reject the product if business begins to raise prices, May not be appropriate for a branded product with a reputation of quality

advantages of price skimming

Help to establish a reputation of quality, Can recoup r&d costs quickly, Having a USP will lead to high profits before competitors launch similar

disadvantages of price skimming

Initial high price might discourage consumers, High price and profitability may attract more competitors

job production advantages

• Suitable for personalised service

• Products can be custom made so it meets the customer’s exact needs

• Workers are often highly motivated due to the work being varied. 

• Goods are often high quality - a high price can be charged

job production disadvantages

• Skilled labour may be required - workers must be paid more

• There are no economies of scale, so production may be expensive

• Each product is custom-made according to the customer’s order rather than mass-produced. Because of this, if a mistake is made during production, it can be very costly in terms of time, materials, and money.

batch production advantages

• There is economies of scale as raw materials are bought in bulk

• unit costs are likely to be lower when batch production is adopted. This is because output is higher, workers can be more specialised and more use is made of machinery

• production is also flexible because orders with different measurements, styles or specifications can still be met.

batch production disadvantages

• work may be less interesting for workers because of specialisation 

• If the batches being made are small, the unit cost may still be high

• It may be more expensive than flow production

flow production advantages

• High output at a low cost due to economies of scale and automation

• Goods are produced quickly, and can be varied to deal with changes in demand

• Goods are produced cheaply so selling prices can be kept low.

flow production disadvantages

• The capital costs are normally very high due to expensive machinery, automated systems being required.

• Raw materials and inventory costs will be high because output is high due to needing to buy raw materials in bulk which takes up inventory space.

• If one machine breaks down, production will stop completely due to it being highly automated and relies on a sequence of machines working together. The delays caused by this can be very expensive.

importance of branding

differentiate the product, create customer loyalty, help recognition, develop an image, raise prices when the brand and image becomes strong