business yr 10

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61 Terms

1

purpose of a business?

-to provide goods and services

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2

reasons for starting a business

  • make a profit

  • provide a good/service

  • to distribute products

  • to benefit society

  • to fill a gap in the market

  • to fulfil a business opportunity

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3

enterprise def

seeing an opportunity to provide a product/service that people are willing to buy

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4

good definition + examples

tangible e.g. computers, food, clothes

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5

service definition + examples

intangible e.g. hairdressing, train journeys

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6

3 stages of production

primary, secondary, tertiary

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7

primary sector of production

extraction of raw materials, little value added, e.g. farming, mining

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8

secondary sector of production

transformation of raw materials into goods, most value is added, e.g. food turned into ready meals, house building

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9

tertiary sector of production

providing a service, e.g. hotels, healthcare, education

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10

Deindustrialisation definition

fall of importance of the secondary sector measured by a fall in employment or output.

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11

why has primary sector of production declined in UK?

  • depletion of raw materials

  • machines replaced workers

  • materials cheaper from abroad

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12

why has secondary sector of production declined in UK?

  • competition from cheaper/better quality foreign imports

  • machines replacing workers

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13

why has tertiary sector of production increased in UK?

  • consumers have higher incomes

  • more leisure time

  • rise in pop. so more education + healthcare required

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14

interdependant

when businesses rely on each other to operate

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15

4 factors of a business - the inputs to produce the outputs (product/service)

land, labour, capital, enterprise

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16

opportunity cost

the benefits given up from the option not chosen

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17

4 functions of a business

work together to make a successful business - marketing, operations, human resources, finance

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18

entrepreneur def

Someone who is willing to take the risks involved in starting a new business

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19

characteristics of an entrepreneur

Hard working, organised, innovative, willing to take a risk

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20

objectives of an entrepreneur

  • be their own boss

  • flexible working hours

  • pursue an interest

  • earn more money

  • identify a gap in the market

  • dissatisfaction with current job

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21

disadvantages to being an entrepreneur?

  • financial risk of losing all money

  • health can be affected

  • time consuming can lead to strained relationships

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22

purpose of a business plan

reduce risk, help business to succeed, make banks trust them, identify markets/resources needed, achieve aims

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23

contents of a business plan

-idea, people running it, market research, finance, objectives, target market, competitors

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24

changes the business environment can experience

  • technological change (new ad methods, machinery, e-commerce ect.)

  • economic factors (inflation, interest rates, GDP ect.)

  • legal change (new legislation coming in)

  • environmental expectations (how to produce, package + transport)

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25

stakeholder definition

anyone who has an interest in a business

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26

examples of stakeholders

owners, managers/employees, suppliers, customers, local community, pressure groups, government

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27

who are the external stakeholders and what are their objectives?

people outside the business and not directly involved in its running

  1. Suppliers - obtain higher prices for their supplies

  2. customers - lower prices, better service

  3. local community - more jobs, less congestion

  4. pressure groups - less pollution (NIMBY)

  5. government - increased tax revenue + jobs from successful businesses

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28

Soletrader definition

business owned by 1 person (may have more employees)

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29

who are the internal stake holders and what are their objectives?

people inside the business and involved in operations

  1. Owners - increase profit

  2. managers/employees - increase salary, improve working conditions

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30

Advantages of a sole trader

  • total control (make quick decisions)

  • cheap and easy to start

  • keep all profit

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31

disadvantages of soletrader

  • Unlimited liability (the business is not a separate legal unit, unincorporated business)

  • Full responsibility

  • Lack of capital (sources of finances are only from owner's savings or from banks but they can be reluctant to give soletraders because it's risky)

  • Difficult to expand/likely to remain small (due to the lack of capital)

  • Difficult to expand/likely to remain small (due to the lack of capital)

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32

Partnership definition

A business formed by two or more joint owners of the enterprise.

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33

Advantages of Partnership

  • More capital available

  • Relatively easy to start

  • workload is shared

  • more skills

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34

disadvantages of partnerships

  • Unlimited liability

  • division of profits

  • Disagreements among partners

  • slower decision making

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35

what is a sleeping partner?

a partner who invests in a partnership but has no part in the running of the business. has limited liability

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36

Private Limited Company definition

Ltd, an incorporated business with limited liability, contains shareholders (family and friends but no general public), run by a Board of Directors

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37

incorporated business definition

has a separate legal identity

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38

advantages of being an Ltd

  • limited liability ( limited to amount shareholder has invested)

  • continuity (if owner dies business ca continue to operate)

  • can raise money more easily (banks more prepared to lend money)

  • control over share sale ( no risk of takeover)

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39

disadvantages of being an Ltd

  • financial info available to public (unlike soletraders + partnerships)

  • administration ( more complex/expensive to set up and run)

  • sale of shares is restricted ( restricts amount of capital that can be raised)

  • dividends (conflict between shareholders + directors over where the profit goes)

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40

Public Limited Company definition

PLC, can sell shares on stock exchange to general public,

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41

Advantages of being a PLC

  • can raise large amounts of capital (shares sold to public)

  • easier to borrow money (banks see them as low risk -- have to have issued share capital greater then ÂŁ50,000 to become one anyway )

  • Limited liability

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42

Disadvantages of being a PLC

  • size (complex to manage all operations, inefficient)

  • costly + complicated to set up (specialist bakers and lawyers needed)

  • financial info available to public (competitors can see performance ect.)

  • shareholders expect dividends

  • threat of takeover (competitor could buy large number of shares + vote in new management team)

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43

why buy shares?

  • dividends payed

  • share may increase (sell it for more - 'capital gain')

  • can influence management of company

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44

what is divorce of ownership and control?

  • people who own the PLC don't control business 364 days a year (AGM exception)

  • shareholders many have to money but not time/ management skills

  • directors normally have large shares so doesn't happen often ( incentive for good dividends + capital growth )

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45

ethical issues for businesses

  • treatment of workers (underpaying, child labour, long hours, unsafe, discrimination)

  • treatment of suppliers (late payment of bills)

  • treatment of customers

  • treatment of environment

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46

advantages of being ethical as a business

  • workers like it (improve motivation, costs of production fall, can get more workers)

  • customers like it (good rep. , sometimes necessary to gain contracts with other businesses)

  • investors like it (long term success)

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47

disadvantages of being ethical

  • higher costs (higher wages, safety precautions, sick pay)

  • lost sales ( unethical bussinesses can increase sales by lower prices + unfair advertising)

  • reduced profits (higher costs = lower sales revenue)

  • poor financial figures

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48

advantages of being environmentally friendly as a business?

  • increased sales

  • reduced tax bill

  • reduced costs

  • subsidies from govt

  • reduces resource scarcity

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49

disadvantages of being environmentally friendly as a business?

  • raw materials cost more

  • capital costs (investment as have to change the way business works)

  • production costs increase (cheaper often not good for environment

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50

advantages of using technology in production process

  • costs reduced (fewer workers)

  • machines more accurate (improved quality)

  • production more flexible

  • 24/7

  • do dangerous/ boring jobs

  • new technology = new products

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51

disadvantages of using technology in production process

  • reluctant workers + redundancy payments

  • new skilled workers needed (in high demand = high salaries)

  • training for workers (expensive)

  • machines break

  • expensive to buy + set up

  • security issues

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52

advs of businesses using e-commerce

  • sell worldwide

  • open 24/7

  • professional look at small cost

  • lower operating cost (don't need workers ect.)

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53

cons of businesses using e-commerce

  • worldwide competition

  • delivering goods/ accepting returns

  • online security (data protection + safe payments)

  • advances in technology

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54

pros to customers of e-commerce

  • price comparison

  • 24/7 availability

  • wide range of products

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55

cons to customers of e-commerce

  • lack of personal contact

  • returning goods difficult/expensive

  • only image of goods seen (unsafe?)

  • security for payments

  • payment methods (no cash)

  • technology (not everyone on internet)

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56

Revenue definition

It is the total income of a business from sale of products and services.

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57

Revenue formula

Revenue = Quantity sold x Selling price

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58

fixed costs definition

costs that do not change when the business changes the amount it produces. (e.g a local tax)

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59

variable cost definition

costs that do change when the business changes the amount it produces. (e.g. raw materials)

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60

variable costs formula

Total variable costs = Quantity sold x Variable cost per unit

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61

Total costs definition

the sum of the fixed and variable costs for any given level of production

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