year 10 KAP l

Why do business ideas come about?

• Changes in technology in business

• Changes in what customers want

• Products and services becoming obsolete

How do business ideas come about?

-Original ideas

-Adapting existing ideas

What are the rewards of business activity?

Business success

Independence

Profit and wealth

What are the impacts of rewards of business activity?

Business success- a company can pay debts and break even. This generates repeat customers along with a positive brand image.

Independence- being alone and free to do what the entrepreneur wants to do with their business.

Profit and wealth- getting more cash out of a business than the owner put in. Generating cash which the owner can choose what to do with.

What is market research?

The process of investigating the key information about a market for products and services.

What is the purpose of market research?

To identify and understand customer needs

To identify gaps in the market

To reduce risk

To inform business decisions

What are the methods of market research?

Primary research: surveys, questionnaires, focus group, observation.

Secondary research: internet, market reports, government reports

Give an advantage and disadvantage of primary research.

Advantage - fits the needs of the business as conducted by them

Disadvantage - time consuming to gather or create

Give an advantage and disadvantage of secondary research.

Advantage - quick to gather

Disadvantage - can be unreliable as not created by the business or controlled by them

Give an advantage and disadvantage of a survey/ questionnaire?

Advantage - cheap to complete

Disadvantage - some customers will not want to spend the time answering

Give an advantage and disadvantage of a focus group.

Advantage - detailed and in-depth responses

Disadvantage - expensive to run and organise

Give an advantage and disadvantage of an observation.

Advantage - easy to record what interests’ customers in stores

Disadvantage - time consuming and expensive for staff to conduct a long process

Give an advantage and disadvantage of the internet during research.

Advantage - free to access

Disadvantage - unknown sources can make it unreliable

Give an advantage and disadvantage of market reports.

Advantage - created by professionals meaning it will be more reliable

Disadvantage - can be expensive to buy

Give an advantage and disadvantage of government reports.

Advantage - free to access

Disadvantage - may not be specific to a business’s needs

What is qualitative data?

Data which is expressed through words. This describes qualities, characteristics or attributes, such as opinions, feelings and experiences.

State an advantage and disadvantage of qualitative data?

Advantage- rich in detail

Disadvantage- difficult to analyse

What is quantitative data?

Information that can be measured, counted, and expressed using numerical values. Can be yes or no answers.

State an advantage and disadvantage of quantitative data?

Advantage- easier to analyse

Disadvantage- limited depth

What is limited liability?

When a business and business owner have a separate legal identity. Limits responsibility for flaw for the owner. Protects personal assets

What is unlimited liability?

An owner/s are responsible for the business’s debts. Personal assets are not protected.

State a feature, advantage and disadvantage of a sole trader.

Feature- one owner → work alone

Advantage- get to choose and make decisions in their opinion → limits disagreements

Disadvantage- unlimited liability → have to take full responsibility due to the business and owner having the same legal identity

State a feature, advantage and disadvantage of a partnership

Feature- 2 or more owners

Advantage- multiple skill sets → more experience

Disadvantage- unlimited liability

What are the advantages of franchising?

Brand recognition → helps sales

Can be easier to get loans → seen as less risky

Franchiser might help franchisee → training, management

Quick way to expand → through franchisees

What are the disadvantages of franchising?

Less freedom → limited by franchisors rules

Extra costs from payments to franchisor

Profits have to be shared

What is revenue? How do you calculate it?

Total amount of income a business makes from selling a certain quantity of goods/services at a given price. Revenue=number of units sold x price of unit

What is a variable cost?

A business expense that changes in direct proportion to the volume of goods or services produced.

Give examples of variable costs.

Raw materials, direct labor, packaging, commissions, shipping costs.

How to calculate variable costs?

Variable costs= cost per unit x total number of units produced

How do you calculate percentage change?

change/original x 100

What is the marketing mix?

The elements a business needs to consider when launching a new product in order to promote and advertise to its customers.

List the 4 factors of the marketing mix?

Price

Product

Promotion

Place

What is a usp?

A unique selling point is a distinct benefit, feature or quality that makes a product, service or brand stand out from competitors.

What is a benefit for a business having a USP?

It gives a business a competitive advantage.

What is a business plan?

A document used by a business to organise and plan resources in order to best exploit an idea. This could be for a new start-up business or a new idea for an existing business.

What should business plans contain?

Business name

Brief description of plan

Forecast : revenue, costs profit.

Location

Marketing

Cash flow forecast

Budgets

Target market/ customers

Aims and objectives

List financial aims and objectives of a business

Survival, profit, sales, market share, financial security

List non-financial aims and objectives of a business

Social objectives, personal satisfaction, challenge, independence and control

What is market share ?

The percent of total sales a business has in a market

What is net cash flow and how is it calculated?

The difference between cash inflow and outflow. Cash inflow-cash outflow

What is the closing balance?

Total amount of cash a business has left in its bank account at the end of a specific period

What is the opening balance?

The amount of money a business starts with at the beginning of a financial period

What is market mapping?

The process of using a graph to plot competitors and their products.

Why are market maps used?

To understand competitor behaviour and spot a gap in the market.

Give an advantage of a business using a market map.

It helps them to gain a competitive advantage and attract customers, therefore generating more sales.

Give a disadvantage of a business using a market map.

Personal perspective may not be accurate and may affect the results.

What is a stakeholder?

Any person, group of people or other organisation that has an interest in the activities of a business.

Give examples of stakeholders.

Shareholders/owners

Managers

Employees

Customers

Suppliers

Local community

Pressure groups

Government

How can conflict between stakeholders affect a business’s activity?

Negotiations and willingness to comply can take a long time, this delays business decisions.