component 1
- Created by: emilymeek8
- Created on: 10-01-18 15:28
Enterprise
-New business are formed
Risks
-business might fail and lose investment
-unlimited liability
-competitor response is aggressive
-poor market research=low costomer demand=no profit
Rewards
-control over business
-profit can be used to expand business
-capital growth
motivation if business succeeds
Entrepreneurs
Characteristics needed
-determined
-creative
-risk taker
-passionate
-innovative
-commited
-knowledgable
-ability to build relationships
Stakeholders
-shareholders
-employees
-customers
-suppliers
-local community
-government
business plans
Business plans helps understand businesses objectives and aims
-finance
-ideas
-goals
-competition
-market
SMART objectives
-Specific
-Measurable
-Achievable
-Realistic
-Timebased
Markets
Niche- smaller segment of a larger market, specific needs and wants
Mass- larger part of the market where similar products are on offer
Global vs Local markets
Market structure
Monopoly- one product/seller, high barriers
Monopolistic- firms have many competitors, not many barriers
Oligopoly- a few firms dominate, small firms can operate, high barriers
Perfect competition- lots of firms, low barriers
supply and demand
surplus- when supply exceeds demand
shortage- demand outweighs supplies
elasticity of demand
price elasticity of demand- measures the responsiveness of demand for a product following a change in its price
%change in demand/%change in price
income elasticity of demand- %change in demand/%change in income
elastic- highly price sensitive
inelastic- isnt price sensitive
percentage change-difference/original x 100
market research
primary, secondary
quantitive- numerical
qualitative- opinions, longer answers
interviews, field trips, observations, surveys, telephone, postal
market share and growth
market share- % of total market-sales/market size x 100
market growth- new sales or size- old sales or size/ old sales or size x 100
business structure
Public sector- government owned businesses eg police, nhs, banks
Private sector- private owned businesses eg clothing brands, post office
sole trader- one owner, unlimited liability
partnership-2-20 owners, unlimited liability
franchise- business selling other brands
private limited- shareholders, limited liability
public limited- government owned, limited liability
location
factors to consider
-price
-weather
-transport
-population
-labour cost/skills
-competition
-utilities
-access to supplies
-land
finance
credit cards- short term funds
own savings- only limit is the amount they have, no interest
bank loan- typically repaid over 1-5 years, interest
trade credit- sup0pliers provide 2-3 months credit to business customers
venture capital- a venture capitalist invests a large sum into the firm in return for a share
government grant- no interest, firm has to jelp society in some way
selling shares- common for LTDs and PLCs
mortage- repaid typically over 25 years
overdraft- agreement with bank allows account to be overdrawn, high interest rates
loan from family&friends- no interest
costs, revenue and profit
revenue- income
profit- total revenue - costs
variable cost- expenses that vary
fixed cost- cost is constant
semi-variable cost- mixed
direct costs-direct to a product
indirect cost- cant be from a specific object
total cost- fixed+variable+semi-variable
opportunity cost- benefit someone couldve recieved but gave up to take another course of action
overheads- things you pay even when you dont use them
contribution and breakeven
contribution- difference between sales and variable costs of production
Total sales - total variable costs
breakeven- volume of sales needed to cover costs
total fixed costs/ contribution per unit
pricing
penetration- offering a lower price
skim- charging the highest price then lowering it
cost plus- adding a specific amount markup to a products unit price
competitve- setting price based on competitors
psychological- (£2.99, £99.99)
contribution-
product and price
Rising star- high market share, high market growth
Problem child- low market share, high market growth
cash cow- low market growth, high market share
dog- low market growth, low market share
product life cycle:
intro - growth - maturity - saturation - decline
promotion and place
finance continued
budget- financial plan for the future concerning the revenues and costs of a business
zero budgeting- budgeted costs&revenues are set to zero
variences- arises when theres a difference between actual and budgeted figures
cash flow- total amount of money being transferred in and out of a business
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