Business Studies Comp 1

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What does enterprise mean?
A company or business
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What are need and want products?
Need products are items that consumers don't need but desire. Want products are items that are bought regularly as they are essential for customers to have.
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What does FMCG stand for?
Fast moving consumer goods
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What does SME mean?
Small-medium business
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What is an entrepreneur?
Someone who starts and runs their own business taking responsibility of all risks taken.
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What characteristics do entrepreneurs have?
Able to take risks, determined, able to develop ideas, good leadership skills, organised, persuasive, sport a niche market, confident, no fear of failing.
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What motives are there both financial and non-financial for becoming an entrepreneur?
No income restriction, be your own boss, flexibility, purse a passion or implement an idea.
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What are stakeholders?
A stakeholder is anyone who has an interest in a business. Examples include, managers, employees, customers, local government, local businesses, shareholders, suppliers, investors, owners, competitors
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What is the primary sector?
Where the production/extraction of raw materials take place. Eg: farms, mines
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What is the secondary sector?
Where raw materials are turned into products ready for sale. Eg: Factories and construction sites
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What is the tertiary sector?
Where the product is made available to the market/consumers. Eg: retail stores and doctors
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Why are entrepreneurs and SME's important to the sectors of the economy?
Entrepreneurs who own SME's are more likely to take risks within markets compared to larger companies. Provide a higher percentage of jobs. Imported materials used by SME's means more jobs. SME's are more creative = USP increasing exports.
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How have entrepreneurs and SME's impacted the economy?
1901 to 2016 data. Primary = 41% - 1% due to to lack of raw material left. Secondary = 38% - 21% due to more foreign competition. Tertiary sector = 21% - 71% due to public greed.
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What is a business plan?
A written document done by the owners of a business as evidence of their business to help convince sponsors and other businesses to fund their company.
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Name 5 things in a business plan.
Purpose of the company, aims + goals, expected turnover, competitors, staffing plans, organisational structure, SWOT, forecasts and cashflow, suppliers, USP, details on how they will pay back money, CV's, long term strategy plan, market size+potental
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What are the possible sources of finance?
Banks, venture capitalists, debt factoring, personal savings, mortgages, lending from friends, asset sales, overdraft
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What are the advantages of having a business plan?
clear aims, identify resources, more likely to be accepted for a loan, easily spot any issues, highlight any gaps in markets/opportunities, help set objectives long term.
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What are the disadvantages of having a business plan?
Will change over time as market changes, time consuming, may not have skills to do properly, costs for research, based on estimates and predictions, may be unrealistic and therefore pointless
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What is market segmentation?
The process of dividing a market into target groups.
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What are target groups?
Groups of buyers that share similar characteristics
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What is target marketing?
When marketing activities are aimed at a particular target group.
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What three things must be present to make a segment?
Must be recognizable (different enough to make marketing worthwhile), large critical mass (big enough to make production worth while) and targetable (possible to target them)
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What are the three different ways to segment a market?
Demographically, geographically, and behaviorally.
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What is demographic segmentation?
making a segment with people with similar characteristics (age, gender, income, occupation, ethnic group...)
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What is geographic segmentation?
making a segment with people from the same area (Northerners like bitter beer, American's like sugar...)
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What is behavioural segmentation?
making a segment with people with the same shopping patterns (usage levels, brand loyalty, elasticity...)
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What are the benefits of segmenting a market?
Helps business appeal to specific markets and needs, can manage resources and still operate on a large scale, identify gaps in the market, increase sales and brand loyalty
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What are the disadvantages of segmenting a market?
Spread of resources too thin, needs to be done efficiently to work, a problem with one product effects brand, opportunities can be missed as the company is only focusing on one product
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What is supply?
the quantity of goods that sellers are prepared to provide at any given price over a period of time.
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What will companies do if the price of an item goes up?
Increase the quantity for sale to maximize sales
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What will companies do if the price of an item goes down?
Lower the quantity for sale
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If supply increases, what happens to the supply curve?
Shift Right
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If supply decreases, what happens to the supply curve?
Shift Left
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What factors influence supply?
Production costs, weather (harvest), introduction of technology, and legislation (anti-pollution laws, taxes)
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What is demand?
The amount of a product that consumers are willing and able to purchase at any given price.
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What is effective demand?
When consumers can actually buy the product/service
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What does the law of demand state?
The higher the price, the lower the quantity demanded and vise versa.
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If demand increases, what happens to the demand curve?
Shift Right
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If demand decreases, what happens to the demand curve?
Shift Left
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What factors influence demand?
Consumer income, current trends/fashion, changes in complimentary products, advertising, price, government legislation (have to have child seats), population change (lots of old people)
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What is equilibrium/market equilibrium?
Where the demand and supply curve intersect.
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What is the equation for break-even?
Fixed costs divided by selling price pu - variable cost pu = Units
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What is elasticity?
The responsiveness of one variable to the changes in another
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What happens to one variable when the other variables changes and they are elastic?
Changes dramatically
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What happens to one variable when the other variables changes and they are elastic?
Only shifts a little
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What is income elasticity of demand?
Responsiveness of demand to the changes of income.
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What are the three types of products to consider when talking about income elasticity?
Normal goods, luxury goods and inferior goods
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What is the nature of normal goods and what is an example?
Demand increases as income increases - eg: cars/furniture
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What is the nature of inferior goods and what is an example?
Demand increases as income increases - eg: gym memberships
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What is the nature of luxury goods and what is an example?
Demand decreases as income increases - eg: brand own products
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What is marketing?
When you anticipate and satisfy the needs of the consumer in a way that delights them and also meets the needs of the company therefore being mutually beneficial
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What is a market?
A place where buyers and sellers can come together.
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Name 10 types of markets.
Mass, niche, seasonal, global, local, online, B2B, product, service, and consumer
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What is a niche market?
When a company attempts to market a product to a relatively small market but has the aim of dominating this market.
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What are the benefits of working in a niche market?
Higher prices can be charged, meets the needs of customers therefore leading to repeated consumers, not a lot of competition, brand loyalty, ideal for SME's, creates an USP
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What are the disadvantages of working in a niche market?
Limits sales and profits, risk not spread, narrow product range and channels, big companies may take over market if it notices your success
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What is a mass market?
When a company attempts to market a product to all consumers in a given market with the aim of achieving an acceptable amount/percentage of the market.
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What is the benefit of working in a mass market?
Wide customer range (no profit limit), less risk, convenient for customers, attract customers of mixed income, lower selling price = more customers.
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What are the disadvantages of working in a mass market?
Lots of competition, expensive, advertising is needed, if demand falls lots of waste on unused produce
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How can market size be measured?
By volume (units) or value (£)
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How can market share be measured?
Company sales over total sales as a percentage
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What is market growth?
The rate at which sales increase
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How can market growth be measured?
Change in the amount of sales over original sales as a percentage
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What 7 factors should a businesses physical location be based on?
Social factors, costs, infrastructure, market and competition, Government, Labor and Resources and transport.
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How does costs effect a business' location?
Transport costs, rent, planning permission, storage costs, production costs and the labor cost for employees effect a businesses location as they cannot go anywhere were these are too high and not worth setting up
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How does infrastructure effect a business' location?
Accessibility = Road/transport links, eCommerce companies, footloose industries (move as market changes), economies of concentration (benefiting from being near competitors)
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How does the market and competition effect a business' location?
Anchor tenants (a popular location that attracts customers therefore increasing the chances of sales) and footfall (locating near a popular company to increase the number of people walking by your store)
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How does the Government effect a business' location?
Give grants to help with costs. Planning permission, tax breaks, land costs
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How does Labor effect a business' location?
Locate near universities that specialize in subjects your business is based on (eg: London has the best business schools). The number of unemployed, the minimum wage (high in the UK)
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How does resources and transport effect a business' location?
Near to customers means less costs for delivering to stores, output should be more then transport, bulk reducing (making a product smaller therefore cheaper to to transport)
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How does social factors effect a business' location?
Population, good schools, will people want to relocate here, do people want to stay here for their entire life or is this a part time job, low crime rate, good environment
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What is market research?
The process of gathering and analysing information about customers, competitors, and distributors within a firms target market.
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What is primary market research/Field research?
When a company collects data first hand and is specific to the company. Eg: questionnaires, interviews, loyalty cards, observations
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What is an advantage of primary market research?
Specific to your business, answers any questions about the market, easily updated (loyalty cards), accurate representation of the markets needs and wants, up to date information.
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What is a disadvantage of primary market research?
Expensive, need a market research team with good skills to do it, can take time and therefore impacts decision making, competitors can see the research found, can become out of date for businesses in FMCG markets
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What is secondary research/desk reseach?
When data has already been collected by someone else and is not specific to your company. Eg: sales figures, annual reports, data from competitors websites
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What is an advantage of secondary market research?
Very cheap or free, easy to access, quick to get, don't need to hire a team, provides information on competitors
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What is a disadvantage of secondary market research?
Generalized findings (not specific to you), may not be accurate for you, outdated, everyone can access this information
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What are the 6 main ways to obtain market research?
Face-to-face, focus groups, postal surveys, telephone surveys, observations, online surveys
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What is face-to-face research?
When a research team member asks people passing by questions usually on the stree.
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What is an advantage of using face-to-face research?
adapt questions for each participant, quick, can identify the target population, can look at the participants body language and determine if they are actually interested or not
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What is a disadvantage of using face-to-face research?
bias (leading questions), costs, can be rushed, selective audience, human error, social desirability
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What is a focus group?
A group of people assembled to participate in a discussion about a product before it is launched.
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What is an advantage of using a focus group?
More then one answer, more feedback, more detail
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What is an disadvantage of using a focus group?
Time consuming, participants just say what the others say, costs
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What is a postal survey?
Sending set questions to people through the post to then be sent back to the company
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What is an advantage of using a postal survey?
Can ask target population only, people can choose when to answer instead of rushing, accessible to everyone
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What is a disadvantage of using a postal survey?
age bias (older people usually), low reposnce rate
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What is a telephone survey?
When researchers call peoples homes and ask them set questions
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What is an advantage of a telephone survey?
Quick, large target population, can answer any queries from consumers
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What is a disadvantage of a telephone survey?
unpopular (annoying), can cost a lot, bias (only those who are likely to be unemployed will answer as they are not busy)
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What is an observation?
When researchers observe the behavior of the target population in order to record their shopping habits.
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What is an advantage of an observation?
Naturalistic, little inconvenience and no bias
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What is a disadvantage of an observation?
expensive, can be considered unethical (invasion of privacy)
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What is an online survey?
When participants can complete a questionnaire online usually as part of a competition or as a pop up
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What is an advantage of an online survey?
easy and cheap, accurate
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What is a disadvantage of an online survey?
Need internet (older people cannot access), can have a low response rate if not pushed online enough
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What is the population?
The total of actual and potential customers in a market
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What is a sample?
A sub-group of the population which represents the population despite its smaller size
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What is random sampling?
When everyone in the sample has an equal chance of being selected to participate.
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What are the advantages of random sampling?
No bias, fair representation of the population.
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What are the disadvantages of random sampling?
Sub-group may not be representative of entire population, can cost a lot if the sample is big
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What is quota sampling?
When the sample is selected based on their age, sex, class... and how that represents the total population (if 70% of customers are female, the sample with be 70% female)
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What are the advantages of quota sampling?
Representative sample
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What are the disadvantages of quota sampling?
Difficult to calculate as you have to find out details about everyone in the population
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What is stratified sampling?
When a business selects a particular market segment and then randomly chooses people from within this group (sub-group is made smaller by being more specific on the people they want to get information from)
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What are the advantages of stratified sampling?
Targets the exact audience required and therefore more accurate
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What are the disadvantages of stratified sampling?
can be time consuming and you must know the exact target audience you have and want
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What is cluster sampling?
When a random sample is made from people from the same area
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What are the advantages of cluster sampling?
very quickly done and therefore good for decision making
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What are the disadvantages of cluster sampling?
not generalisable to the wider population
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What factors affect sample sizes?
Finance available, nature of the product, risk involved, target market
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What are the advantages of market research?
can identify what is happening currently in the market, can find out why things have changed, can predict trends and spot opportunities, can find out information that you need about a market
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What are the disadvantages of market research?
can be bias, sample may not be representative, can be expensive, time limits (for products release), social desirability
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What is capital expenditure?
Money spent on yearly or once off payments - machines, vehicles, land
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What is revenue expenditure?
Money spent on regular payments (months, weeks) - rent, wages, fuel, raw materials
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What are the long term and short term finance methods?
Long term = (should be) personal savings, mortgages, bank loan. Short Term = Lending, asset sales, overdraft, venture capital, debt factoring
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What is internal finance? What are sources of internal finance?
Money that comes from within the business (by the company's resources or accounts) - personal savings, mortgages, lending, asset sales
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What is external finance? What are sources of external finance?
Money that comes from outside the firm - bank loan, overdraft, venture capital, debt factoring, mortgages
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What is personal savings?
Money that the entrepreneur has accumulated before starting the business
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What is an advantage of personal savings?
no loan/interest, low opportunity cost, no control of business lost
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What is a disadvantage of personal savings?
may not have a lot saved, new businesses have a high risk of failing and therefore is risky to put all your money into the business
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What is a mortgage?
The entrepreneur takes out a second mortgage on their house/property
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What is an advantage of a mortgage?
lower interest rates, can raise a lot of money
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What is a disadvantage of a mortgage?
risking property, need to own a valuable property with sufficient equity
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What is lending?
Borrowing money from friends and family
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What is an advantage of lending?
often low/no interest rates
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What is a disadvantage of lending?
can cause problems with relationships and it puts lots of pressure to make business successful
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What is asset selling?
Sell personal assets for money
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What is an advantage of asset selling?
Good way of making money and getting rid of things you don't need, dont have to borrow anything
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What is a disadvantage of asset selling?
must have property worth money, dont usually raise a lot
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What is a bank loan?
an agreement with a bank to borrow a specified amount with repayments to be made over a set time
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What is an advantage of a bank loan?
financial planning is made easy, relatively simple to arrange once the banks lending criteria is met
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What is a disadvantage of a bank loan?
Interest rates vary, but smaller businesses get the higher rates
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What is an overdraft?
Enables firms to borrow money up to a set amount for any period of time they wish
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What is an advantage of an overdraft?
Flexible, relatively cheap regarding interest rates in the short term
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What is a disadvantage of an overdraft?
long term, very expensive, if limit is exceeded, they can demand a full refund immediately
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What is a venture capital?
firms/individuals that give money to smaller companies engaged in high risk activities, in return for a percentage equity. usually given between £50-100k
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What is an advantage of a venture capital?
Accept that there is a risk, most also provide help in the form of back up management and financial expertise, large sum of money quick
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What is a disadvantage of a venture capital?
lose 20-40% control, smallest loan is £50k
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What is debt factoring?
When a firm pays a debt factoring company to collect their debts from customers. the debt company keeps the debt money collected and when first hired, pays the company a slightly smaller number of what they are owed from debt.
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What is an advantage of debt factoring?
ideal for small companies, don't have to do it yourself, expensive to make a debt collecting team within a business so better to outsourse
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What is a disadvantage of debt factoring?
lose maximum profit, may not have any/a lot of debt to collet
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What is a mortgage (external)?
take out a second mortgage on any properties owned by the business
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What is an advantage of a mortgage (external)?
raises lots of money, lower interest rates
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What is a disadvantage of a mortgage (external)?
risking property, needs to be valuable
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What 6 factors must a company think about when choosing where to seek finance from?
what the finance is for, how much, legal structure of business, firms profit levels, level of risk, owners preferences
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What is the competition continuum?
The range of competition in the market
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Describe the features of a perfect market.
lots of companies, product homogeneous, price takers, low barriers for entry, same prices, no power to influence price, customer has perfect knowledge
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Describe the features of a monopolistic market.
many business that differentiate themselves to be in a monopolistic position, weak brand loyalty, few barriers for entry, set up costs low, market has consistent flow of business, mainly SME's
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Describe the features of a oligopoly market.
A few large businesses, strong brand identity but low loyalty, danger of cartel, should compete on things other then price but often do have price wars, can be competitives
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Describe the features of a Monopoly market.
One business dominates the market, (theory = complete control, legal definition = 25%+ and dominant), rarely happens, price makers, high barriers for entry, hard to compete with, very strong brand loyalty and identity
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What are 4 examples of barriers for entry?
patent, high start up costs, customer loyalty, need large scale production in order to compete
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Perfect market analysis
very rarely happen therefore when it does they will follow the market taking the price commanded
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Monopolistic market analysis
price = accept that prices are similar, product = vital as it is how they differentiate themselves, place = somewhere convenient, promotion = price competitiveness likely to budget any advertising
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Oligopoly market analysis
price = should compete over price but do leading to loss of profit, product = vital as it is their USP against competitors, place = somewhere convenient, promotion = very important, should advertise its USP
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Monopoly market analysis
price = price leaders/setters and therefore can take advantage but controlled by government, product = little need for new product, place = somewhere convenient, promotion = high barriers for entry so only informative about product advertisement
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What do consumers need protection against?
high prices, unfair trading, unsafe products, cartel, insufficient information about product to make a purchasing decision
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What is a sole trader?
When a business has one owner and has unlimited liability. They make all decisions in the business and pay income tax. They are 'unincorporated'.
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What are the advantages of being a sole trader?
own boss, flexible, full profit, achieve your goals
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What are the disadvantages of being a sole trader?
hard to gain finance, no help, limited skills, unlimited liability
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What is a partnership?
when 2-20 people start and own a business together. They have unlimited liability and pay income tax. Are 'unincorporated'.
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What are the advantages of being a partnership?
multiple skills, not answerable to shareholders, less pressure and spread of responsibility, if another member is sued, you don't pay for them
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What are the disadvantages of being a partnership?
hard to disassemble legally, hard to gain fiance, arguments usually end the business, unlimited liability
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What is a private limited company (ltd)?
a company that is owned by shareholders but cannot sell shares to the public as they have to be invited to buy them. Have to produce an annual report for tax purposes and pay corporation tax. Have limited liability and are incorporated.
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What are the advantages of being a private limited company (ltd)?
less financial risk, can control who has shares, limited liability,
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What are the disadvantages of being a private limited company (ltd)?
Need to pay profits out as dividends and need to register at a house and complete memorandum and articles of association
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What is a public limited company (plc)?
Owned by shareholders and cal sell its shares to the public on the LSE. it needs £50k to start up and has to produce annual reports and pay corporation tax. Has limited liability and must pay out dividends. Has divorce of ownership and are incorporat
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What are the advantages of being a public limited company (plc)?
easiest to gain finance, can sell shares for money, status, limited liabiltiy
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What are the disadvantages of being a a public limited company (plc)?
exposed to takeover, have to pay dividends, accounts are made public, need £50k to start
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What is the private sector?
Owned, financed, and controlled by private individuals.
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What are the aims for a private sector business?
Survival, profit maximization, sales maximization, growth, brand loyalty and social objectives
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What are the advantages of a private sector company?
Spreading risk, expanding, increase of income due to larger target population.
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What are the disadvantages of a private sector business?
may be hard to enter new markets, may need a new brand name for products
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What is the public sector?
non-profit business who produce goods from taxes. owned, financed and controlled by the state through the government or local authorities.
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What are the aims of a public sector business?
provide quality service, value for money, meet the customers needs
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What are merit goods?
something that is seen as good for you and therefore is provided by the government (eg: NHS), education)
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What are public goods?
Goods we need in our everyday lives that are not provided by the private sector. Non-rival and are there fore everyone (eg: street lights)
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What is privatization?
When a public sector company is made into a private sector company
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What is nationalization?
When a private sector company is made a public sector company
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What are the advantages of a public sector company?
creates jobs, provision of key goods/services, provides benefits for the whole population
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What are the disadvantages of a public sector company?
costs of provision (higher taxes), inefficient if little competition, government controls what the taxes are spent on despite their lack of knowledge about the business world
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What is a non-profit organization?
Dont work for profit but for surplus so they can survive, money is reinvested,cannot distribute assets or funds with owners and have no private owners, must publish their finances, don't pay taxes, shared control, high start up costs, limited liabil
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What is a social enterprise?
An organization that applies commercial strategies to maximise improvements for society is called a social enterprise. they can be for profit or non-profit.
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What features do social enterprises usually have?
charity, benefit corporation, co-operative, disregarded equity, mutual organisation
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Other cards in this set

Card 2

Front

What are need and want products?

Back

Need products are items that consumers don't need but desire. Want products are items that are bought regularly as they are essential for customers to have.

Card 3

Front

What does FMCG stand for?

Back

Preview of the front of card 3

Card 4

Front

What does SME mean?

Back

Preview of the front of card 4

Card 5

Front

What is an entrepreneur?

Back

Preview of the front of card 5
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