Business Unit 2

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what happens when a business is under utilised?
may not be meeting demand of customers, may not make fixed costswork so they are reduced, staff may be underworked leading to demotivation, money may be wasted on employees that are not needed
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what happens when a business is over utilised?
if sudden spike may not meet demand, staff may be overworked leading to demotivation, repairs may be needed for the over use of machinery, may not be able to allocate time for general servicing, risk of accidents due to high workload
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How can estimating the long term level of sales improve capacity utilisation
helps the business prepare itself for surges and drops in demand allowing it to work as close to the neccesary capacity as possible
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how will creating more demand improve capacity utilisation?
this can be done through promotion and brand strengthening
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how will understanding the consumer improve capacity utilisation?
done through primary research and secondary market research
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how will the sale of assets improve capacity utilisation?
money made could be reinvested back into the business as promotion in order to create more interest in its goods
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how can emplying more/fewer staff improve capacity utilisation?
if the business has more employees thats it's consumer demand requires it may need to consider redundancies and visa versa
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how can a business break even sooner?
work from home so rent is cheaper, lower prices (fixed costs), try using different pricing strategies, rent/lease equipment and/or machinery
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what are the benefits of break even?
predict when you will have a profit or loss, see if you need to reduce any costs, identify any risks of the business, supports objectives, secures funding
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what are the drawbacks of break even?
no experience, doesn't take external factors into cinsideration, only an estimate, assumes that you sell every item
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what is meant by a favourable budget?
actual revenue > budgeted AND actual costs < budgeted
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what is meant by an adverse budget?
actual revenue < budgeted AND actual costs > budgeted
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what is the purpose of budgets?
control over money, improve cash flow, communications may improe, claer sense of direction, increases the business' efficiency, allows planning, can it be acheived, forecast inflows and outflows, improve profitability, highlights concerns
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what is zero based budgeting?
starts from 0, build it as you go, stops unneccesary purchases, company may not need huge budgets, easier for smaller businesses
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what is meant by sales budgets?
set a target, compare with competitors
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what are historical figures budgets?
figures from previous years, improves accuracy
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what are the key characteristics of perfect competition?
many sellers/buyers, each relatively small, identical product, perfect information, buyers can easily switch, buyers have no personal preferences/loyalty, demand is perfectly elasticated, no barriers to entry
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what are some examples of perfect competition?
large fish, fruit, vegetables and stock market
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what are possible seller impacts on perfect competition?
compete on price alone, have little power(price takers), may enjoy high profits in the short run, strive for efficiency to cut costs as firms enter to lower prices
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what are possible consumer impacts on perfect competition?
large choices, low prices, little time or effort to gather information to buy as product are identical
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what are the key characteristics of monopolistic competition?
many buyers/sellers, each seller has a small share, differentiated products but not sufficient to eliminate products as substitutes, few barriers to entry
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what are some examples of monopolistic competition?
cereal manufacturers, cafe/restaurants, clothes retailers, hairdressers, electricians, insurance companies
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what are possible seller impacts on monopolistic competition?
have some control over price, use non-price elements such as adverts to win sales and convince customers to pay more, less pressure to cut costs
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what are possible consumer impacts on monoplistic competition?
can be time consuming, costly to gather info required to make purchasing decisions
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what are key characteristics of a monopoly?
one firm supplying market, no close substitutes, relatively inelastic demand, very high barriers to entry
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what are examples of a monopoly?
royal mail, microsoft
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what are the possible monopolist impacts?
has considerable power over price, may attempt to raise prices to enjoy high profits, may use price discrimination to gain more profit, more able to benefit from economies, under less pressure to keep costs and prices down
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what are consumer impacts on a monopoly?
less choice, higher prices, little time and effort required to gather information to help make purchasing decisions
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what are key characteristics of an oligopoly?
small umber of large sellers, have majority of the market share, mutually independent, one seller chanegs prices other is likely to follow, diffeentiated product but close substitutes, high barriers to entry
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what are some examples of an oligopoly?
groceries, finance, motor vehicle manufacturer, petrol
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what are possible seller impacts on an oligopoly?
have considerable market power, need to consider responsesof other main sellers in decisions, can enoy high profits in the long run as there is high barriers
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what happens when a business is over utilised?

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if sudden spike may not meet demand, staff may be overworked leading to demotivation, repairs may be needed for the over use of machinery, may not be able to allocate time for general servicing, risk of accidents due to high workload

Card 3

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How can estimating the long term level of sales improve capacity utilisation

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Card 4

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how will creating more demand improve capacity utilisation?

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Card 5

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how will understanding the consumer improve capacity utilisation?

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