Business and Economics Unit 1

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What 5 things need to be thought about when setting up a new business?
is there an opportunity, how will the business be financed, what's required to get the business running, legal aspects and what products/services will be sold and to whom
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What 6 things can market research tell a business?
What features customers want, how much they're willing to pay, where they shop, their age/gender, main competitors and if the market is growing or shrinking
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What's the definition of primary research?
Collecting data that did not exist before
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What's the definition of secondary research?
Collecting data that already exists
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What are the 5 advantages of primary research?
More accurate, up to date, specific to needs, effective at collecting qualitative data and direct customer contact
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What are 3 advantages of secondary research?
More general, less time consuming and effective at collecting qualitative data
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What's qualitative data/
Information about opinions, judgement and attitudes
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What's quantitative data?
Data that can be expressed as numbers and statistically analysed
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What's a market segment?
A group of buyers with similar characteristics and buying habits
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What 6 things does market segmentation allow a business to do?
Meet specific customer needs, differentiate their products, focus on specific customer groups, target marketing activity, develop a unique brand image and build close customer relationships
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What's the use of market mapping?
To position and compare products in a market and identify opportunities where customer needs aren't being met
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What are the 7 ways a business can compete?
Wider product range, better after-sales service, stronger brand image, better product features, higher quality, better design and more enjoyable experience
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What's a brand?
A named product that customers see as being different from other products
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What are the 6 ways to add value?
USP, better design, improved quality, branding, greater service speed and more convenience
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What's the benefit of added value to a business?
Profit is made quicker leading to increased chance of survival and success
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What are the 6 benefits of a franchise?
Brand image/reputation already established, marketing costs covered by franchise, access to tested products, established customer base, higher chance of survival and training/support provided
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What are the 5 drawbacks of a franchise?
High start-up costs, have to pay royalties, complicated application, lack of control and limited decision flexibility
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What is enterprise?
The ideas and initiatives involved in starting a new business
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What are the 3 enterprise skills?
Risk-taking, showing initiative and willingless to undertake a new venture
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What are the 6 results of thinking creatively?
Better products, considers 'what if' questions, unique ideas and products, cheaper production techniques, improved customer service and identify new opportunities and markets
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What's deliberate creativity?
The intentional creation of new ideas through recognised tecniques
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What are 4 methods of deliberate creativity?
Creating lists, mind mapping/brainstorming, make it bigger/smaller and combining things together
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What's blue skies thinking?
Coming up with as many ideas as possible to solve a problem
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What's lateral thinking?
Thinking differently to find new and unexpected ideas
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What's invention?
Turning research and development into potential products and processes
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What's innovation?
Turning potential products and processes into products ready to sell to customers
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What's a patent?
The right of ownership of an invention, design or process when it's registered with the government
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What's copyright?
Legal ownership of material such as books, music and films which prevent these being copied by others
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What are trademarks?
The logo, sign or symbol of a product or business that cannot be copied by others
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What are 5 important enterprise skills?
Planning, drive, thinking ahead, determination and seeing opportunities
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What's an objective?
A goal that a business tries to achieve?
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What are 4 examples of financial objectives?
Survival, profit/income, wealth and financial security
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What are 3 examples of non-financial objectives?
Personal satisfaction, independence/control and helping others (social enterprise)
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What are 8 entrepreneurial qualities?
Planning, initiative, taking risks, determination, making decisions, persuasion, leadership and luck
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What's the formula for revenue?
Price x quantity
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What are fixed costs?
Costs that do not vary with output
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What are variable costs?
Costs that vary with output
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What's the formula for variable costs?
Cost of one unit x quantity produced
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What 6 things does profit allow a business to do?
Survive, re-invest profit for expansion, give an incentive to start the business, provide security and savings, reward employees and generate wealth for the owner
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What are the 4 ways to increase profit?
Lower variable costs, lower fixed costs, increase sales price and increase sales quantity
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What are the impacts of a loss on a business?
Can't repay loans, can't pay bills such as wages, experiencing cash flow problems and inability to survive
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What 6 things affect cash flow?
Change in sales revenue/demand, change in costs (commodity prices), seasonality in sales, business expansion or contraction, a change in credit terms and change in stock levels
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What 5 things does does insolvency stop a business from doing?
Pay its debts, repay bank loans, pay wages, buy raw materials/products and promote the business
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What are the 6 purposes of a business plan?
Convince a bank to loan money, forecast financial projections, identify customer needs, formulate market research into information, provide information and provide the owner with an 'action plan' to minimize risk
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What 6 things go into a business plan?
Overview, objectives, market research, personnel, finances and production
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What are 8 long term sources of finance?
Share capital (limited companies only!), personal savings, venture capitalist (external investor looking for fast growth and return), grants, loans, mortgage, retained profit (if applicable) and leasing
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What's a share?
A part ownership in the business
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What's the definition of 'short term' finance?
Finance that is repaid immediately or fairly quickly (within 1 year)
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What are 5 sources of short term finance?
Trade credit, bank overdraft, delayed payments, credit cards (short term borrowing) and factoring (being paid immediately instead of waiting)
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What are the 3 stages of being customer focused?
Identifying needs, anticipating needs in advance and meeting needs (providing whatever customers want)
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Describe the product element of the marketing mix?
The product has to meet needs of customers and have correct attributes and features, a successful business will differentiate their products
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Describe the place element of the marketing mix?
The way a product is distributed (online or in retail stores)
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Describe the promotion element of the marketing mix?
Communication between business and customers making customers aware the product is for sale
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Describe the price element of the marketing mix?
The price must reflect the value customers place on the product, price is very subjective because it depends on many factors (eg commodities and competitors)
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What are the 4 differences between sole traders and Ltd's?
Risk, control, profits and privacy
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What are 4 reasons to have legislation on a business?
So that the government can track business activity, so taxes can be collected, to protect business form illegal activity and to protect customers from illegal activities
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What are the 4 legal requirements of a small business?
Register and trade under a unique name that promotes the business, keep records of sales, purchases and partnerships, register with HMRC and pay the appropriate level of tax to HMRC
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What 3 taxes do limited companies pay?
VAT, national insurance and corporation tax
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What 3 taxes does a sole trader pay?
VAT, national insurance and income tax
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What's customer satisfaction?
A measure of how much a business or its products meet customer's expectations
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What 8 things can businesses do to provide effective customer service?
Dispatch orders quickly, 100% delivery/order accuracy, offering excellent after sales care, provide a personal service, go the 'extra mile' to meet needs, be convenient, be polite+friendly and respond immediately to complaints
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What are the 5 benefits of good customer satisfaction?
Repeat purchase, loyalty, ability to charge a premium price, improve reputation and differentiate the business and become the USP
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What 5 things stimulate repeat purchase?
Cheaper prices than competitors, easy and convenient service, effective customer service, promotions and special offers and building good customer relationships
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What are the 5 stages of the recruitment process?
Create recruitment documents, receive applications, shortlisting, selection and training
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What are the 6 ways a business can motivate staff?
Paying fair+competitive wages, providing good working conditions, providing perks (eg company car), delegating power+responsibility, training staff development and encouraging teamwork
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What are the 4 areas of employment legislation?
Recruitment (discrimination), pay, discipline and working hours
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What's the impact of a high demand and low supply?
Shortage-prices rise
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What's the impact of low demand and high supply?
Surplus-prices fall
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What's a market?
Where buyers and sellers meet to exchange products and services
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What's a commodity market?
A market for raw materials such as oil, steel and wheat, used in the production of other goods
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What's a goods market?
A market for everyday goods
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What are the 3 influences on the impact of changes in raw material and energy prices?
Their proportion of total costs (a percent), how much costs go up (a number) and the ability to pass on costs to customers
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What are the 3 impacts of a high interest rate?
Business may struggle to repay loans, small business are less likely to borrow money to start up or expand and customers are less likely to spend money
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What are the 3 impacts of a low interest rate?
Business will have more money to spend and cash flow may improve, business may borrow money for a start up or expansion and customers are more likely to borrow and spend money
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What's economic activity?
The amount of buying and selling that takes place between businesses and consumers in a period of time
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What's economic growth?
A rise in economic activity
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What's business cycle?
The fluctuation in the level of economic activity over time
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What are the 4 stages of business cycle?
Boom, downturn/slowdown, recession, recovery/upturn
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What's a boom?
A strong increase in economic activity
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What's a slowdown/downturn?
Economic activity begins to slow down
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What's a recession?
When economic growth is negative (the economy shrinks)
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What's an upturn/recovery?
Economic activity begins to rise
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What action would the government take during a boom?
Raise interest rates to control spending and price rises to prevent too fast growth
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What action would the government take during a downturn?
Lower interest rates to encourage spending and reduce costs
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What are the 5 effects of a boom?
Consumer and business confidence rises, consumers borrow and spend more, sales increase, business take on more employees and businesses invest and expand
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What are the 6 effects of a downturn/recession?
Low consumer and business confidence, consumers borrow and spend less (to save), sales fall (prices may have to be cut), Businesses may make employees redundant, businesses save and cut back on spending and businesses suffer cash flow problems
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What are 8 examples of stakeholder groups?
Owners, managers, workers, customers, competitors, local community government and suppliers
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What are the wants for the 8 different stakeholder groups?
Managers want bonuses+long term success, workers want good pay+conditions, customers want VFM, competitors want cooperation, community wants investment+less pollution, government wants low unemployment+competition and suppliers want regular orders
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Other cards in this set

Card 2

Front

What 6 things can market research tell a business?

Back

What features customers want, how much they're willing to pay, where they shop, their age/gender, main competitors and if the market is growing or shrinking

Card 3

Front

What's the definition of primary research?

Back

Preview of the front of card 3

Card 4

Front

What's the definition of secondary research?

Back

Preview of the front of card 4

Card 5

Front

What are the 5 advantages of primary research?

Back

Preview of the front of card 5
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