Unit 1 AS Business Studies

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What is an Entrepreneur?
• “someone who has a flair for business ideas, and has the confidence to take risks involved in setting up a business” • “someone with the attitude and skill to turn an idea into a reality”
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What makes a good entrepreneur?
• Common characteristics: o Initiative.  Being prepared to start something. o Hard-working.  Involves long working hours, doing more than one job. o Resilience.  Determination to succeed.  Being prepared to redesign and rethink.  Not being put o
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Why do people set up a business?
• Profit Motives: o Survival. o Profit. o To provide for family. o Increase revenues. • Non-Profit Motives: o To be own boss. o To work from home. o To help others. o Ethical reasons.
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Why take an Ethical Stance?
• Good Publicity: o Can be used to make your business different. • Additional Sales: o Can occur due to good publicity may lead to greater profits. • Helps others: o Makes a positive contribution to the economy.
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What leadership styles are there?
• Autocratic: o They will:  Tell people what to do.  Expect workers to do as they are told.  Want to make all the decisions.  Have to take responsibility for all decisions. o They can be effective when:  Quick decisions are needed.  Workers are
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What affects leadership styles?
• The task. • The organisation. • The workers. • The group size. • The leader’s personality.
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What motivates entrepreneurs?
• Financial Reward. • Self-Achievement. • Be their own boss. • To help others.
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What is a Social Entrepreneur?
• Use business skills to start an organisation with the goal of making the world a slightly better place, e.g. Charities.
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What is Douglas McGregor’s Theory X and Theory Y?
• Psychologists examined how managers view their subordinates. (Workers under them) • He paced managers in two different categories theory X and theory Y.
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How did Theory X managers view their staff?
• Workers are motivated by money. • They are lazy, dislike work and avoid it if they can. • Unsupervised employees will not perform properly or efficiently. • The average person prefers to be told what to do and to avoid responsibility.
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How do Theory Y managers view their staff?
• Employees seek satisfaction from work and not merely financial rewards. • Effort is put into work naturally. • Most employees possess ingenuity and creativity and want to use these skills in their work. • They often accept and seek responsibility.
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What is Management?
• The organisation and co-ordination of the activities of a business in order to achieve set objectives.
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What is leadership?
• Taking the initiative to set clear objectives and motivate staff.
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What factors affect leadership style?
• External Factors: o Is the market slow or dynamic? o Where is the company on the product life cycle? o The competitors. o Is international business possible? • Internal Factors: o Organisation culture. o Quality of staff/ are they trustworthy. o Re
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How important is leadership?
• Leadership style can influence the: o Frame work of ethics within the company. o Attitude to business (entrepreneurial/ cautious)
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What is a market?
• A market puts buyers and sellers in touch with one another so that goods and services can be bought and sold.
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What is a product orientated business?
• A business where it’s main focus of activity is on the product and its price.
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What is a market orientated business?
• A business that carries out market research to find out what the consumer wants before the product is developed and produced?
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What is demand?
• Demand is the desire to own a good or service, backed up by the ability to pay for it.
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What factors affect demand?
• Price. • Competitors’ prices. • Fashion/Taste. • State of the economy. • Specific to business factors, e.g. Seasonality or weather. • Income- changes demand of luxury items.
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What is Supply?
• The willingness of a company to produce and deliver goods or services demanded by customers.
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What factors affect supply?
• Operating costs. • Price the market will offer. • Physical constraint. • Changes in technology. • Changes of taxes or subsidies (money given by the government)
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When will the equilibrium point change?
• If any factors of supply and demand cause the lines to change.
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When is a firm more likely to be product orientated?
• When there is a high emphasis on technical quality or safety. • Those in charge have a technical background. • There is little competition.
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When is a firm more likely to be market orientated?
• When they undertake market research continuously. • Develop products that the market wants and in the right quantities. • Price the products at an acceptable level. • Promote the products effectively to the target market. • Distribute the products
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Why undertake market research?
• To find out the current size of the target market. • To consider the future potential of target market. • To find out market shares of existing companies/ brands.
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What are the ways of undertaking market research?
o Primary Research- • Gathering of original information about the market first hand. Also called field research. o Secondary Research- • Use of information that already exists about the market from other sources.
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What are the advantages and disadvantages of Primary Research?
• It is acurate and reliable. • It is time consuming and expensive.
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What are the advantages and disadvantages of Secondary Research?
• It is convinient and quick to do. • It can be unreliable, out-dated, innacurate and not tailored to what you need to know.
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What is qualitative research?
• In depth research into motivations behind attitudes and buying habbits of consumers.
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How is qualitative research carried out?
• By group discussions (focus groups). • In – depth interviews. • Discussions can mean that answers are influenced by others.
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What is quantitative research?
• Preset questions to a suitable sample of people to provide satisfactory valid data.
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How is quantitative research carried out?
• Sampling: o Selecting a sample size and method. E.g. Stratified (no bias). • Methods: o No Bias: Random & Sytematic (every nth person) o Bias: Quota (selection wih key qualities)
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What are the key features of a questionnaire?
• Clearly defined objectives, no leading questions (although this can lead to ambiguous, invalid answers) question meaning is clear, mainly used closed questions, some open questions to justify and explain.
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What are the other considerations?
• The users age, gender and job should be included to get a detailed analysis. • Response rate- if it is low, will there be a danger to bias. • Face to face or self completion. • Cost. • Bias.
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What is test marketing?
• Trying out a new product in a limited geographical area.
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What are the benefits of test marketing?
• Competitors can see what you’re doing. • It is expensive as it reduces large scale production.
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What are the weaknesses of test marketing?
• Competitors can see what you’re doing. • It is expensive as it reduces large scale production.
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What is ‘back-data’?
• Results from past research.
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What is market size?
• Is it the number of individuals in a certain market who are portentials buyer/sellers of a product or service. • Companies are interested in knowing the market size before launching a new product or service in an area.
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How can market size be measured?
• Can be measured in volume (quantity sold): • TOTAL UNITS SOLD = MARKET SIZE • Also meaured in value (total revenue): • UNITS SOLD x PRICE = MARKET SIZE
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What is market growth and how is it calculated?
• It is the change in size of a market over time: CHANGE IN MARKET SIZE x100 OLD MARKET SIZE
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What is market share and how is it calculated?
• It is the measure of sales of one business as a percentage of total sales in the market. • Volume: FIRMS UNITS x 100 TOTAL MARKET UNITS • Value: FIRMS SALES x 100 TOTAL MARKET SALES
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What different types of markets are there?
• Local, national, international. • Physical (street, auction) • Electronic (stock exchange, ebay, amazon)
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What are the features of electronic markets?
• Very price competitive, not location dependent, low cost barrier to entry. • Lots of competitive profitable small businesses providing niche services.
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What are the advantages and disadvantaged of being market leader?
• Better distribution. • Better ability to negotiate most competitive prices from suppliers. (suppliers have confidence that it will sell) • Pressure from competition. • Pressure from shareholders for dividence.
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How can the market size grow in volume but stay static in value?
• The price of the product has decreased, increasing its attractiveness, causing more people to buy it. This means that the quantity of sales has increased but the total values of sales is the same.
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How can there be a rapid growth in one sector of one segment of a static market?
• Overall the market size is the same (m&s) but one sector (childs clothes) is growing, so they need to stock more clothes.
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What is a market niche?
• A very small segement of a much larger market. • Products or services are specialised to meet the needs of a distinctive demand. • Tend to have lower volume but can charge higher prices (price inelastic).
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What are the advantages and disadvantages of a niche market?
• There are no competitors. • They can sell products or services ar a higher price. • If you have bad customer loyalty you will gain less sales.
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What are the advantages and disadvantages of a mass market?
• If you are market leader you can negotiate lower costs. • You have to keep prices competitive.
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What is competition?
• Rivalry in which every seller is trying to get what the other sellers are seeking at the same time; sales proft and market share. This is done by offering the best combination of price, quality and service. • Competition plays a function in balanci
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What’s in a product?
• A product contains: o Actual benefits e.g. taste, funtion. o Psychological benefits e.g. brand, image.
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What is product differentiation?
• It is the degree to which consumers percieve that a brand is different from its competitors. • A products point of differentiation is described as a USP.
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What is actual differentiation?
• It can be a unique design e.g. iPad, ikes, Porshe. • It can be a unique function e.g. mobile feature. • It can be ergonomically better. • It coulf have a superior performance e.g. Ferrari.
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What is imagined or perceived differentiation?
• Psychological e.g. Coca Cola/ Pepsi, it is created by persuasive advertising , celebrity endorsment and sponsorship.
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What are the advantages of product differentiation?
• It can reduce customer price sensitivity, and increase brand loyalty. • This means that customers are willing to pay a higher price. • When prices increase, total revenue will increase. • Highly differentiated goods will be more price inelastic. •
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What are the disadvantages of product differentiation?
• Product differentiation is not permenant and requires ongoing marketing spend. • The USP can change ased on competitive activity, technology and tastes.
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What ways can you improve competitiveness?
• Training staff- impact on productivity, improved quality, better customer service. • Quality of management. • Modernisation and investment.
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What is added value and how can it be maximised?
• Added value is the difference between cost price and selling price. • You can maximise added value by lowering costs (supplies, rent) and increase revenue (higher price).
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What are the benefits of a product trial and how do you achieve a high product trial?
• The benefits are that you are able to observe actions to see if its worth mass producing. • To achieve a high product trial, you have to have an innovative product. You must display the product in a prominent place. Have strong advertising back up
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How do you achieve repeat purchase?
• Quality of a product must be excellent. • Price must be affordable. • High quality branding and advertising. • Ensure the product is ‘placed’ correctly.
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What is an opportunity cost and why is it relevant?
• It is the cost of missing out on the next best alternative when making a decision. This concept is at the heart of every business decision. • This is relevant as every business is forced with limited resources and so faces decisions everyday.
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What are the most important resources to a business?
• Money and time.
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What are the most important opportunity cost issues to a new business?
• Dont tie up too much capital in stock. • Dont overstretch yourself, good business decisions take time. • Care is needed with every decision that uses cash.
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What is a trade-off?
• Accepting less of one thing to achieve more of another. • E.g. slighty lower quality for cheaper costs.
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What is an exchange rate?
• The value of one currency, measured by how much it will buy off of other currencies. • Strong (pound is more valuable £1:$2) • Pound • Imports • Cheap, • Exports • Dear.
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What is an interest rate?
• The cost of borrowing money, and the reward of saving it. • Expressed as a percentage figure per annum. • Higher the interest rate the higher the cost.
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What internal sources are there?
• Reinvested profit: o There are no interest rates. o Company owe more income tax. • Cash squeezed from the business: o You can pay suppliers later to get interest from savings so you arent overdrawn. o Customers may pay you later. • Sales of assets:
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What external sources of finance are there?
• Short Term: • Bank overdrafts: o Banks allow the borrowers to overdraw funds to an agreed amount (trade in the red). o Instant finance. o High interest rates. • Trade credit: o A supplier grant a period of credit of between 30 and 90 days before pa
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What is collateral?
• It is an asset used as a security for a loan (e.g. house)
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What does the amount of finance a business can obtain depend on?
• The type of business: o A sole trader will be limited to the amount he can put in himself. o A public limited company needs a share capital of £50k and a track record of sales success. • The stage of development of a business: o An established busi
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What is over trading?
• It is when a business expands without sufficient finance to support its growth.
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What is leasing?
• A long term rental agreement that allows businesses to use assests without having to pay for them. This frees up funds for other uses. Often used for vehicles, machinery and photocopiers.
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What is ordinary share capital?
• The money raised by the selling of ordinary shares in plc businesses, these are the stakes in the business and the shareholders will recieve a dividend.
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What is the difference between fixed and variable costs?
• Fixed costs- do not change with output. • Varible costs- change with output. (piece rate, commision, materials)
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What are the different types of profits?
• Gross profit: o Add up all the sales the comany generates over a certain period of time and suptract in the costs of production. • Operating profit: o Gross profit- operating expenses • Net profit: o Profit- interest and taxes. • Retained profit: o
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What is contribution?
• The difference between selling price and variable costs. • Contributuion per unit= • selling price- variable cost • the amount each sale contributes towards unit fixed costs of running the bu
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How do you calculate breakeven?
Fixed costs Selling price per unit – variable costs
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What is margin of safety?
• It is the difference between your current output in units and the breakeven point. • Its the amount that a firm can fall in demand before it creates a loss.
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What is a business plan?
• It is a document setting out a business idea and showing how it is financed, marketied and put into practice.
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Why would you create a business plan?
• To obtain a capital finance. • To help steer the business towards goals.
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What should a business plan include?
1. Executive summary- who you are, you team, capital required, how much you invest, what demand you will meet. 2. Details of the product or service. 3. The market- the current trends, key competitors. 4. Marketing plan- how will you communicate with
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What are the benefits and problems of a business plan?
• Helps you obtain finance. • Shows you know the market you are entering. • Helps achieve goals. • Doesnt highlight the risks. • Takes a long time and effortcant predict the future market (demand, tastes)
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What makes a good entrepreneur?

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• Common characteristics: o Initiative.  Being prepared to start something. o Hard-working.  Involves long working hours, doing more than one job. o Resilience.  Determination to succeed.  Being prepared to redesign and rethink.  Not being put o

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Why do people set up a business?

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Card 4

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Why take an Ethical Stance?

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What leadership styles are there?

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