Business activity

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3º de ESO Business (Topic 1: Understanding business activity) Flashcards on Business activity, created by Carmen Diaz on 26/04/2018.
Carmen Diaz
Flashcards by Carmen Diaz, updated more than 1 year ago
Carmen Diaz
Created by Carmen Diaz almost 6 years ago
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Question Answer
What are the Factors of Production? Land, labour, capital & enterprise. All of these 4 are the resources used to produce goods and services
Definition of land Natural resources on the planet e.x: broccoli/fish, cows, diamond, cool, trees/flowers, ground/area, hills, seas, air, water...
Definition of labour Is the human input (workers, managers...) Human capital: levels of skills, qualities & qualifications e.x: teachers, security, chefs, cleaner, bus driver
Definition of capital Man made physical goods used to produce other goods and services e.x: machines, computers, tools, roads, kitchen equipment, school bus, furniture...
What are investments Investments are increases in the level of capital
Definition of enterprise The entrepreneur provides the original idea: they risk their own resources: they organize the 3 factors of production e.x: Miss Tessa, Mr Ray
What is the added value? Is the difference between selling price of a product and the cost of bought in materials and components.
Added value Input: tissue, worker, machine. AV: branding, quality, style, decoration, customer service, shop decoration. Output: a jean There are many factors that can increase the added value of a jean
Definition of opportunity cost The next best alternative you have to give up is the opportunity cost
What are the stages of economic activity? Primary, secondary & tertiary
Definition of primary Extracting natural resources e.x: extracting coal, oil, iron, gas. FORESTRY
Definition of secondary Manufacturing e.x: aircraft, assembly, vehicles, white goods, dishwasher. TRAVEL AGENT
Definition of text Services e.x: health, educating, banking. BAKERY
Qualities needed in an effective entrepreneur? -imagination/ creativity -goals -hard-working -experience -patience -resiliance(=determination) -original ideas -money? -confidence -smart -taking calculated risks -ambition
Definition of Specialization and Division of labour Where the production process is split up into different tasks and each worker performs one of these tasks
Advantages of Specialization and Division of labour -quicker -no swapping of tools -staff become expert in one task -less skills needed -allows for more machinery
Disadvantages of Specialization and Division of labour -if someone is absent, production may stop -boredom for staff: repetitive -one person can hold up production
What are the types of economy? Planned & free market.
Definition of planned The government own and control businesses and organisations
Definition of free market Private individuals own and control businesses and organisations
Examples of Private sector -private schools -taxis -shops -banks -restaurants Most countries have mixed economies with a private an public sector
Examples of public sector -state hospitals -courts of law -buses/train -army -correos Most countries have mixed economies with a private an public sector
Why do businesses want to grow? -bigger market share -more profits -credibility (bigger, better known) -market power -expanding the brand -spread risks -economies of scale
How do businesses grow? Internal/Organic Growth & External Growth
Definition of Internal/Organic Growth When a business expands by increasing the size of its operations e.x: opening more outlets, shops, factories
Definition of External Growth When a business grows by joining with or buying another business (merger or takeover)
What is Horizontal Integration? When firms at the same stage of production process to join together e.x: brewery = brewery
What are the types of Vertical Integration? Vertical Backward Integration & Vertical Forward Integration
Definition of Vertical Backward Integration When a firm joins with another firm at an earlier stage of the production process e.x: hop farm = brewery
Definition of Vertical Forward Integration When a firm joins with another firm at an later stage of the production process e.x: brewery = PUB/Bar
What is Conglomerate? Joining with firms in a different industry. Diversification e.x: virgin mobile, virgin money, virgin airplane
What is De-industralisation? This happens when there is a decline in the importance of the secondary sector in a country
Problems linked with growth? -diversification could weaken the brand -too many costs/debts -loss of control -diseconomies of scale -poor communication -could be dashes = different cultures/ways of doing things in 2 joined businesses
Why do some businesses prefer staying small? -keep it personal, keep close contact with staff and costumers -more mangeable, less stressful -keep control -finance not available -less risk -niche market
Ways of Comparing Business Size? Labour Intensive & Capital Intensive
Definition of Labour Intensive Uses more workers relative to machinery in the production process
Definition of Capital Intensive Uses more machinery relative to worker in the production process
Ways of Measuring Sizes of Businesses? -Number of workers -Value of output -Value of capital employed -Level of sales
what is meant by Number of workers? How many people are employed -Some businesses are large, but capital intensive -means limitations
What is meant by Value of output? How much are the products worth -makes services businesses look small -higher value of output might not mean more output
What is meant by Value of capital employed? Money invested into the business in assets -Some businesses are large, but labour intensive
What is meant by Level of sales? Measures sales turnover/revenue -some firms sell more, but at lower prices
Why do some businesses fail? -poorly trained staff -don't meet customer's needs -faulty/poor quality products -over-expansion -poor service -bad location -financial difficulties -illegal activity -lack of market research -too much competition -lack of control -lack of experience running a business -not enough income -too expensive products/charge too much money
Why do businesses have to draw a Business Plan? -Because the business needs to be well planned/organized -To show it to the bank and/or investors
What does a Business Plan include? -name of the business & owners -the idea (which products will be sold) -price of the products -who is it aimed at -market research -location of the business -resources needed to start it: equipment, human resources.... -finance (where the money will come from at the start) -cash flow forecast and projected profit & loss accounts
What are the Private Corporations? Sole traders, partnerships, franchises, LTDs & PLCs
Define Sole Trader? Owned and operates by 1 person
Advantages of Sole Trader? -easy to set up -needs little money to set up -the owner makes all the decisions -accounts can be kept private -all the money earned is for the owner (because he is the only staff)
Disadvantages of Sole Trader? -Unlimited liability -money difficult to obtain -holidays difficult to take -owners may have to work long hours illness may close the shop
Define partnership? Owned by 2 to 20 people
Advantages of partnership? -partners will invest -responsibilities and decisions can be shared -more skills available
Disadvantages of partnership? -unlimited liability -legal costs if a deed of partnership is required -possible arguments
What is a Private Limited Company? (LTD) A company owned by at least 2 shareholders and shares are sold privately to friends and family
Advantages of LTD? -can get money by selling shares -death and illness won't affect the running of the company -limited liability
Disadvantages of LTD? -shares can be sold on the stock market -more expensive to set up -have to share profits, by paying dividends
What is a Public Limited Company? (PLC) Private business which shares are sold to the public on a Stock Exchange.
Advantages of PLC? -shareholders have limited liability -can get a lot of money by selling shares to the public, making the firm bigger -shares can be given to workers to motivate them
Disadvantages of PLC? -firm can be taken over (if you buy 51% of the shares) -accounts are not private -more expensive to set up
Limited liability -owners/shareholders are separate from the business itself -business entirely separate legal identity = shareholders not personally responsible for debts = liability limited to the amount of money they put into the company -Public and Private Limited companies
Unlimited liability -business isn't a separate legal identity from the owner -business in trouble = owner personally responsible for debts = so owner can be forced to sell their own possessions -Sole Traders & Partnerships
What's a franchise? A franchise is the right to offer the concept and sell the product of an existing business
What's a franchisor? The franchisor is the owner of the original business that sells the franchise
What's the franchisee? The franchisee buys and operates the franchise, they have to continue to pay a set fee or a % of the profit
Advantages of franchisors? -franchisee buys a licence from him to use the brand's name -expansion of the business much faster than if the franchisor had to finance all new outlets -Management of the outlets is the Franchisee's responsibility -All product obtained must be from the franchisor
Disadvantages of franchisors? -franchisee keeps profits from the outlet -poor management of one outlet might end to a bad reputation for the whole business
Advantages of franchisee? -chances of business failure reduced because a well-known product is being sold -franchisor pays for advertising -all supplies are obtained from a central source = the franchisor -fewer decisions to take than with an independent business: prices, store layout and range of products will have been decided by the franchisor -training for staff and management is provided by the franchisor -banks are often willing to lend to franchises due to low risks
Disadvantages of franchisee? -less independence than with a non-franchised business -may not be able to make decisions that would suit the local area -licence fee must be paid to the franchisor and possibly a percentage of the annual turnover
What are joint ventures? Joint ventures occurs when two businesses combine resources for a specific goal for a period of time. A separate business is created with two parent businesses (like: google & NASA developing Google Earth
Advantages of joint ventures? -sharing of costs (very important for expensive projects) -local knowledge when joint venture company is already based in the country -risks are shared
Disadvantages of joint ventures? -if the new project is successful, then the profits have to be shared with joint venture partner -disagreements over important decisions might occur -the two joint venture partners might have different ways of running a business
What's a stakeholder? Anyone who has an interest in a business
Advantages of setting businesses? -help motivate the workers (they have something to aim for) -help managers make decisions -SMART objectives unite the business
What are the business objectives? -survival (for new businesses or the open of a big competitor) -profit (everyone) -returns to shareholders (dividends and increased share price = concern companies) -growth of the business (to increase status and salaries, spread risks...) -market share (publicity, increase influence over suppliers and customers -service to the community (has social objectives - help people/environment)
What are Public Corporations? They are large businesses owned by the government
Who manages the PC? The government sets objectives, but they appoint a board of directors to manage it
Advantages of PC? -if its a monopoly, they keep prices low (or free) for customers -government can nationalize a failing business, therefore keep it open (provide essential services) and secure jobs
Disadvantages of PC? -profit motive not as powerful as in a private sector business -often no close competitor = so lack of will to increase choices and efficiency -could be used for political gain (win as election)
Why businesses objectives changes over time? -big competitor opens = changes to survival -new laws -already met previous objectives -change in customer's needs -change of owner/manager
Objectives of Public Sector businesses? -provide a service & improve quality -make profits to reinvest in the organisation or other public sector businesses -provide jobs
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