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Flashcards by sophiamcgheex, updated more than 1 year ago
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Created by sophiamcgheex
about 9 years ago
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| Question | Answer |
| What is value added? | Added value is equivalent to the increase in value that a business creates by undertaking the production process. |
| Two reasons why adding value is important to a business. | - Creates a USP over competition - Business can charge a higher price |
| How can a business add value? | - Building a brands reputation by improving quality etc. - Offering convenience i.e. an online shopping service. |
| Disadvantages of adding value | - Other areas such as quality may be overseen if the business is concentrating solely on adding value leading to a fall in sales as consumers will see this as a fault and turn to substitutes. |
| How customers are affected by added value | - Higher quality product - The quality of product may mean a substantially higher price, leading customers to go elsewhere to a cheaper alternative |
| How shareholders are affected by added value | - Adding value leads to higher sales - Greater levels of dividends from the business as there are more sales - Although if sales are deducted due to prices too high, may mean shareholders are dissatisfied due to lower dividends being received |
| What are stakeholders | Someone who effects or is affected by a business |
| Name 5 different types of stakeholders | - Shareholders - Employees - Customers - Government - Local community |
| What are the two types of SOF | Internal - funds found inside the business. For example, profits can be kept back to finance expansion. External - found outside the business, e.g from creditors or banks. |
| Why might a business need more finance? | - Expansion - To increase variety - To compete in the market - To buy supplies - To simply start up a business - To be more ethical |
| What is a short term SOF | - Working capital, it is needed for day-to-day - An example is paying bills |
| What is a medium term SOF | - Needed for 1-5 years - An example would be for expansion or conversion |
| What is a long term SOF | - Finance for periods in excess of 10 years - An example would be loans or shares |
| ( An internal SOF) What is retained profit | - When some profit is retained for the purpose of using it in the future. It is a firms profit after tax, interest and dividends are deducted. - It is a medium term SOF |
| Advantage and disadvantage of retained profit | - Doesn't incur business any debt - Readily available, no application nor wait needed for the money - Only works after the business is making profit for several years - Opportunity cost, money may be needed in the future |
| When should this SOF be used | - Less suitable for expenses, more suitable for investment within the business i.e. machinery |
| (An internal SOF) What is working capital | - The capital of a business which is used in its day-to-day trading operations. - It is a short term SOF |
| Advantage and disadvantage of working capital | - Readily available as already within the business i.e cash and stock - No interest rates charged - May need to chase up current assets e.g. debtors - Opportunity cost of using this money as it cannot be used again in the future |
| When should this SOF be used | - When only needed for a short time - Working capital would not be used for growth, but instead used for paying for day-to-day expenses i.e. wages and bills |
| (An external SOF) What is an overdraft | - A sum of money an individual can access each month - It is a short term, prearranged source of finance |
| Advantage and disadvantage of an overdraft | - Quick and easy - Efficient if paid back in time - Can leave a poor credit rating meaning it'd be harder to borrow in future - High rates of interest if not paid back in time |
| When should this SOF be used | - Seasonal businesses i.e. a Christmas tree shop who are certain they will be able to pay back the money at the end of the month |
| (An external SOF) What is hire purchase | - A purchase that is paid off in instalments e.g. a sofa that you pay back £30 a month for - It's a medium-long term source of finance |
| Advantage and disadvantage of hire purchase | - Easier to pay back with immediate use of the item - Small instalments monthly helps improve cash flow - Item isn't yours until all payments are made - High rates of interest can occur |
| When should hire purchase be used | - If a business requires an item e.g. machinery but doesn't have the money upfront or has a poor cash flow |
| Key factors to consider when choosing most appropriate source of finance | - Type of business - The amount of control desired - Security - Internal funds - The length/time involved - Currents methods of finance being used - Existing levels of debt |
| (Relationship between SOF and a firm's legal ownership) Sole trader | Possible SOF - Owners saving, loan, government grant Key issues for consideration - Security - Loss of control - Prove potential - Financial history |
| Partnership | Possible SOF - Partner's savings, loans, govt. grants Key issues for consideration - Partner problems -Lack collateral -Expense of large sums |
| Private limited company (LTD) | Possible SOF - Private share issues, loans, govt. grants, venture capitalists Key issues for consideration - Shareholders agreement - New shareholders - Loss of control -Risk in the loan |
| Public limited company (PLC) | Possible SOF - Public share issues via. stock exchange, loans, venture capitalists, govt grants Key issues for consideration - Move to area receiving aid - State of economy/ stock market - Reputation of managers |
| What is cash flow | The movement of cash into and out of the business |
| What is a cash flow forecast | A prediction of how cash will flow through a business over a period of time |
| What is a cash flow statement | A statement showing how cash has flowed through a business over a period of time |
| What's the difference between cash flow and profit | Cash flow measures the money you have available now. Profit is how much money you will make eventually. |
| What is market research? | The collection, analysis and presentation of data relating to the marketing and consumption of goods and services |
| What is training | The action of teaching a person a particular skill or type of behaviour |
| What is on the job training | -Training that takes place whilst the employee is producing the product. -Examples include coaching, mentoring, job shadowing and job rotation. |
| Advantages and disadvantages of on the job training | - More efficient in the sense that if one is confused, employee is there to help - Better product will come out of it as each product is completed at same standard - Person offering training may be taken away from other important work - Bad habits may be passed on |
| What is off the job training | Learning the task whilst not carrying out the actual job. This may be at the businesses premises or maybe carried out externally. |
| Advantages and disadvantages of off the job training | - No production pressure - More people taught at the same time meaning it's more efficient - More expensive - May incur travel expenses |
| 3 advantages of using interviews | - Employee gets a glimpse of what the candidate is like, e.g. their appearance - Can see if they are suitable for the job - To see if they get along with other workers |
| 3 disadvantages of using interviews | - Time consuming -Costly as there are several candidates -Pressure may mean candidate doesn't truly reflect themselves - For larger companies, organisation skills may be slacking |
| What is an aptitude test? | A candidate is asked to deal with situations that he/she is likely to encounter in the job e.g. logical reasoning |
| What are recruitment agencies? | -They help candidates to find jobs -Companies go to agencies to help find candidates with specific skills -They are the point of contact between the candidate and the employer. - When job is offered and accepted, agency is paid an agreed amount by employer |
| What is a psychometric test? | Tests that are designed to ascertain information about the personality of the applicant e.g. questionnaires |
| Different methods of recruitment and selection? | - Online application -Upload CV's -Online viewing of jobs -Psychometric testing -Telephone interviews - allows shortlisting -Video conferencing |
| What is labour turnover? | The % of employees that leave a business within a given period of time. This could be due to a poor work ethic, where employers do not treat their employees well. There is something wrong with their recruitment method. Not rigorous enough |
| Reasons why marketing research is carried out | - To describe the market - To explain the market - To predict changes in the market - To explore future customer reaction |
| What is the ultimate aim of marketing research? | To achieve a more effective approach to decision making -By concluding market research businesses are more likely to detect potential problems and weaknesses with particular decisions. Short term - investment in MR. Long term - Reduction of negative reputation |
| What is quantitative data? | Data that can be measured and analysed in a numerical way. -It is useful when describing the market (e.g. 48% of customers are male) or considering trends. |
| What is qualitative data? | -It involves the collection of data about attitudes, beliefs and intentions. -The information gathered is difficult to quantify. - Very expensive to carry out -This info can carry uncover key info/opinions |
| What is primary data? | Data which does not already exist, it is gathered for a specific purpose |
| What is secondary data? | Data that already exists, it is gathering information that has been collected for another purpose. |
| (Examples of market research) Primary | - Focus groups -Questionnaires -Surveys -Observations -Samples with feedback -Product testing -Interviews with customers and suppliers |
| (Examples of market research) Secondary | -Government statistics websites - Industry journals -Already existing market surveys -Marketing databases -Previous financial accounts -Books -Internet |
| Additional factors to consider in relation to market research | -The business' resources - The level of risk involved in the project -The attitude towards risk of the key decision makers |
| Advantages & disadvantages of PRIMARY market research | - Extremely relevant to the business as they decide what they want to find out - The information collected is up to date - The business will probably have to provide incentives to increase response rates - There is an opportunity cost to investing in MR |
| Advantages and disadvantages of SECONDARY market research | - Can be a good starting point, before more in depth MR is carried out - Easy to access as there is a lot available - SR doesn't enable a business to establish why something is happening, nor does it allow a business to investigate new possibilities -May be out of date |
| 3 different types of sampling involved in market research | - Simple random sampling - individuals are randomly selected from a list, every individual has a chance of selection. - Systematic sampling - every "nth" element from a list is selected i.e. the sample interval. - Quota sampling - only ask people whom are relevant. |
| What is sampling? | - A process that enables a firm to gather primary research from a small, but representative, section of the targeted population. |
| 3 reasons why a vacancy may arise? | - An increase in the demand of a product - Someone is fired - Seasonal jobs in times where busier i.e. Christmas |
| 4 pieces of information contained in a job description | - Job title - Location - Tasks/duties - Working conditions |
| 4 pieces of information contained in a person specification | - Qualifications - Experience - Self profile and characteristics - Strengths i.e. teamwork |
| Give two advantages of internal recruitment | - Cheaper as no recruitment process - Best candidate chosen (within the business) |
| Give 2 disadvantages of internal recruitment | - May lead to jealousy and resentment within the workplace - Better candidates may be missed |
| Give 2 advantages of external recruitment | - Offers the business higher chance of attracting a wide range of prospective candidates - New candidate may bring new ideas to the business |
| Give 2 disadvantages of external recruitment | - Costly - Time consuming |
| Name 2 ways that a business may advertise a vacancy internally | - A poster within the business - A discussion amongst the staff |
| Name 3 ways that a business may advertise a vacancy externally | - Online - In a newspaper - Posters |
| Why might aptitude tests be beneficial to the business? | It assesses the level of skill that a candidate shows in a given situation |
| Why may psychometric tests be beneficial? | - It shows the type of person the candidate is, i.e. assertive or passive |
| 2 factors that a business should consider in order to ensure an interview is successful and they are recruiting the right applicant for the job. | - There aren't too many people on the panel - Asking the appropriate questions |
| The employer must provide the new employeee with a contract within 2 months of starting work. List at least 4 things that should be included in this contract. | - Job title - Working hours - Rate and timing of pay - Terms of notice |
| What is induction training and what does in involve | -Training that focuses on the business as opposed to the specific job e.g. the rules of the business, passwords etc. |
| Discuss benefits of training to the business | - Employee benefits from a more skilled worker in the sense that more productivity will take place. -For employees they benefit in terms of being more motivated and so will work to a greater standard. -Both of these will mean an increase in number of sales for the business, meaning additional revenue. |
| .. Give two disadvantages of it | - It is costly -No guarantee that employers will carry on their job after training has taken place |
| What is motivation? | Forces that encourage and drive people to work hard |
| If there is a change within a business, explain 2 implications for HR | - If business expand internationally, they will require less help in terms of employees from within the country, and seek it elsewhere. Jobs loss, meaning unemployment. - If a business goes bankrupt, then all jobs will be cut and redundancy will occur, meaning that individuals will lose jobs, and the stages of recruitment will no longer be applicable. |
| What are franchises? | Where a business with a well known brand name lets a person or a group of people set up their own business using the brand |
| Advantages for the franchiser | - Firm doesn't have to spend large amounts in order to expand -The products necessary for the franchise to operate are under the franchisers direct control |
| Advantages for the franchisee | - It may be easier to obtain finance from a bank because of these factors - Specialist advice and training are available from the franchiser |
| What is a private limited company? | - Where there are more than 20 owners of a business, it is likely that the business has shareholders, making it a limited company. - LTD's are firms whose shares can only be sold if all the shareholders agree. - LTD's have limited liability |
| What is an example of an LTD? | - Virgin - Topshop - Phones 4U - Argos - M&Co |
| Advantages and disadvantages of private limited companies | - Shareholders have limited liability - can only lose the money that they have invested into the business. - There are more expertise and ideas available for the business. - LTD's are more expensive to set up because of all of the legal paperwork needed e.g. registration with Companies House. |
| What's a public limited company? | - A PLC must have issued at least £50,000 worth of shares - It can sell shares to the general public - Can be listed on the stock exchange |
| An example of a public limited company? | - Microsoft - McDonald's - Chrysler - Blackberry - Starbucks |
| Advantages and disadvantages of PLC's | - Flotation on the stock market allows access to a larger scale of the SOF - Enhanced reputation of the company due to its PLC status - Flotation is an expensive process and not guaranteed to be successful - Stricter rules and regulations are placed on PLC's |
| Similarities between a private and a public limited company | - They exist in their own right - The owners and the company are separate legal entities - Shareholders are the owners of Limited Companies - Shareholders have limited liability |
| What is a sole trader? | An individual who owns and runs their own business, it is the simplest form of business. |
| Advantages and disadvantages of a sole trader | - Inexpensive to set up - As the business is unincorporated (with the companies house), the financial state of the business can be kept private - The is unlimited liability for the owner - The sole trader has to carry out all business tasks and decisions, requiring them to be a "jack of all trades" |
| What is a partnership? | Where two to 20 people own and run the business. -Each partner will take a share of the profits and are equally responsible for debts incurred. - It is not a legal identity in it own right and is therefore unincorporated |
| Advantages and disadvantages of partnerships | - Very few procedures to setting up a partnership. - The work load can be shared between partners. - Profits need to be shared amongst the owners. - The partnership ends when one partner leaves, meaning there is no continuity |
| What is an entrepreneur | A person who turns a good commercial idea into a successful business |
| What is flotation | Where the shares of a company are offered for sale on a stock market for the first time |
| What are dividends | Payment made by a company to its shareholders out of profits earned |
| What are directors | Managers who are responsible for managing a company on behalf of shareholders |
| What is an emerger | Where two businesses of equal size are joined together |
| What is a cooperative business | An organisation where the members have an equal say in how it is run |
| What is a chairman | The person elected to chair meetings of the board of directors or an organisation, they are the head of annual general meetings |
| Give 5 reasons for business failure | - Insufficient market research - Failure to seek professional advice - Lack of financial discipline - Unsuitable campaign - Lack of testing |
| What is a franchisee? | The person who pays an initial fee to start up the franchise business |
| What is royalty | A percentage payment made to the franchisor for the use of their reputation and property |
| What are the aims of public corporations? | - They provide services to the general public that are essential but NOT profitable -The government can stop customers being "ripped off" - They provide and protect key jobs and key industries |
| What are the aims of the private sector? | - To make profit - To beat competitors - USP/Market share - Good customer service |
| Types of public sector organisations | - Central government owned - e.g. parliament, NHS is run centrally - Local government owned - e.g. Councils, local organisations to help society such as libraries |
| What is privatisation | The transfer of assets from the public sector to the private sector Examples; British Airways 1987 British Gas 1986 British Rail 1994-1997 |
| What is nationalisation? | The transfer of assets from the private sector to the public sector Examples; - RBS - Lloyds TSB banking - Dartford Crossing - Royal Mail |
| Advantages and disadvantages of privatisation | - Efficiency will increase - privately run businesses have to keep costs down in order to survive. - Competition between businesses is beneficial to the consumer. - The industries were sold off too cheaply - the share prices usually rise quickly. |
| What are economies of scale? | Economies of scale are a proportionate saving in costs gained by an increased level of production |
| Name the 6 different types of EOS | -Technical - Risk bearing - Managerial - Marketing -Financial - Purchasing |
| What is diseconomies of scale? | Where unit costs fall as the scale of production increases |
| Types of diseconomies of scales | - Communication - Motivation levels - Less innovation - Technical disceconomies |
| What is transparency | When a deal or decision is made in an open manner so that all those affected understand the reasons. Lack of transparency can lead to rumours or ill feeling often directed at particular individuals. |
| What are the consequences of poor Accountability | - Rumours and negative reputation - Ill feeling - Sale of shares -Bankruptcy / decline of financial help - Defamation - Competitors taking advantage |
| What does being accountable mean? | It is when a business takes full responsibility for its actions. Whether a business is viewed as accountable is therefore highly influenced by the media and public opinion. |
| Draw the demand curve | |
| What does the demand curve show? | -When the price rises, demand fall. When the price falls, the demand rises. - Demand is the quantity of goods and services that people in a particular market can and will purchase at each given price. |
| What would make a shift in the demand curve? | - Events - Seasonality -Complements - Trends - Advertising - Population -Substitutes |
| What is an inferior good? | A product or service that decreases in demand when income increases e.g. value brands, second hand goods |
| Why do complements make shifts in the demand curve? | -A complement are products and services that are joint in demand e.g. scarves and gloves, bikes and helmets. - If the price of a CD player was to be increased, then the demand for CD's will fall, causing a shift in the demand curve |
| Draw the supply curve | |
| What is the equilibrium price? | - The price at which demand is satisfied and all supplies are sold. |
| What is excess supply? | |
| What is quantity demanded? | |
| What is meant by the market structure | - The organisational and other characteristics of a market. |
| What is meant by perfect competition? | -The situation prevailing in a market in which buyers and sellers are so numerous and well informed that all elements of monopoly are absent and market price of commodity beyond control of individual buyers and sellers |
| What is meant by monopolistic competition? | -Elements of monopoly allow individual producers or consumers to exercise some control over market prices. They are differentiated. |
| What is oligopoly? | - A state of limited competition in which a market is shared by a small number of producers or sellers, e.g. petrol |
| What is monopoly? | - The exclusive possession or control of the supply of or trade in a commodity or service. They have 25% of market share |
| What is a barrier to entry? | - The existence of high start up costs or other obstacles that prevent new competitors from easily entering an industry or area of business |
| What is a homogeneous product? | - One that cannot be distinguished from competing products from different suppliers. One product can easily be substituted for the other |
| What is a differentiated product? | - The process of distinguished a product or service from other, to make it more attractive to a particular target market |
| What is ethical behaviour? | - The actions that business or people take because they believe them to be right. It is a matter or opinion |
| Examples of behaving unethically | - Paying the minimum wage - Testing products on animals - Use unethical suppliers - Importing raw materials |
| Benefits of ethical behaviour to business | - Positive image portrayed e.g. putting something back to the local community e.g. sponsoring local youth football teams. - Better pay, health and safety, holidays and pensions = More motivated workforce |
| Disadvantages to businesses of acting ethically | - Higher costs e.g. employment - Requires ethical research - Increased costs in advertising to make people aware of ethical practices - Risk is higher - will demand exceed the cost? |
| What is an e-business | a company that does all or most of its transactions through the Internet |
| Advantages and disadvantages of e-businesses | - Do not have to pay rent or buy a large, expensive building - Can be run from a person's home - Payment systems must be secure - The website must be designed well and be user friendly |
| How has technology improved the primary sector? | -Huge advances e.g. tractor designs to designs to detects oil under sea beds. - HR - online recruitments quicker e.g. interviews over Skype. Online training decreases labour, so the job is made easier. |
| How has technology improved the secondary sector? | - It has increased automation due to ; CAD - computer aided design ; CAM - computer aided manufacturer - Increases efficiency and less wastage - Increased productivity - Decreases long term costs as no need to pay labour costs |
| How has technology improved the tertiary sector? | - EPOS - led to great improvement and efficiency in areas such as inventory control, distribution and delivery. - Virtual sites - estate agencies, kitchen designs. These save time and costs. - Saves time. |
| What are the opportunities with technological changes? | - It minimises costs - providing a competitive edge by streamlining processes and reducing time and wastage. - Minimises time - from concept to creation, which helps if you want to be the first out with a new product. - Improved quality of final product |
| Threats of technological change | - Cost of research - Speed of innovation - Compatibility -Industrial relations problems - Change management - Costs involved in training employees |
| How do social changes affect businesses? | - Ageing workforce - Consumers are now brand loyal, 5 key brands, e.g. Starbucks. - More higher skilled jobs, i.e. more doctors are needed. - Migration means an increase in ethnic groups e.g. Hispanic - cheaper employment for businesses |
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