Edexcel business studies Unit 1

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Brief flash cards to refresh your memory on the Unit one of Business studies AS specifically aimed at the Edexcel Specification

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Question Answer
Name 4 Characteristics of a successful entrepreneur and a failed entrepreneur Good: Takes calculated risks, Creative, Innovative and Self-confident
What are the 3 motives of an entrepreneur? Ethical, Profit, Non-profit
What are the four leadership styles? Autocratic, Paternalistic, Laissez-faire and Democratic
Explain McGregor's Theory X and Theory Y. x= blue collar workers, non-motivated requires more of an autocratic leadership style y= White collar workers, self-motivated requires more of a laissez faire management style
Factors affecting demand: Price - price set by suppliers is crucial is the consumer equation quality over price = value for money
Which factors affect demand? Tastes/ Preferences, Competitors price, State of the economy
What does the Demand Curve allow? To work out the right price to sell a product/ service and to maximise profit.
What is a Supply Curve? A chart which shows consumers willing to pay more cause supply to increase
What changes demand? Population/Structure, FMCG, Disposable income, Complementary, Competitors prices
What are the 2 types of primary research? Qualitative: Focused on consumers opinions, feelings. Quantitative: A statistic, to represent the demand
What are the 4 types of sample? Biased Random Quota Stratified
Define- Market Size Measurement of all the sales by all the companies within a market place
Market Share is... Refers to calculating trends. Is the market growing or declining? Proportion held by one company: measured- value (mostly) and volume, shows dominance of the market.
Market Subdivision: Segmentation This requires splitting consumers into categories of similar characteristics
What are mass and niche markets? Mass- Refers to the products which have universal appeal, instead of targeting segments. Niche- A small segment of a large market, usually a low profit and low demand section where the market is smaller.
What should entrepreneurs do in finding the right market? They should identify a part of the market which is unsatisfied, and the products should be superior to those of the mass market
What is a market map? A grid plotting where each existing brand sits on scales based on two important features of a market.
What is a competitive advantage? Introducing a unique selling point or market niche that will make your company stand out from competitors e.g Green and Blacks
Why are product trials used? Necessary for start up businesses, give the opinions of the consumers
What is a trade off/ opportunity cost? Occasions when one factor has to be traded off against another e.g. needs of business over friendship. one opportunity has to be forged in order to make way for a better one in the long-term.
What are interest rates? The money charged by a bank per year for lending money or for providing credit
How can changing interest rates affect businesses? Low interest rates: Cause businesses to want to invest and expand their business. Creating indirect employment, helping the economy. High interest rates, can put businesses off expanding and affects consumer demand, meaning the total costs are higher.
What are exchange rates? Measures the quantity of foreign currency that can be bought with one unit of domestic currency
How do changing exchange rates affect businesses? Strong exchange rates: higher prices meaning for exporters they get less profit. For importers a strong exchange rate will mean they earn more money per unit of goods sold
How can the governments spending and taxation affect businesses? If prices are increasing too much they may increase tax meaning a fall in demand, for a short-term pain but a long-term gain. This would lower public spending which could fail businesses for services e.g. education
What is inflation? The annual percentage increase in price levels
What are a few advantages and disadvantages of inflation? Ads: - boost revenue, but its an illusion as in real terms everything has risen too - Will find big loans easier to pay off as they will be receiving higher revenue Disads: - Could damage profitability - High inflation hits businesses under contracts - UK companies will find it hard to compete with foreign companies
What are the types of finance that can be sourced? Internal: e.g. Existing capital in business - re-invested profit External: Borrowing from a bank, trade credit, business angel, venture capitalist
What are unlimited and limited liability? Limited: You can only lose what you put into the business Unlimited: You can lose everything until debts are paid including house, car, clothes
What are the different pricing strategies? Cost-based: (retail) constant Mark ups on clothing Customer-based: What a firm believes customers will pay Competitors pricing: Based on competitors pricing
What is the psychological aspect of price? The higher the price the better the quality
Everyday low pricing: Keeping prices down to build up a customer base, so customers know what to expect
Name one other pricing strategy: Penetration pricing: if demand is highly elastic, you can set prices low to establish a customer base, changing the image of the product quality, this doesn't work if competitors then lower their prices, therefore you may have to do skimming: where you higher the prices for a short period of time
What is break-even point? Where total revenue= total cost
How much money per unit of sales do you have after paying variable costs. Describes? Contribution per unit
What does a break-even chart show? It identifies how much you need to sell to reach break even, showing visual representation of whether its achievable or not.
What is the margin of safety? The amount demand can fall before a company starts to make a loss.
Total revenue- Total cost is the equation for? Profit
What is the difference between fixed and variable costs? Fixed costs don't vary due to the levels of production, variable costs do.
What are the equations for gross prift, and operating profit? GP= TR-TCOGS OP= GP-OC
What is a business plan? A series of documents created by a business to gain finance.
What would you expect to see in a business plan? Marketing strategies, Sales forecasting, Profit and loss statement and Sources of finance.
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