Business Studies Unit 2

tara.springate
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GCSE Business Studies Flashcards on Business Studies Unit 2, created by tara.springate on 05/18/2013.

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tara.springate
Created by tara.springate about 6 years ago
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Question Answer
Advantages of becoming a big business - More resources - Holiday time - Economies of scale (buying, research and promotion)
Disadvantages of becoming a big business -Slow to bring about change -Slow communication - Reduced motivation - Culture clashes
Merger When two or more firms join together and create another joint business.
Takeover When one firm gains control of another and buys it up
Advantages of selling franchises - Brand awareness - Fast growth as franchisee finances it - Franchisees are motivated
Lean production Aims to reduce the amount of waste in a business, to reduce costs. This includes just in time and kaizen production.
Disadvantages of selling franchises - Quality problems and bad reputation spreads through whole business - Original entrepreneurs no longer own the business
Advantages of becoming a plc - Advertise shares on stock market - More media coverage - More status (investors more willing to buy shares as they're sold on easily)
Disadvantages of becoming a plc - More media coverage shows mistakes - Can't control who buys shares - More regulated than plc and expensive to start up and run
Just in time production When a customer order is received, the business orders stock from the supplier and starts producing.
Advantages and disadvantages of just in time production - The business holds little stock, so it is not damaged or stolen. - Less waste as there is little unwanted stock to be thrown away - Delays can be very expensive
What is divorce between ownership and control Owners of company (shareholders) may not have the same aims and objectives as the people who control the company and make the decisions (managers).
Kaizen production Everyday teams of employees think of new ways to improve the production process. By involving employees, they are more motivated and also the changes reflect their needs.
Advantages of expanding abroad - More customers - Reduces risk (eggs/basket) - Government incentives abroad
Management styles - Authoritarian leadership Senior managers take most important decisions - Piece rate pay system - Bonuses and other financial benefits
How does lean production affect employees? - Staff must be motivated, as strikes can be damaging to JIT production - Kaizen requires staff to want to help - Staff must be trained to check quality at every stage and be willing to send back faulty products
Disadvantages of expanding overseas - Employees may not want to move - Different rules - Different market (may need to alter products which may be expensive)
Advantages of flow production - Cheap per unit - Allows for specialisation - Huge volumes - Easier quality control
Specialisation The process is broken down, so individuals only focus on one part of production. Through repetition, staff become more efficient, but it may lead to boredom.
Disadvantages of flow production - High initial costs (only use if high demand) - Specialisation leads to boredom - Lacks flexibility
Quality The extent to which a consumer is satisfied with a product or service.
Cross subsidy When a company produces a range of products then they can use revenue from their cash cows (high share/low growth market) to support the new product. They subsidise the extra money that needs to be spent.
Stages of Product life cycle Development Introduction Growth Maturity Decline
Measuring quality - Customer questionnaires - Mystery visitors - Staff checking own work
Extension strategies - Redesign product - Advertise more -Cut prices -Find new customers - Deals (BOGOF)
Difference between current liabilities and long-term liabilities Current liabilities (e.g. tax) are debts that have to be paid within a year Long-term liabilities are debts that will be paid back over many years
Price skimming High price when product first enters market (High demand - e.g. iPhone)
Advantages and disadvantages of customer questionnaires - Unbiased opinions of the people who matter most to the business - Customers may not have time - Take a long time to read and log
Penetration pricing Low price when product is launched to try and get quick sales
Debtors People that own you money (include these in current assets)
Competitive pricing When firms try to match the prices of their competitors (Common in markets when a few big firms are competing (eg. supermarkets)
Advantages and disadvantages of mystery visitors - Good outsider's view - Staff feel spied on - May not be indicative of every experience
Loss Leader When a product is sold at a loss in the hope that customer will buy more of something else where firm will profit. (Printers are cheap, ink is not)
Creditors People that you own money to (Include these in current liabilities)
Advantages and disadvantages of staff checking their own work - Allows reflection - Staff feel like their thoughts matter - Need training to be effective - Staff may be biased
Quality assurance The process of determining whether products meet customer expectations and making sure they do.
Advantages of intermediaries in the distribution channel - A producer can access more customers by selling to wholesalers or retailers - By selling its products in other business' stores, customers can compare products
Total quality management Involves all employees in the process of preventing mistakes in order to achieve zero defects.
How would a business maintain consistent quality? - Ensure suppliers are reliable - Train staff - Invest in modern equipment - Inspect products
Disadvantages of intermediaries in the distribution channel - More mark ups at each stage mean final price is far higher for customers - By selling the product onto someone else the producer loses control and may not like store layout etc.
Why is good quality important? - Customers are more likely to return and recommend the business - Avoiding mistakes saves money - They can charge more for the products
Name the two profit margin equations Which is more useful and why? Gross profit/net profit margin = (net/gross profit x 100) ÷ revenue Net profit is more useful as it includes overheads.
Sources of finance for a large business - Retained profits - Selling assets - Bank loans - Mortgages - Selling shares
Current ratio Compares the current assets the business has with the current liabilities. 2:1 is a good figure, and the business should be able to pay the debts on time.
Acid test ratio Same as current ratio but doesn't include stock. A good figure is 1.1:1. This may be a better guide than the current ratio, as it may be hard for a business to sell its stock quickly enough to pay its debts.
Organisational chart A plan showing the roles of and relationships between all employees in a business.
Line manager An employee's immediate superior or boss
Retained profits advantages and disadvantages - No interest payments - Quick to arrange - Only available to profitable firms - Shareholders may oppose decision
Span of control Number of employees managed directly by a manager.
Advantages and Disadvantages of selling assets - No interest payments - May keep assets (if leased back) - Many firms have no suitable assets - Leasing assets back means regular payments
Advantages and disadvantages of bank loans and mortgages - Can be arranged quickly - Allows repayment over a long time - Interest must be paid - Bank may require asset as collateral
Advantages and disadvantages of selling shares - No interest payments - Owners may lose control of the company - Only available to plcs
What is a profit and loss account? A financial statement showing a business' revenues and costs over a period of time.
Flat organisational structure (Few levels of hierachy, wide span of control) - Quicker communication - More responsibility given to junior managers -Workers need training to take responsibility (increases motivation) - Appropriate for senior managers who think that workers should take responsibility and make decisions.
Overheads Fixed costs
Tall organisational structure - Managers can easily control fewer staff - Senior managers have all responsibility (fewer risks) - Lower training costs as workers aren't trained for making decisions - Appropriate for managers who believe workers must be closely controlled.
Delegation The passing down of authority onto more junior employees
Decentralisation When employees working in branches, departments or factories across the business are given more authority to take decisions.
What factors would be taken into consideration when choosing a source of finance? - Profitability of business (retained profits and bank loan) - Assets owned by business - Past history and future prospects (chance of getting a loan/paying it back) - Legal structure (selling shares) Amount of finance to be raised (may use more than one source - selling too many shares could cause lack of control)
Advantages of decentralisation - Reduces pressure on senior managers - Employees are motivated - Local managers - better knowledge - Quicker decisions
Disadvantages of decentralisation - Employees may take decisions to benefit their branch, not whole firm - Costly training - Hard for senior managers to send messages to all employees - Risky as inexperienced junior managers may make bad decisions
Person specification - Education requirements - Special skills - Experience
Induction training - Introduction to company and workplace - Basic rules
Advantages and disadvantages of 'On the Job' training - Job specific - Cheap - Employee learns and works - Trainer is not as productive
Advantages and disadvantages of "Off the job" training - Staff can get qualifications - Staff bring new ideas back - Expensive - Staff don't work while being trained
Financial methods of motivation - Piece rate pay - Bonuses - Company car or health insurance
Gross profit Revenue minus cost of sales (That figure's grossly miscalculated, you Forgot Fixed costs!)
Non-financial methods of motivation - More demanding jobs / responsibility - Rota (saves boredom) - Teams (social and more authority) - Training
Net profit Revenue - cost of sales and overheads (Just profit really...)
Management styles - Democratic leadership Employees play a major role in decision making - Team work - Training - Varied and demanding tasks
Function of a balance sheet Sets out the assets and liabilities that a business has on a particular day.
Difference between fixed and current assets Fixed assets are kept for many years (e.g. buildings and machinery) Current assets are only kept for a short time (e.g. cash and stock) and are used by the business to settle debts.