| economic problem | there exists unlimited wants but limited resources to produce the goods and services to staisfy these wants |
| opportunity cost | is the next best alternative given up by choosing another item |
| needs | is a good or service which is essential to living |
| wants | good or service which people would like to have but isn't essential for living, people's wants are unlimited |
| economic problem | there exists unlimited wants but limited resources to produce the goods and services to staisfy these wants |
| factors of production | land, labour, capital, enterprise |
| scarcity | lack of sufficient products to fulfil the total wants to the population |
| specialisation | when people and businesses concentrate on what they are best at |
| importance of specialisation | specialised machinery and technologies are now widely available, increasing competition means that businesses have to keep costs low |
| division of labour | when the production process is split up into different tasks and each worker performs one of these, tasks |
| advantages of division of labour | workers are trained in one task and specialise in this which increases efficiency and output, less time is wasted moving from one workbench to another, quicker and cheaper to train workers as fewer skills need to be taught |
| disadvantages of division of labour | workers can become bored doing just one job and efficiency may fall, if one worker is absent and nobody else can do the job production might be stopped |
| added value | difference between selling price and materials and bought in costs |
| how added value can be increased | increase sale price and try to reduce the costs of materials |
| primary sector | extracts and uses natural resources to produce raw materials (woodcutter) |
| secondary sector | manufactures goods using raw materials from primary sector (furniture maker) |
| tertiary sector | provides services to consumers and the other sectors (retailer) |
| de-industrialisation | occurs when there is a decline in the importance of the secondary, manufacturing sector of industry in a country |
| reasons for the changing importance of business classification | sources of primary products become depleted, developed countries are losing competitiveness in manufacturing to newly industrialised countries like China |
| public sector | businesses owned and controlled by the government, will make their own decisions about what and how to produce and price, some goods and services are provided free of charge like health which is paid for by the taxpayer |
| private sector | businesses not owned by government these businesses will make their own decisions about what and how to produce and price |
| capital | the money invested into a business by the owners |
| mixed economy | has both a private sector and a public sector |
| entrepreneur | organises, operated and takes the risk for a new business venture |
| characteristics of successful entrepreneurs | innovative, creative, independent, optimistic, hard worker |
| contents of a business plan | description of the business, products and services, the market the business is targeting, financial information |
| how business plans assist entrepreneurs | they are forces to think ahead and plan out their business carefully which can help them get a loan |
| why governments support business start-ups | reduce unemployment, increase competition, benefit society |
| how governments support business start-ups | loans for small businesses at low interest rates, organising training for entrepreneurs, 'enterprise zones' which provide low-cost premises to start-up businesses |
| capital employed | total value of capital used in the business |
| methods to compare business sizes | number of people employed, value of output, value of sales |
| limitations for number of people employed, value of output, value of sales | some firms use production methods that employee few people but produce high output levels, a high level of output does not mean a business is large, could be misleading because of higher end products |
| why owers might want to expand a business | possibility of higher profits, larger share of the market, lower average cost |
| different ways a business can grow | internal, external involving a takeover or a merger |
| 3 examples of external growth | horizontal merger, vertical merger, conglomerate intergration |
| internal growth | occurs when a business expands its existing operations |
| external growth | when a business takes over or merges with another business, it is often called integration as one business is integrated into another |
| takeover | one business buys out the owners of another business, which then becomes part of the business which has taken it over |
| merger | the owners of two businesses agree to join their businesses together to make one business |
| horizontal integration | when one business merges with or takes over another one in the same industry at the same stage of production |
| vertical integration | one business merges with or takes over another one in the same industry but at a different stage of production |
| conglomerate integration | when a business merges with or takes over a business in a completely different industry |
| problems linked to business growth and how these might be overcome | larger business is difficult to control (operate the business in small units), cost of expansion (expand more slowly), larger business leads to poor communication (operate the business in small units) |
| causes of business failure | lack of management skills, changes in business environment, over expansion |
| why some businesses remain small | the type of industry the business operates on, market size, owners objectives |
| why new businesses are at a greater risk of failing | lack of finance, poor planning, owners of a business may lack experience and decision-making skills |
| sole trader | business owned by one person |
| partnership | is a form of business in which two or more people agree to jointly own a business |
| private limited company | businesses owner by shareholders, but they cannot sell shares to the public |
| public limited company | businesses owner by shareholders, but they can sell shares to the public |
| franchises | a business based upon the use of the brand names, promotional logos, and trading methods of an existing successful business |
| joint ventures | 2 or more businesses start a new project together sharing capital, risks and profits |
| limited liability | you only have to pay back the capital you invested in the business |
| unlimited liability | you have to pay back all the debts the business might have |
| incorporated business | companies that have separate legal status from their owners |
| unincorporated business | the business does not have a separate legal identity to the owner, so if the owner dies the business will not continue to run |
| private limited company | businesses owned by shareholders but they cannot sell shares to the public |
| public limited company | are businesses owned by shareholders, but they can sell shares to the public and their shares are tradeable on their stock exchange |
| sole trader risk, ownership and limited liability | carried by one sole owner, one person, no |
| partnership risk, ownership and limited liability | carried by all partners, several partners, no |
| private limited company risk, ownership and limited liability | shareholders up to their original investment, shareholders - may be few or many but shares cannot be sold to the public, yes |
| public limited company risk, ownership and limited liability | shareholders up to their original investment, many shareholders (can be millions), yes |
| business organisations in the public sector | public corporations |
| public corporations | businesses in the public sector that is owned and controlled by the state |
| need for business objectives | give workers and managers a clear target, can focus decisions, managers can compare if the business has been successful |
| different business objective examples | survival, growth, profit, market share |
| social enterprise objectives | has social objectives as well as an aim to make a profit to reinvent back into the business |
| stakeholder | any person or group with a direct interest in the performance and activities of a business |
| community stakeholders aims | jobs, clean environment, safe products |
| government stakeholders aims | employment, taxes, increasing national output |
| workers stakeholders aims | income, job security |
| managers stakeholders aims | salaries, status, control |
| owners stakeholders aims | profits, return on capital |
| customers stakeholders aims | goods and services, quality, good value |
| objectives of public sector businesses | financial, service, social |
| why people work | money, job security, social needs |
| maslows hierarchy | physiological needs, safety/security needs, social needs, esteem needs, self-actualisation |
| hertzburgs theory | hygiene factors must be satisfied, or they will act as demotivators, but they don't act as motivators so once they are satisfied it can quickly wear off, so the workers need true motivators |
| examples of hygiene needs | work conditions, status, security |
| examples of motivators | achievement, recognition, personal growth |
| what was Taylor's theory | thought workers should pay for what they produce, all people are motivated on personal gain, money is the main motivator |
| limitations of Taylor theory | employers are motivated by more than just money, if a practice problem arises you cannot easily measure an employer's output |
| financial reward examples | wage, salary, bonus, commission, profit sharing |
| non-financial reward methods | job satisfaction, team working, promotion |
| organisational chart | refers to a diagram that outlines the internal management structure |
| hierarchy | refers to the levels of management and any organisation from the highest to the lowest |
| levels of hierarchy | refers to manager, supervises other employees who are given similar level of responsibilities in an organisation |
| chain of command | structure in an organisation, which allows instructions to be passed down from senior management to lower levels of management |
| span of control | number of subordinates working directly under a manager |
| role and functions of management | planning, organising, coordinating, commanding and controlling |
| without having effective management, a business is going to lack | coordination between departments, control of employees, organisation of resources |
| delegation | giving a subordinate the authority to perform particular tasks |
| advantages of delegation for the manager | can measure the success of their staff more easily less likely to make mistakes, managers cannot do every job by themselves |
| advantages of delegation for the subordinate | The work becomes more interesting and rewarding, the employee feels more important, delegation helps to train workers |
| leadership styles | different approaches to dealing with people and making decisions when in a position of authority |
| autocratic leadership | Manager expects to be in charge of the business, and to have the orders followed, communication is normally one way and make most of the decisions themselves |
| potential advantage and disadvantage of autocratic leadership | quick decision-making during a crisis, no opportunity for employee input into key decisions which can be demotivating |
| democratic leadership | get other employees involved in the decision-making process final decision as often made by the leader |
| possible advantage and disadvantage for democratic leadership | better decisions could result from consulting with employees and using your experience and ideas a motivating factor, unpopular decisions such as making workers redundant cannot effectively be made using the style of leadership |
| lassiez fair leadership | makes broad business objectives known, then employees are left to do organise their work and make their own decisions |
| possible advantage and disadvantage for lassiez fair leadership | encourages employees to show creativity and responsibility, unlikely to be appropriate in organisations were consistent and decisive making structures needed |
| trade union | group of employees who have joined together to ensure their interests are protected |
| advantages of employees being union members | strength in numbers when negotiating with employees improved condition of employment, improved environment where people work, improve benefits for members who are not working |
| advantages of a trade union for employer | help improve communication between workers and management, wait agreements are easier to negotiate with a trade union than individual workers |
| reasons for training | introduce a new process or equipment, decrease the level of accidents, improve efficiency |
| internal recruitment | is when a vacancy is filled by someone who is an existing employee of the business |
| external recruitment | when a vacancy is filled by someone who is not an existing employee and will be new to the business |
| benefits of part-time workers | more flexible hours, easier to ask employees just to work at busy times, can be easier to make them redundant |
| limitations of part-time workers | takes longer to recruit 2 part-time workers, more difficult to communicate with, less likely to seek training |
| importance of training to a business and workers | increase skills and knowledge, decrease chance of accidents, improve efficiency |
| induction training | introduction given to a new employee, explaining the business is activities, customs, and procedures, introducing them to the fellows workers |
| on-the-job training | occurs by watching a more experienced worker do the job |
| on-the-job training advantages and disadvantages | specific to the job and flexible, workplace distraction can impact effectiveness |
| off the job training | involves being trained away from the workplace, usually by specialist trainers |
| advantages and disadvantages of off the job training | employees are away from workplace distraction, training isn’t usually specific to the business |
| why businesses might need to downsize | falling demand for their goods and services, relocating their factory abroad, closure |
| how to decide what workers to make redundant | skills of current employees, how much they are being paid, how new they are to the business |
| dismissal | employment is ended usually for not working in accordance with the employment contract |
| redundancy | employment is ended through no fault of their own, but the employee is no longer needed |
| workforce planning | establishing the workforce needed by the business for the foreseeable future in terms of the number of skills of employees required |
| legal controls over employment issues | employment contracts, unfair dismissal, discrimination, health and safety, legal minimum wage |
| employment contracts impacts | both employees and employers know what is expected of them, provides security of employment, legal dismissal is allowed if employee doesn't follow contract rules |
| unfair dismissal impacts | employer must keep accurate records of workers performance if they want to claim employee has broken contract before dismissing them, employees have security of employment, allows employees to take employer to industrial tribunal |
| discrimination impacts | employees should be treated equally, when selecting an employee an employer must be treated all equally, employers must be careful when wording advertisement e.g. to put person and not woman |
| health and safety impacts | workers feel safer and more motivated, reduces accident rate and compensation cost, time needs to be found to train workers |
| legal minimum impacts | encourage more people to seek work, some employers can't afford wage rates, increases business cost causing business products to also increase |
| why effective communication is important for a business | so information or message being sent is received, understood and acted upon when intended |
| verbal communication advantages and disadvantages | info can be given out quickly and there is opportunity for immediate feedback, in a big meeting there is no way to feel if everyone is listening, no accurate permanent record of the message |
| written communication advantages and disadvantages | evidence of the message, electronic communication is quick and cheap, no opportunity for body language to reinforce the message, message can be too confusing |
| visual communication advantages and disadvantages | can present info in an appealing and attractive way, written messages can be made clear with a chart, charts can be difficult for people to interpret, no feedback |
| how communication barriers arise | if either the sender, receiver, medium or feedback doesn't operate the way it should |
| how communication barriers can be reduced or removed | make the message as clear as possible, choose an appropriate communication method, receiver should be asked for feedback to ensure understanding |
| roles of marketing | identify customer needs, satisfy customer needs, maintain customer loyalty |
| identify customer needs | find out what kind of products or services customers want, the prices they are willing to pay and where they want to get their goods and services |
| satisfy customer needs | customers want the right products in the right place at the right price failure can lead to losing business |
| maintain customer loyalty | building customer relationships and making sure products and services are still maintaining customer needs |
| why have consumer spending patterns changed? | technology improved, evolved fashion, changed incomes |
| the power and importance of changing customer needs | if businesses fail to respond to customer needs then they are likely to fail |
| why have some markets become more competitive? | globalisation of products, transportation, improvements, Internet/e-commerce |
| how can businesses responds to changing spending patterns and increased competition | maintain good customer relationships, improve existing products, keep costs low |
| niche marketing | targets a very small segment of a market e.g. local restaurants, sales will be lower, the prices will be higher like designer brands |
| niche marketing advantages | needs of consumers can be more closely focused on, small businesses may be able to sell successfully |
| niche marketing disadvantages | limited sales potential, big risks as usually specialised in one product |
| mass marketing | when there is a very large number of sales of a product |
| mass marketing advantages | total sales are high, opportunities for growth, risks are spread |
| mass marketing disadvantages | high levels of competition, high costs of advertising and promotion, might not be specialised to the consumer |
| how markets can be segmented | socio-economic group, age, gender, location, use of product, lifestyle |
| benefits of segmentation to a business | identify if a segment's needs are not being met, identify a gap in the market |
| role of market research | what price would consumers be prepared to pay, what type of customers would buy the product, where they are most likely to get the product from |
| the market research info can be used to | identify new business opportunities or ideas, identify patterns in consumer behaviour and forecast likely demand, identify main competitors |
| market orientated business | business that carries out market research to find out consumer wants before a product is developed and produced |
| primary research | collection and collation of data via direct contact with potential or existing customers |
| primary research advantages | up to date, not available to other businesses, directly answers the question |
| primary research disadvantages | can be expensive, takes time to collect |
| methods of primary research | questionnaires, online surveys, interviews, focus groups |
| secondary research | is the use of information that has already been collected and available for use of others |
| secondary research advantages | often much cheaper, usually quicker |
| secondary research disadvantages | may not be relevant, available for all businesses, can be out of date |
| methods of secondary research | government statistics, newspapers, trade association, market research agencies, online sources |
| factors of influencing the accuracy of market research data | how carefully the sample was drawn up, bias, age of information |
| marketing mix | a term used to describe all the activities which go into marketing a product or a service |
| benefits of developing new products | unique selling point, may allow the business to expand into existing markets, allows for the business to expand into new markets |
| costs of developing new products | lack of sales if the target market is wrong, cost of carrying out market research, costs of producing trial products |
| role of packaging | eye catching, carries info, protects the product |
| product life cycle | development, introduction, growth, maturity, saturation, decline |
| how product life cycle influences pricing | branded product should be introduced at a high price so low quality idea isn't given, in saturation/maturity prices may be lower to avoid sales dropping to competitors, price discounts in decline stage to extend product life |
| how product life cycle influences promotion | advertising will be reduced in later stages because product is already known, promotion might increase if business wants to keep product in the maturity stage, spending on promotion will be highest at introduction phase |
| cost plus pricing | cost of manufacturing the product plus a profit mark up |
| cost plus pricing advantages and disadvantages | easy to apply, no incentive to reduce costs |
| competitive pricing | when the product is priced in line with or just below competitors prices to try to to to capture more of the market |
| comeptitive pricing advantages and disadvantages | sales are likely to be high as the price is at a realistic level, your production costs might be higher than competitors which can lead to less profit |
| penetration pricing | when the price is set lower than the competitors prices in order to be able to enter a new market |
| penetration pricing advantages and disadvantages | market share could build up quickly, if product is sold at a low price profit may be lower |
| skimming pricing | where a high price is set for a new product on the market |
| skimming pricing advantages and disadvantages | help establish the product as good quality, high price may discourage some potential customers from buying iy |
| promotional pricing | when a product is sold at a very low price for a short period of time |
| promotional pricing advantages and disadvantages | useful for getting rid of unwanted inventory, revenue will be lower |
| price inelastic | when customers are not sensitive to changes in price like necessities |
| price elastic | where consumers are very sensitive to changes in price like non necessities |
| distribution channel 1 | producer → consumer |
| advantages and disadvantages for distribution channel 1 | lower price if sold directly to customers, may not be suitable for products which cannot easily be sent by post |
| distribution channel 2 | producer → retailer → consumer |
| advantages and disadvantages of distribution channel 2 | producer sells large quantities to retailer, no direct contact with customers |
| distribution channel 3 | producer → wholesaler → retailer → consumer |
| advantages and disadvantages of distribution channel 3 | wholesaler may deliver to the small retailer saving on transport costs, produce might not be as good quality because of transport time |
| distribution channel 4 | producer → agent → wholesaler → retailer → consumer |
| advantages and disadvantages for distribution channel 4 | agents will be aware of local conditions and know the best places to sell, producer has less control over the way the product is sold to customers |
| aims of promotion | increase sales, create a brand image, improve company image |
| advantages and disadvantages of television advertising | advert will go out to millions of people, very expensive |
| advantages and disadvantages of radio advertising | cheaper than television, not as wide as an audience as television |
| advantages and disadvantages of newspaper advertising | lots of information can be put in the advert, many young people dont read newpapers |
| advantages and disadvantages of magazine advertising | magazine ads look more attractive, not publishes very often |
| advantages and disadvantages of posters advertising | they are permanent, can easily be missed as people go past them |
| advantages and disadvantages of DVD advertising | Relatively low cost, seen only by a limited number of people |
| advantages and disadvantages of leaflets advertising | cheap, may not be read |
| internet advertising | large amount of info can be placed on a website, security issues may discourage customers from buying online |
| types of sales promotion | price reductions, free samples, gifts |
| importance of a marketing budget | type of promotion depends on the amount of money there is to spend, how much they spend relations to how many sales they expect to make |
| how to decide what type of promotion to use | where the product is on the life cycle, who you're selling it to (like to another business), cultural issues in internation markets, nature of the target market |
| why do business sponsor | to raise awareness to the public which increases the likelihood of them having a competitive advantage |
