Unit 2 - Growing a Business

  1. The four Ps are:
    Price, Product, Place, Promotion
  2. State 2 reasons for lowering the price of an item.
    • To boost stales, 
    • because competitors have lowered their prices
  3. State 3 determinants of the price of a product
    • the number of customers
    • costs
    • target audience
    • nature of the product or service
  4. State 2 ways of promoting a product
    • advertising
    • sales promotion
    • sponsorship
  5. State 3 factors that might determine how much is spent on promotion
    • media used
    • the firms objectives
    • the firms resources
  6. State 2 ways of advertising a small local food shop
    • local newspaper
    • Yellow pages
    • posters/flyers
  7. Give 3 examples of below the line sales promotion
    • buy one get one free
    • short term discounts
    • competition
  8. Modifying an existing product might keep its sales going. This is know as what?
    Extension Strategy
  9. State the stages of the product life cycle.
    introduction, growth, maturity and decline
  10. State 2 reasons why so many products fail
    • poor market research
    • competitors actions
  11. Why do firms need to invest in new products?
    • need to keep up with competitors
    • customers want new products
    • technology advances
  12. State 3 situations when a firm might charge a higher price
    • brand image
    • if the product is unique and new
    • if there is little competition
  13. State 3 reasons why a firm might increase its advertising
    • to prevent sales falling
    • to make customers aware of new product
    • to match a competitors campaign
  14. One firms sales as a percentage of the whole market is called its?
    Marketing Share
  15. How might the size of the market be measured?
    by the number of items sold, by the value of the items sold
  16. Identify different ways of segmenting a market
    age, gender, income, region, lifestyle, personality
  17. What would you expect to happen to cash flow in the early stages of the life cycle? Why?
    it would be negative, sales are low and the product needs promoting heavily
  18. State 3 reasons why a firms market share might fall
    poor marketing, poor quality product, competitors actions
  19. The gathering of information for marketing is called?
    Market Research
  20. What is a retailer?
    A business selling a final product
  21. Give examples of below the line promotion
    price cuts, special offers, point of sales displays, free samples, competitions, after sales service.
  22. How might a firm react to a fall in sales?
    increase promotional activities, cut prices, modify the product
  23. Distinguish between primary and secondary research
    Primary gathers new data, secondary uses data that already exists
  24. Would you use primary or secondary research to test a new product? why?
    Primary - the idea/product is new so there is no previous data
  25. What is batch production?
    Groups of items move from one stage of production to the next
  26. Give 1 advantage and 1 disadvantage of batch production
    • more flexible than flow production, can produce numbers of items at the same time
    • let flexible than job production.
  27. What is flow production?
    items are produced by moving continuously along the production line, with each stage responsible for part of the production process
  28. What is job production?
    produces one off items, flexible but expensive
  29. State 3 objectives of production management
    • control quality
    • control costs
    • ensure the right volume of production
  30. State 3 examples of decisions made by a production manager
    how much to produce, how to produce, how many stocks to hold.
  31. State 4 ways in which effective production management might help a firm.
    keeps costs down, produces good quality products, produces items quickly, produces a range of goods.
  32. Why might a firm find it difficult to recruit staff?
    job is unattractive, rewards are too low, better jobs are available, jobs are available elsewhere
  33. What is meant by research and development?
    use of science to develop new products and processes
  34. Are stocks an asset or liability of a business? Why?
    Asset, the firm owns them
  35. What might determine how much stock a firm holds?
    whether it is using lean production, the warehousing space available for holding stock, demand and rate of usage, opportunity costs
  36. State one benefit of lean production
    Lower costs leading to higher profits
  37. Lean production may involve producing with little or no stocks. This is known as what?
    Just in time production
  38. State one problem of holding low stock levels
    may not be able to meet customer demands, leading to customer dissatisfaction
  39. State 3 problems of introducing lean production
    • finding the right suppliers
    • costs of training employees
    • costs of flexible equipment
  40. State 2 benefits of improving quality
    • fewer rejects and less wastage
    • greater customer satisfaction
  41. State 2 ways of improving quality
    • better supplies
    • making employees more responsible for their own work
  42. Why is better quality more important nowadays?
    because of more competition and greater demands from customers
  43. What is quality control?
    inspection of items to check that they are not faulty
  44. Is rent a fixed or variable cost? Why?
    Fixed, it does not change with output
  45. State 2 ways in which the government might influence a firms location
    • offering subsidiaries or tax cuts
    • controlling planning permission
  46. What factors might influence the location of a business apart from the government?
    • costs,
    • customers location,
    • availability of labour
  47. State 2 diseconomies of scale
    • Problems controlling and coordinating a business
    • employees may be demotivated as they do not feel part of a large business
  48. State 2 problems of diseconomies of scale
    • May have to increase prices
    • profit margins may fall
  49. State 4 types of economy of scale
    • purchasing
    • technical
    • managerial
    • financial
  50. State one benefit of economies of scale
    may be able to reduce prices or benefit from higher profit margins
  51. State 2 ways in which a firm can raise money from outside the business, apart from selling shares.
    • overdraft
    • loans
    • government grant
  52. State 2 ways in which a firm can raise money from within the business
    • sale of assets
    • retained profits
    • owners savings
  53. Is issuing shares a short term or long term source of finance?
    Long term
  54. State one reason for producing a cash flow forecast
    to estimate when a firm needs to borrow money
  55. State 3 reasons why a cash flow forecast might be wrong
    • customers may be slow to pay
    • suppliers may demand payment more quickly
    • sales may be lower than expected
  56. What happens if a firm has too little cash?
    • may not be able to pay bills
    • may be closed down
    • may not be able to afford to meet its debts
  57. State 2 ways in which a firm might increase its cash flow quickly
    • overdraft
    • sell stock cheaply
  58. What is an asset?
    something the firm owns
  59. What is a current liability?
    something that has to be paid within a year.
  60. Which of the following is an asset - overdraft, loan, stock, or creditor?
  61. What is a limitation of a balance sheet?
    • only shows the position of the business at a given moment
    • it is likely to be out of date and may not help predict the future
  62. State 3 measures of a firms success, apart from profit
    • growth
    • sales
    • number of employees
  63. When does a loss occur?
    when costs are higher than revenue
  64. How do you calculate profit?
    Sales Revenue - Costs
  65. What is the difference between gross profit and net profit?
    Net profit deducts overheads and expenses (e.g. administration and marketing) from gross profit.
  66. What is the difference between an asset and a liability?
    An asset is owned by a firm, a liability is owed by a firm.
  67. State 4 external sources of finance
    • Overdraft
    • Loan
    • Shares
    • Government incentives
  68. Why does a firm want to make a profit?
    To generate funds for investment and expansion, to reward the owners
  69. What is the equation for the acid test ratio?
    current assets - stock / current liabilities
  70. What is a current asset?
    Something a firm owns that can be turned into cash within a year
  71. State one problem of borrowing money
    have to pay interest
  72. State one disadvantage of selling more shares to raise finance
    The business will have to bring in new owners and might lose control
  73. What is the difference between a PLC and an LTD?
    a PLC can advertise and sell its shares on the stock exchange, whereas a LTD can only sell shares by inviting people to invest in the business.
  74. Who owns the business in the public sector?
    The Government
  75. What is the equation for the current exam?
    current assets / current liabilities
  76. What does a low acid test ratio suggest?
    liquidity problems - the firm may have problems meeting is short term debts
  77. To provide liquidity, should current assets be higher or lower than current liabilities
  78. What is a fixed cost? Give an example
    A Cost that does not change with output, rent
  79. What is a variable cost? Give an example
    A cost that changes with output e.g. raw materials
  80. State 2 advantages of centralisation
    • decision makers have an overview of the business
    • it leads to consistency across the business
  81. What is the opposite of centralisation?
  82. State 1 disadvantage of centralisation
    May mean that managers cannot react to local conditions or that local managers are demoralised as they cannot make decisions for themselves
  83. State 3 benefits of a motivated workforce
    • better productivity
    • better attendance
    • greater willingness to cooperative
  84. State 4 ways of measuring the success of a business
    • profits
    • turnover
    • growth
    • customer satisfaction
  85. What is meant by the national minimum wage?
    Determines the least someone can be paid in a job
  86. What is the role of the Advertising Standards Authority?
    To ensure that printed advertisements are legal, decent honest and truthful
  87. State 3 elements of a contract of employment
    • terms and conditions of work and pay
    • holiday entitlement
    • notice period for dismissal
  88. How can technology help production?
    • Computer Aided Design (CAD)
    • Computer Aided Manufacturing (CAM)
    • Automated Stock Control
  89. State 2 factors influencing the span of control
    • the nature of the task
    • the ability and nature of superior and subordinates
  90. State one possible problem if the span of control is too wide
    • communication problems
    • manager has too little time for subordinates
  91. What is meant by a level of hierarchy?
    a level of responsibility within the organisation
  92. What is meant by the chain of command?
    the vertical line of authority within a business
  93. What is a salary?
    A fixed sum per year paid monthly to employees
  94. What is a pension?
    A payment to employees once they have retired
  95. What is a piece rate system?
    Payment by output
  96. What is a bonus?
    additional payment on top of normal pay
  97. State 3 benefits of delegation
    • Motivates staff
    • Firms benefit from the skills of others
    • Frees up superiors time
  98. State 1 disadvantage of delegation
    managers and owners can lose control of decisions
  99. What is an authoritarian manager?
    A manager who tells people what to do
  100. What is a democratic manager?
    A manager who listens to employees before making a decision
  101. A company is always owned by its managers. True or false
  102. A sole trader is the owner and manager of the business. True or false?
Card Set
Unit 2 - Growing a Business
Unit 2 - Growing a Business Revision Cards