Name the three sectors of industry
What is a business?
A business is a group of people who use the resources available to make a product or provide a service
What do all businesses have?
A name, aims, rules, resources and an image
What do businesses do?
- Make a product
- Provide a service
Describe a Private Limited Company
This is normally a family run business whereby members of the family are entitled to a share of the profits. These shares are not sold on the stock market and the liability of the shareholders is limited to the value of their shares
What is a multinational company?
A company that operates in a number of different countries
What is a Franchise?
A Franchise is an existing business that allows people to but into it, using their name and reputation under which to operate
How is wealth created?
Wealth is created at each stage of the production chain by adding value to the product and then making a profit
Why do businesses exist?
- To provide a public service eg NHS
- For charitable reasons eg Comic Relief
- To make a profit
- To develop good ideas
What is an Entrepeneur?
An Entrepeneur is someone who not only had an idea for a business but gets all the resources needed to make the dream a reality. They are a risk taker as the venture may not necessarily be a success
What is a stakeholder?
A person or a group of people who have an interest in a business organisation and in the way in which it is run or managed
Name three benefits for the local community when a business locates near them
- Customer satisfaction
- Wages and salaries for the community which in turn results in a higher standard of living
- Contributions made to the local community eg sponsoring local sports events
- Improved roads
- New schools
Name three costs for the local community when a business locates near them
- Air pollution
- Noise pollution
- Water pollution
- Traffic congestion
- Larger class sizes
- Health problems
What does an Organisation Chart show?
- The links between departments
- The lines of authority - who is in charge of who
- The lines of responsibilty - who is responsible for who
- Visitors the layout of the company
A tall organisation has _________ different layers of management
A flat organisation has only _______ levels of management
What are the four main areas of business?
- Human Resources
What are the two types of market research?
What are the main elements to Human Resources?
- Conditions of Service
Give three reasons why people want to start their own business
- They want to be their own boss
- They do not like their present job
- They think they can earn more money working for themselves
- They have lost their existing job eg been made redundant
- They have an idea for a new product or service
- They have an interest or hobby they would like to make money from
- They have skills but cannot find a job and decide to set up on their own eg painter, electrician, etc
What makes up the Marketing Mix?
What are the four stages in The Product Life Cycle?
What is the difference between FIXED assets and CURRENT assets?
Fixed assets are things the company will own for a long period of time, eg vans and buildings, whereas current assets are things the company will own for a short period of time, eg cash and stock
What are the Factors of Production?
What is a Business Plan?
A Business Plan is a outline prepared by a business to show how they are going to attempt to achieve their objectives
State three details that may be included in a Business Plan
- The Business
- The Personnel
- The Product
- The Market
- The Premises
- Profit Estimates
- Cash Flow
State three benefits of remaining a small business
- Easier to manage
- Workers feel they belong
- Fewer union problems
- More jobs
What is meant by the Economies of Scale?
The advantages of being big
State three internal Economies of Scale
- Financial benefits
- Buying advantages
- Recruitment and Training
State three external Economies of Scale
- Better roads and transport facilities
- Colleges offering training courses in their speciality
- Local labour will train in relevant subjects to gain work
- Training agencies in the area will gain expertise and advice all firms in the industry
State three internal Diseconomies of Scale
- Communication worsens
- The standard of quality can fall
- Loss of customers
State three external Diseconomies of Scale
- Damage to the environment
What are the two main ways that firms can expand?
Internally and Externally
What are the four types of INTEGRATION?
- Vertical - backward and forward
State three motives behind mergers and takeovers
- Market control
- Market power
- Control of raw materials
- Internal Economies of Scale
How do businesses survive?
- Estimating the demand for its product or service
What is a BUDGET?
A plan of how much money you have and how you will spend it
What does a CASH BUDGET show?
All the money coming in and going out of the business during a specific period of time
What documents make up the FINAL ACCOUNTS?
The trading, profit and loss account and The Balance sheet
What is meant by the term drawings?
Money taken out of the business by the owner(s) for their own personal use
Why does a company use ratios?
- compare the firm's performance in one year to that of the previous year
- compare the firms performance with other companies in the same industry
- highlight any problem areas that need attention
- highlight areas of improvement which they can continue to concentrate on
What is the WORKING CAPITAL ratio?
Current assets / Current liabilities : 1
What is the ACID TEST ratio?
Current assets - stock / Current liabilities : 1
What is the RETURN ON CAPITAL EMPLOYED ratio?
Net profit / Capital x 100
What is the GROSS PROFIT PERCENTAGE ratio?
Gross profit / Sales x 100
What is the NET PROFIT PERCENTAGE ratio?
Net profit / Sales x 100
What is the RATE OF STOCK TURNOVER ratio?
Cost of Sales / Average Stock*
*Average Stock = opening + closing stock / 2
What is a recession?
When the economic activity within a country begins to slow down
Name three things that are essential for a business to succeed
- Quality control
- Quality assurance
- Human Resources
How can firms gain a competitive advantage?
- Offering quality goods
- Keeping control on prices
- Maintaining a good reputation
- Delivering goods on time
- Late opening
- Market research to see what consumers want
How does a business know it is failing?
- Falling sales
- Reduction in profits
- Bad reputation
- Reduction in sales
- Low staff morale
What is THE BUSINESS CYCLE?
The Business Cycle is the patterns of ups (booms) and downs (slumps) over a period of time in the economy - the level of economic activity
State the three features of a successfully run business
- The demand for products in increasing
- Profits are rising from previous years
- Profits are better than the industry adverage
- Wage increase for workers
- Renown for producing quality products
- Market share is increasing
State three types of EXTERNAL FINANCE
- Hire Purchase
- Trade Credit
- Small Business Loans Guarantee Scheme
Who can give grants?
The Central and Local Government
What is GLOBALISATION?
The term used to explain how the world has almost become one big market through better communication eg fax, e-mail, etc
Give three reasons why people work
- To earn money
- To have security (money) for the future
- To have friends and be part of a team
- To feel good about what we do and gain pleasure from our job
- To develop skills
What are the two main types of workers?
- UNSKILLED WORKERS (Maunal or Blue Collar)
- have no formal qualifications
- few worl related skills
- limited work experience
- SKILLED WORKERS (Professional or White Collar)
- have formal qualifications
- have several skills
- accept responsibilites
What are the main stages a business should go through when looking for new employees?
- Prepare a job analysis
- Job Specification
- Person Specification
- Advertise Jobs
- Design an application form
- Application Recieved
What does a job specification show?
The tasks to be carried out and all of the main details relating to a particular job
What does a person specification show?
The particular skills, qualities or talents needed for the job. These qualities can be split into essential or desirable
What is an APPRAISAL?
A two way discussion between employees at different levels of an organisation eg a manager and a supervisor OR a receptionist and the head receptionist
What are the benefits of an appraisal?
Both the employers and the employees have the opppurtunity to discuss issues and concerns. This improves communication and working relations within the company
Give three examples of ICT in businesses
- Word processing
- Communication (Networks - LAN's and WAN's)
- Mobile phones
- Electronic mail
How can ICT help make decisions in businesses?
- generating information very quickly
- providing accurate information
- storing large amounts of information
Give three examples of sources of information
- The internet
- Phone calls
- Books Reports
What should information be if it is to be of any use in making a decision?
- Cost effective
- Up to date
What are the main methods of communication?
What are the four main methods of production?
- Just in Time (JIT)
What is the difference between mechanisation and automation?
Mechanisation is when workers are replaced by machines but they still play a role in production whereas Automation is then workers are totally replaced by machines