Business definitions.txt

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Business definitions.txt
2014-05-18 11:31:50

Unit 1
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  1. Enterprise
    The ability to handle uncertainty and deal effectively with change
  2. Entrepreneur
    Someone who starts and runs a business, taking risks in hope of reward.
  3. Opportunity cost
    The cost of an activity expressed in terms of the next best alternative, which has to be given up when making a choice
  4. Copy rights
    The protection of books, play films and songs
  5. Patent
    An exclusive right to use a process or product, usually for a fixed period of time, up to 20 years
  6. Trademark
    A word, image, sound or smell that enables a business to differentiate itself from its competitors
  7. Added value
    The difference in value between the price of the finished product and the cost of the material used
  8. Business plan
    A document that provides important information about different aspects of the business
  9. Quota sample
    This is not a random sample, as everyone doesn't have an equal chance of being in it and the results cannot be used i predict the behavior of everyone.
  10. Stratified sample
    Popular with researchers as it has the benefits of being random - reducing bias - it is not as expensive or as difficult as a full random sample
  11. Quantitative data
    Data in numerical form which is usually collected from larger scale research in order to generate statistically reliable results
  12. Qualitative data
    Data about opinions, attitudes and feelings. It is usually expressed in terms of why people feel or behave the way they do
  13. Market segmentation
    The technique when the market is broken into smaller sections with similar characteristics
  14. Market share
    The proportion of the total market accounted for by one product of company.
  15. Market growth
    The measurement in change in market size usually expressed as a percentage of its original size
  16. Market size
    The measurement of the size of the total sales of the whole market, either expressed in terms of value (£) or volumes of sales
  17. Partnership
    Joint ownership of a business, owners contribute capital to the business, share decision making & control & share profits - an unincorporated business
  18. Unincorporated business
    A business that is not legally separate from its owner (sole trader and partnership)
  19. Unlimited liability
    Where a business owner can give up personal wealth to pay off its business debts
  20. Private ltd company
    A business is a separate identity from its owners and so has a limited liability.
  21. Public limited company
    A larger type company that has at least £50,000 of share capital and has its share traded on the stock market.
  22. Limited liability
    The owners liability is limited to the amount they have invested in the business - private and public limited companies.
  23. Incorporated business
    A organisation with a separate legal identity from its owner
  24. Shareholders
    The joint owners of a limited company, whose investment entitles them to vote on major decisions and take a share if the profits
  25. Separation of ownership & control
    A situation where the owner are not train same people controlling the business on a day to day basis.
  26. Loan
    A good source of finance which are for assets such as start up costs
  27. Venture capitalist
    Professional investor often another company interested in high growth and high risks businesses, who will invest in a company and in return expect to have a share in the ownership of the business
  28. Equity
    Money generated through through sales of shares; another term for share capital
  29. Share capital
    Finance raised through the issue of shares; part ownership of a company
  30. Capital expenditure
    Money spent on purchasing fixed assets
  31. Revenue expenditure
    Money used to generate sales - working capital
  32. Debenture
    A long term loan with fixed repayment date
  33. Infrastructure
    The utilities around the business such as transport and communication network
  34. Consultant and advisors
    Business or individuals who provides professional advice or service for a fee
  35. Full time.employment
    Workers who work more then 30 hours a week
  36. Permanent employees
    Employees that work on a permanent basis and they have a contract of employment
  37. Temporary employees
    Employees who are employed for a fixed period or period of times
  38. Cost
    These are expenditures made by the business as part of its trading operations
  39. Fixed costs
    Costs that do not change with the level of output or sales
  40. Contribution
    The difference between sales revenue and variable costs of production
  41. Cash flow
    The total cash payments into a business (inflows) minus the total cash payments (outflows)
  42. Liquidation
    Turning assets into cash
  43. Insolvent
    When a business cannot meets its short term debts
  44. Debtors
    Customers who have bought products on credit and agreed to pay at a later date
  45. Credit sales
    Value of goods sold to customers who do not pay cash immediately
  46. Budgets
    Financial targets for the future covering revenue and expenditure over a certain time period
  47. Business objectives
    Clearly defined targets for a business to achieve over a certain period of time
  48. Profit satisficing
    Making enough profit with risking too much stress
  49. Government grants
    Sums of money given to a business for specific purpose
  50. Primary research
    Data collected by or for the entrepreneur which doesn't already exist
  51. Secondary research
    Data already in existence that has not been collected specifically for the purpose of the entrepreneur
  52. Local market
    Customers are only a short distance away
  53. National market
    A geographically dispersed market where customer are dispersed all over the country
  54. Electronic market
    A virtual market that does not have a physical presence
  55. Sole trader
    A business owned by one person with unlimited liability - unincorporated business
  56. Flotation
    Becoming a plc by issuing shares for general sale on the stock market
  57. Overdraft
    A temporary arrangement which allows the business to draw out more money than is in its account up to an agreed limit
  58. Business angel
    A wealthy entrepreneur willing to invest in small, high risk businesses who expects a high return
  59. Location
    May enable a business to add value if the location is seen as particularly desirable or exclusive
  60. Personal service
    Allows a business to differentiate its product or service
  61. Advertising
    Creates interest in the product and may convince customers to pay higher prices therefore increasing the added value
  62. Niche Market
    A smaller part of a larger market in which customers have more specific needs and wants.
  63. Franchisor
    The owner of a business format (franchise) which is licensed out to other people or businesses (franchisees)
  64. Demographic segmentation
    defining a market in terms of social‐economic factors such as age, income, class etc
  65. Elasticity of demand
    The responsiveness of demand to a change in price or incomes
  66. Franchisee
    The person or company which operates a franchised business format ‐ under license from a franchisor
  67. Margin of safety
    The difference between the actual level of output and the break‐even output
  68. Demand
    The amount of a product or service that customers are willing and able to pay at a given time
  69. Mass market
    Has a large value of sales by volume aimed at the bulk of a large market.
  70. Uniquesellingpoint
    A feature of a product or service that makes it stand out compared with the competition
  71. Explain ways an entrepreneur can identify a
    new business idea
    • A personal need by spotting the gap in the market
    • Family and friends ideas
    • Brain storming session
  72. Motivates of an entrepreneur
    • Success
    • Profit
    • Own boss
    • Do things differently
    • Have been inspired
    • Are creative 
    • Moral reason
  73. Characteristics of an entrepreneur
    • Determination to see things though
    • Passion –its not just to make money but to achieve something
    • Persuasive abilities – entrepreneurs need to persuade others to do things
    • Ability to cope with risk
    • Creativity to create ideas
  74. Methods an entrepreneur can use to generate
    • Spot a gap in the market
    • A personal need for the product
    • An existing hobby or skill
    • A brain storm session
    • Ideas from family and friends
    • Seeing a existing product or service could be developed further
  75. Advantages and disadvantages of operating in a niche market
    • + Charge higher prices because the product is limited
    • - A business might be dependent on one product in a market where customer need and technologies are changing
    • - Niches may be short lived if a new, more efficient entrant is attracted by potential profits
    • - Limited opportunities of economies of scales
  76. Advantages and disadvantages to an
    entrepreneur of operating as a franchise
    • + Trade under an established brand, so customers instantly
    • + Have help and support from the franchiser
    • - Pay part of the business profits to the franchiser
    • - Lose control – must conform to the image and characteristics of a franchise
  77. Advantage and disadvantage to
    business of operating as a franchisor
    • + Receives a lump sum from the franchise sale plus a percentage of future profits
    • + Promotes the brand more with the sale of every franchise
    • - A degree of loss of control of the business
    • - Reputation may get damaged if the franchised don’t operate as they are meant to
  78. Ways in which a business can add value
    • Advertising – creates an interest in the product and to pay a higher price thereby increasing the added value
    • Branding – customers may be prepared to pay more for a branded item, even though it is basically the same as the generic item
    • Product features – desired features enables businesses to charge higher prices
    • Location – may enable a business to add value if the location is seen as particularly desireable or exclusive
    • Personal service – allows a business to differentiate its product or service
  79. Benefits to adding value
    • Differentiation from competitors - using branding to out sell rival products
    • Charging higher price
    • Reduce the sensitivity of demand to change in price
    • Higher profit margin
  80. Purpose of a business plan
    • To plan for the future
    • To develop a strong understand of the business
    • To identify a main course of action
    • To support requests for extra funding
    • To provide a regular check on progress regarding cash flow, objective and financial forecasts
  81. Benefits of a business plan
    • Clear vision for the future
    • Help develop a strong understanding of the business
    • Identifies a main course of action
    • Can support requests for extra funding
    • Provides a regular check on progress
  82. Drawback to a business plan
    • Its costly
    • Time consuming
    • Financial information may not be accurate as its based on how good the market research was
    • Lack flexibility - doesnt plan for unexpected events such as the recession
  83. Factors affecting demand
    • Price - some products/services have a demand which is very sensitive to price changes
    • Competition - the actions of competitors will affect demand
    • Incomes - some products/services have demand which is very sensitive to changes in peoples incomes
    • Marketing - there is a relationship on the amount of money spent on marketing and the demand for the product
    • External factors such a seasonality will also affect demand and possibly price.
  84. Benefits of segmentation
    • Understanding a market segment helps in meeting their needs - increased sales
    • Its cheaper to produce a product or service that meets a specific need - increased profit margins
    • Less wasteful of resources than trying to sell a product to everyone - advertising
    • Segmentation is a way of differentiating a product or service from competition, thus enabling the business to charge a higher price.
  85. Limitations of segmentation
    • depends upon an entrepreneur's knowledge of the market - this may be limited in the case of a small business set up
    • Segmentation is an approximation of behaviour - not everyone behaves in the same way
    • May not be appropriate to a very small business with limited markets
  86. Advantages and  disadvantage  of qualitative market research
    • + Allows the product to be tailored to meet the needs of the consumer
    • - Hard to analyses as tend to be open questions
  87. Advantages and disadvantages of primary research
    • + Tailored to the entrepreneurs needs
    • + increase reliability and validity
    • - Expensive
    • - May only be small sample size
  88. Advantages and disadvantages of secondary
    • + Cheaper
    • + asses to large sample size so more accurate account of the market
    • - Research already exists - not tailored to the entrepreneurs needs
    • - Lack reliability and validity
  89. Advantages and disadvantage of quantitative research
    • Easier to analyse as tend to be closed questions
    • Help create financial date
  90. Advantages and disadvantages of operating as a sole trader term
    • + Take all the profits
    • + Have full control over the business
    • - Unlimited liability for debts
    • - Less opportunity to share problems and there not a variety of skills.
  91. Advantage and disadvantages of operating as a partnership
    • + The range of view points and expertise
    • + More finance available as each partner contributes
    • - More difficult to raise capital from outside investors
    • - unlimited liability - partners have to pay if one partner gets into financial difficulty.
  92. Advantages and disadvantages of operating as a private limited company
    • + Limited liability for debts - only lose what you have invested
    • + More scope for raising finance from outside investors
    • + Shareholder are involved for the long run
    • - The separation from management and leadership can cause conflict
    • - Takes longer to make decisions as all the share holders have to be involved when making a decision and all have to agree.
  93. Advantages and disadvantages of operating as a public limited company
    • + Flotation can be a way of raising a considerable amount of finace
    • + Limited liability for debts
    • - Flotation can be an expensive process
    • - Original owners may lose control of company
    • - Possible conflict between directors and shareholders.
  94. Advantages and disadvantages of using a bank
    • + The length of the loan can match the length or the need for it
    • + The interest is fixed for the period of the loan
    • - May be secured against personal assets or business assets
    • - The length of the loan may run longer than the life of the asset which means the business is paying for something they no longer need
  95. Advantages and disadvantages of using an overdraft
    • +Allows the business to continue operating when the businesses cash flow is negative
    • + Very quick and easy to arrange
    • - High interest rates would add to the total cost - expensive in the long term
    •  - Can be removed at short notice
  96. Advantages and disadvantages of raising finance through a venture capitalist
    • + have experience in the business
    • + may have contact which the business can use
    • - Lose some control of decision making
    • - Have to give them a share of the profits.
  97. Advantage and disadvantages of a partnership using personal savings to set up the business
    • + There is no cost to using this money - no interest
    • + putting own money into a business is a sign of confidence
    • - Limited finance at the start which can limit the business
    • - For a new business start ups are risky so the entrepreneur could lose everything
  98. Advantages and Disadvantages of employing a permanent worker
    • +Creates a committed and reliable workforce
    • + More security so easier to train
    • - Likely to be set hours so not very flexible
  99. Advantages and disadvantages of
    employing a temporary worker
    • + Based on an hourly or daily rate
    • + Flexible - good for seasonal contracts
    • - Able to leave without notice
    • - Communication is hard if there is constant change
  100. Advantages and disadvantages of employing part-time worker
    • + Flexibility - cover extra work that is needed
    • + Cover the busiest period of trade
    • + Used to build up a business slowly until it become more established
    • - Lack of commitment - less motivation
    • - harder to communicate - in less.
  101. Advantages and disadvantages of employing Full-time worker
    • + Higher output as workers may be more committed
    • + build up better relationships as they spend more time together
    • - Not flexible - might need to pay them overtime - more cost
    • - Cost more for the company - more hours therefore more labour costs
    • - entitled to more holiday/ sick pay