Business points test 1
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Define the term business organisations.
A business is any organisation that works to fulfil a common goal. E.g. Apple/tesco
State the four factors of production.
Land, labour, capital and enterprise.
Define the term capital goods.
Capital goods are goods purchased by businesses and used to produce other goods, such as tools, equipment and machinery. Also known as producer goods
Define the term intermediate goods.
Intermediate goods are work in progress, goods purchased by producers and include materials and components for short term usage.
Define the term consumer goods.
Consumer goods are goods produced for general use by the public. Can be durable or non-durable. Durable goods can be used repeatedly for a long period of time, TV. Non- durable goods are used soon after they are produced, food.
Distinguish between goods and services.
Services are intangible business activities that people are prepared to pay for e.g. hairdressing, banking, and leisure services. Goods are physical items that the business produce to sell.
Distinguish between needs and wants.
Needs are human requirements that must be met for survival. Needs are limited. Include warmth, shelter, food, healthcare. Whereas wants are human desires that are unlimited. They are not essential for survival. Include iPhones, perfume etc.
Scarcity means not everybody can have everything they want and therefore choices have to be made. The name for the outcomes of these decisions is opportunity cost.
Using a business example explain the concept of opportunity cost.
Opportunity cost is the sacrifice of the next best alternative forgone. For a business this could be a choice of profit maximisation or to use that profit and reinvest it into the business.
Distinguish between aims and objectives.
An aim refers to the long term goal of the business. Business aims describe what the business is trying to achieve in the long term, perhaps 3-5 years. However, objectives are how the business intends to achieve this overall aim.
Define the term private sector.
The private sector is made up of all organisations that are owned by private individuals. This includes sole traders, partnerships and limited companies.
Define the term public sector.
The public sector is made up of all organisation which are owned/funded by local/national government. This includes public service, public organisation and municipal services.
List 3 private sector objectives.
Profit maximisation, growth/market share and/or image and social responsibility.
List 3 public sector objectives.
Not wasting taxpayers money, provide value for money and/or provide for consumer's needs.
Define the term privatisation.
Privatisation is where public owned industries are transferred to the control of private shareholders. It is the transfer of an organisation from the public sector. E.g. gas, electricity, Royal Mail.
3 possible reasons for privatisation.
- The cost of many state run organisations were too high, causing a high burden on the public sector.
- Customers would benefit as a result of competitive pressure which would force down prices and create more choice.
- An end to political interference, which had hampered progress in some industries.
Define the term nationalisation.
Nationalisation is the removal of an industry, from private ownership or when an industry moves from the private sector into the public sector.
List 5 stakeholders of a business.
Owners/shareholders, director/manager, employees, government and suppliers.
Define with the use of examples what is meant by the term primary sector.
Primary sector involves the extraction and production of raw materials, such as coal, wood and steel. A coal miner and a fisherman would be workers in the primary sector.
Define with the use of examples what is meant by the term secondary sector.
Secondary sector involves the transformation of raw materials into goods. E.g. manufacturing steel into cars. A builder and a dressmaker would be workers in the secondary sector.
Define with the use of examples what is meant by the term tertiary sector.
Tertiary sector involves the provision of services to consumers and businesses, such as cinema and banking. A shopkeeper and accountant would be workers in the tertiary sector.
Define the term industrialisation.
During the 19th century, the industrial revolution. Secondary production expanded rapidly.
Define the term deindustrialisation.
Deindustrialisation led to the decline in the once prosperous industries such as shipbuilding, steel, textiles and car manufacturing.
List 3 reasons for the decline of the primary sector.
Rise of the tertiary sector, deindustrialisation and secondary sector.
List 3 reasons for the decline of the secondary sector.
- Changes in consumer demand in favour for foreign goods.
- Increased use of technology meaning fewer workers are needed.
- Lack of investment in manufacturing by both government and industry.
List 3 reasons for the growth of the tertiary sector.
- Tertiary business created which did not exist until fairly recently.
- Increased leisure time.
- Greater affluence has led too growth in demand for services.
List 2 reasons for the growth of part time workers.
- Increasing number of women in workforce.
- Part time staff can provide flexibility for the business.
Define the term temporary workers.
Temporary workers are employed for a limited period. In the UK around 10% of all workers are temporary, but this is a figure which is set to grow as more and more businesses want the flexibility that temporary contracts offer them.
State 2 advantages of employing older workers.
- May be more reliable and have greater sense of responsibility (time keeping, absence, etc)
- May have a positive impact on younger employees.
- May bring experience and expertise to the business.
State 2 disadvantages of employing older worker.
- May require higher levels of pay as they are more experienced members of staff.
- May require training to enable them to have new technical skills essential in many workplaces today.
State 3 examples of flexible working.
- Job sharing
State 2 benefits to employees of flexible working practices.
- Allows employees to develop work patterns that suit their own lifestyle.
- Less stress juggling work and home.
- Can work to personal preferences.
State 2 drawbacks to employees of flexible working practices.
- Lower pay but fewer hours if part-time/job sharing.
- May be less promotion opportunities.
- May have lower status than full-time staff.
State 2 benefits to employers of flexible working practices.
- Employees work more effectively/more productively/better motivated if they choose type of working patterns that suits them/better morale.
- Can better meet employer's needs.
State 2 drawbacks to employers of flexible working practices.
- If part-time working more difficult to organise meeting/training.
- Extra cost of training if part-time.
- Specific staff may not be available when needed.
State 2 advantage and 2 disadvantages of being a sole trader.
Adv: keep all profits, no lengthy setting up procedure or expensive administrative costs. Disadv: Unlimited liability, difficult to find finance, money for expansion comes from profit or savings.
State 2 adv and disadv of being in a partnership.
Adv: Fewer legal formalities, more finance than a sole trader. Disadv: Profits have to be shared, partners may disagree: lead to breakup of the organisation.
State 2 adv and disadv of being a private limited company.
State 2 adv and disadv of being a public limited company.
Explain what is meant by the term unlimited liability.
The owner/owners of the business are liable for any debts that the business incurs. If a business takes out a loan or buys goods and services on credit, then the sole trader himself/herself is liable to repay any debt.
Explain what is meant by the term incorporated business.
The business has a separate legal identity from their owner.
State 2 ways which social enterprises differ from other types of business organisation.
State 2 ways in which social enterprises are similar to other types of business organisations.
They share the aims and objectives of survival, making profit and growth. Both are enterprises combing the four factors of production to provide goods and services in order to meet consumers needs and wants.
Outline the 3 main characteristics of a workers co-operative.
- Ownerships and control of the business come from working in the company, rather than simply investing capital in it.
- Prevents non-workers from holding voting shares.
- Profits are shared amongst worker-owners according to either the hours worked or level of pay.
Define the term franchise.
Is the legal right to use the brand name, products and business style of an existing business.
State the 2 advantages and disadvantages of a franchise to the franchisor.
State 2 advantages and disadvantages of a franchise to the franchisee.
State 3 characteristics of an entrepreneur.
Passion, visionary and persuasive.
State 2 reasons why someone may wish to become an entrepreneur.
- More control over working life.
- Feel that skills are being wasted and that potential is not being fulfilled.
State 2 reasons why entrepreneurs are are important to the UK economy.
- Pay taxes - access to innovative products and services and government reinvest in merit and public goods.
- Provide jobs - wages spent in the economy and don't have to pay benefits.
State 2 reasons why entrepreneurs are important to businesses.
Entrepreneurs are the business leaders. They drive the business forward. Also they are innovative. They give business ways of doing things, ultimately making the business more successful/profitable.
State 3 things that you would expect to see in a business plan.
- What the business aims to achieve.
- Who is involved in the business.
- When the cash will come in and when the cash will go out, cash flow.
State 2 uses of a business plan.
Planning is important for setting objectives and laying out a strategy. Essential for convincing lenders that you will be able to repay loans therefore without one, obtaining finance from banks, etc. is less likely.
State 2 drawbacks of a business plan.
The business plan can be of little help if it is poorly constructed and based on poor research and misleading figures. For some small businesses a details
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