business

• why owners of a business may want to expand the business: to increase profits to increase market share to increase sales to increase employment
• what are the advantages of expanding your business: increased profitability, increased market share, increased sales, increased employment opportunities
• what are the disadvantages of expanding your business: high costs involved, risky as there is no guarantee that it will be successful, competition from other businesses
• how can a business reduce risks when expanding: researching the new area thoroughly, using market research to identify demand, investing enough money into marketing so people know about the expansion
• what are the disadvantages of expanding your business: high costs involved, risky as there is no guarantee that it will be successful, requires more management time, can damage existing reputation if expansion fails
• how do businesses decide whether or not to expand their business: by considering the advantages and disadvantages of expansion, looking at the current state of the economy, assessing the demand for products/services, researching competitors, analysing financial information
• how can a business reduce risks when expanding: researching the market thoroughly, using market research to identify customer needs, testing new products or services on small scale first
• what are some ways a business could finance expansion: borrow money from banks, use retained earnings (money made by the company), sell shares in the company
• what is an advantage of selling shares in the company: more capital available to invest in expansion
• opportunity cost is the cost of the next best alternative that is foregone when a decision is made
• the opportunity cost of buying a car would be the amount of money spent on other things instead
• a business may have to make difficult decisions about how to allocate resources between different departments within the organisation
• an example of this might be deciding which department gets the most funding - marketing, production or sales
• businesses need to make decisions about how they allocate these scarce resources between different activities
• a business may have limited resources such as time, money, staff, equipment, raw materials etc.
• an example of this might be deciding whether to spend more money on marketing or production
• when making these types of decisions it's important to consider the opportunity costs involved
• if a business decides to increase spending on marketing then there will be less money left over for investment in production which means they won't be able to produce as many goods/services
• specialization: the process of concentrating on and becoming expert in a particular subject or skill
• division of labour is where people specialise in doing one specific task within an organisation
• the benefits of division of labour include increased productivity due to greater efficiency and economies of scale
• economies of scale are when the average cost per unit decreases as output increases because fixed costs can be spread across more units
• the benefits of division of labour include increased productivity, higher quality products, lower cost per unit produced, greater efficiency and better use of skills
• the disadvantages of division of labour are that workers become bored with repetitive tasks, there can be problems if someone leaves their job (as no-one else knows how to do it) and there could be communication breakdown between different departments
• purpose of business activity: to satisfy the needs and wants of consumers, to make a profit, to provide employment
• a product is something tangible that can be touched, tasted, seen etc.
• businesses need to identify what customers want and then produce goods or services which meet those needs at a price they're willing to pay
• a service is intangible - cannot be touched, tasted, seen etc.
• a service is an intangible benefit provided by one party to another
• primary sector includes agriculture, forestry, fishing, mining and quarrying
• secondary sector includes manufacturing, construction and utilities
• consumers have unlimited choice so businesses must offer high levels of customer service to keep them satisfied
• consumer goods are bought by individuals for personal consumption
• customers expect good value for money - this means getting lots of benefit from the things they buy compared to the amount they spend on them
• services are often more expensive than similar products because they require skilled staff who have to be paid well
• capital goods are used to produce other goods/services
• secondary sector involves manufacturing products from raw materials using machines and factories
• tertiary sector provides services such as banking, education, health care, retailing, transport and tourism
• added value is the difference between the selling price and the cost of production, it is the profit
• benefits of adding value are: higher prices, higher profit margins, higher sales, higher market share