paper 1

• What must businesses adapt to changes in?

  Technology, consumer needs, competitor actions
• What is innovation in business?

  Developing new ideas or improving products/services
• What is the difference between innovation and invention?

  Innovation improves existing products; invention creates new ones
• Why do businesses spot opportunities?

  Due to changes in technology, consumer wants, or obsolescence
• What is risk in a business context?

  The chance of failure or loss
• What is a reward in business?

  Positive outcomes like profit and success
• What do entrepreneurs do?

  Take risks for potential rewards
• What is a business enterprise?

  • An organization set up to produce goods/services
  • Purposes include:
  • Providing goods/services
  • Meeting customer needs
  • Adding value
• Who is an entrepreneur?

  Someone who takes risks and makes decisions
• What needs must businesses meet?

  Price, quality, choice, convenience, customer service
• How does meeting customer needs affect businesses?

  Increases customer satisfaction and loyalty
• What is the purpose of market research?

  • Identify customer needs
  • Reduce risk
  • Spot market gaps
• What are the types of market research?

  Primary and secondary research
• What is primary research?

  First-hand data collection methods
• What is secondary research?

  Analysis of existing data
• What are the advantages of primary research?

  Up-to-date information but can be expensive
• What are the advantages of secondary research?

  Cheaper but may be outdated
• What is market segmentation?

  • Dividing customers into groups based on:
  • Age
  • Gender
  • Income
  • Location
  • Lifestyle
  • Helps target marketing and meet specific needs
• What is a risk of market segmentation?

  Smaller market size, higher marketing costs
• Why is understanding competitors important?

  Helps decide how to compete effectively
• What are business aims and objectives?

  • Aims: broad goals (e.g. survive, grow)
  • Objectives: measurable targets (e.g. increase sales by 10%)
• What are financial objectives?

  Targets related to profit, sales, market share
• What are non-financial objectives?

  Targets like independence, challenge, personal satisfaction
• What is the formula for revenue?

  Revenue = Price × Quantity sold
• What are fixed costs?

  Costs that stay the same regardless of output
• What are variable costs?

  Costs that change with output
• What is the formula for total costs?

  Total costs = Fixed + Variable costs
• What is the formula for profit?

  Profit = Revenue - Total costs
• What is cash flow?

  • Movement of money in and out of business
  • Cash inflows: sales, loans, investments
  • Cash outflows: rent, wages, bills
• What does positive cash flow indicate?

  Surplus of cash inflows over outflows
• What does negative cash flow indicate?

  Shortage of cash inflows compared to outflows
• What is a cash flow forecast?

  Prediction of future cash inflows/outflows
• What are sources of finance?

  • Short-term: overdraft, trade credit
  • Long-term: personal savings, loans, venture capital, share capital, retained profit, crowdfunding
• What is the break-even formula?

  Break-even output = Fixed costs ÷ (Price - Variable cost per unit)
• What is margin of safety?

  Actual sales - Break-even sales
• What are the types of business ownership?

  • Sole trader: one owner, unlimited liability
  • Partnership: 2+ owners, unlimited liability, shared profit
  • Ltd: limited liability, shares sold privately
  • Franchise: buying rights to sell under a brand
• What are the pros of a franchise?

  Lower risk and existing customers
• What are the cons of a franchise?

  Less control and royalties to pay
• What factors affect business location?

  • Proximity to market, raw materials, labour, competitors, costs
  • Online businesses less affected by physical location
• What is the marketing mix (4Ps)?

  • Product: design, features, branding, packaging
  • Price: penetration pricing, price skimming, cost-plus, competitive
  • Place: retail, online, direct
  • Promotion: advertising, sales promotions, sponsorship, social media