business

• Product


  A good or service provided by a business
• Good


  A physical product
• Service


  An action performed by other people to aid the customer
• Purpose of business activity

  • To provide goods or service
  • To meet customer needs
  • To add value to an existing product
• Entrepreneur


  • Must be able to manage skills, organise resources and make business decisions
• Risks of starting a business

  • Financial loss
  • Failure
• Rewards of starting a business

  • Success
  • Profit
  • Independence
• Competitor


  A business that sells the same products
• Ways to compare competitors

  • Pricing
  • Customer service
  • Quality
  • Product range
  • Location
• Primary Research


  • Provides up to date information specific to a product
  • Needs large samples to be reliable
  • Time consuming
• DUQAS


  Abbreviation for a type of research
• Secondary Research


  • Cheaper than primary research
  • Easily found
  • Often out of date
  • Not always relevant
• Quantitative data


  Information that can be reduced to a number
• Qualitative data


  Information that involves people's opinion or feelings
• Market segmentation


  When people within a market are divided into different groups
• Ways to segment a market

  • By demographic (age & income)
  • By location
  • By lifestyle
• Aim


  A goal the business wants to achieve
• Objective


  A step the business uses to work toward an aim
• Financial aims

  • Survival
  • Maximise profit
  • Maximise sales
• Non-financial aims

  • Personal satisfaction
  • Independence & control
  • Reflect values
• Fixed costs


  Costs that don't change e.g. rent, insurance
• Variable costs


  Costs that increase e.g. raw materials
• Total costs

  Fixed costs + variable costs
• Interest


  Total repayment - borrowed amount / borrowed amount
• Margin of safety


  Actual sales - breakeven sales
• Trade credit


  Paying suppliers one or two months after purchase
• Advantages of trade credit

  • Time to earn money to repay
  • Disadvantages: late repayment can lead to large fees
• Overdraft


  Taking more money out of a bank account
• Advantages of overdrafts


  • Can make payments on time without having the cash
  • Disadvantages: high interest rate
• Loans


  Borrowing money
• Advantages of loans


  • Quick & easy
  • Lower interest rate than overdrafts
• Disadvantages of loans


  • Making monthly payments increases fixed costs
• Personal savings


  Owner can invest their own savings
• Advantages of personal savings

  • Easy
  • No interest payments
• Disadvantages of personal savings

  • Owner could lose their personal money if the business falls
• Unlimited liability


  Business owners are liable for paying back all the debt if the business fails
• Limited liability


  Company is liable for paying back debts, not the owners
• Sole trader


  A business with just one owner e.g. plumber
• Advantages of sole trader

  • Easy to set up
  • Full control over business and profit
• Disadvantages of sole trader

  • Unlimited liability