Unit 1

Created by

Chloe Smedley

Cards (38)

What is opportunity cost?
The value of the next best alternative that is forgone when making a decision
What are the factors of production
Land
Labour
Capital
Enterprise
What does chain of production mean
The process a product goes through from the primary to secondary to tertiary sectors
What are the functions of a business
Marketing
Finance
Operations
HR
Unlimited liability
If the business or sole trader gets into debt the owner will have to use their personal wealth
Limited liability
If the business gets into debt only money within the business will be lost
Advantages of not for profit organisations
They can provide for the needs of the poor in society
Those involved in selling second hand items help in protection of the environment
Help provide goods and services that would not have otherwise been available
Disadvantages of not for profit organisations
They can be insufficient as they do not earn a profit
Staff can be demotivated because they usually are not paid well
Ways of measuring success in a business
Has the business been ethical
Have they survived
Has customer satisfaction increased
Has the business grown or expanded
Has market share increased
Are they environmentally friendly
Advantages of being a sole trader
You keep all the profit
You are your own boss
You have flexible hours
You get to make all the decisions
There is less paper work
Disadvantages of being a sole trader
Unlimited liability
You have to produce all the finance
No one to share ideas with
Difficult to take time off
Profit =
revenue - total costs
What is an aim
A goal a business sets
What is an objective
Something that helps the business achieve its aim
What is a stakeholder
Someone who has an interest in the business
Advantages of locating overseas
Cheaper labour
Access to cheaper resources
Avoid trade restrictions
Financial support from the government in those countries
Disadvantages of locating overseas
Different laws
Customers may have different tastes
Total costs =
Total fixed costs + total variable costs
Revenue =
Price x quantity
Benefits of a business plan
Can be shown to the bank to help get a loan
Forces the business to think carefully about all areas of the business
Helps organise the business
Drawbacks of a business plan
Must be updated and referred to regularly
Takes a lot of experience to write an effective business plan
Backward vertical integration
Acquiring a business operating earlier in the supply chain
Forward vertical integration
Acquiring a business further up the supply chain
Horizontal integration
When companies from the same firm merge
Conglomerate integration
A merger between firms that are involved in unrelated business activities
Benefits of growth
More economies of scale
More power in the market
More status
Less likely to be taken over
Better rewards for staff
Drawbacks of growth
Can lead to diseconomies of scale
Decision making is slower
What is economies of scale 
These happen when the cost per unit falls when a business output increases
What is diseconomies of scale
These happen when the cost per unit rises when the business output increases
Unit costs =
Total costs / outputs
What is franchising  
When a larger business allows other smaller businesses to use its name and products and then charges them a fee
What is marketing?
Promoting, advertising and selling
What is finance?
Looks after money
What is operations?
The making of the products or providing the service
What is HR?
Looks after the workers
What is offshoring?
When businesses move some or all of their operations to other countries
Components of a business plan
Aims and objectives
Market environment
Products or services
Financial information
Staffing
Production details
Marketing information
Factors affecting location
Type of business
Proximity to market
Cost of premises
Cost and availability of labour
Ability to expand
Ease of deliveries
Transport links
Proximity to competitors
Technology