Introduction

Question 1

Limited liability

Answer 1

The business owner or owners are only responsible for business debts up to the value of their financial investment in the business

Question 2

Unlimited liability

Answer 2

The business owner or owners are personally responsible for all of the debts of the business no matter what the value.

Question 3

Private limited company

Answer 3

Is separate from the perople who own it. Its finances are separate from their personal finances.

Question 4

Sole Trader

Answer 4

Business owned by one owner, but they can take on staff. (Small shops, accountants that work from home, online traders and plumbers).

Question 5

Public Sector

Answer 5

Organisations run by government that exist to provide a service for the population and communities.

Question 6

Social enterprise

Answer 6

Business that trade for social and/or environmental purposes.

Question 7

Life style business

Answer 7

Aim to provide a return of investment for investors, provides great quality of life for the owner.

Question 8

Growth to PLC and stock market Flotation

Answer 8

Once a limited company has grown in size and needs further investment which cannot get from its current pool of owners it may consider becoming a PLC.
-Legal paperwork
-Company must have £50,000 in share capital

Question 9

Expanding Business

Answer 9

Opening in more locations, franchise, advertising, license the products/add more.

Question 10

Intrapreneur

Answer 10

Someone within a business who thinks like an entrepreneur.

Question 11

Barriers

Answer 11

Lack of finance, lack of confidence, fear of failure, wrong mindset, lack of training.

Question 12

Uncertainty

Answer 12

Inability to predict external shocks/future events (weather, health, comedies, exchange rates.

Question 13

Reasons to start a Business

Answer 13

Passion, heritage, profit, flexibility, utilise strengths, fill a gap in the market, help others, job creation, personal growth.

Question 14

Running a Business

Answer 14

Completing finances, contacting customers, chasing payments, buying stocks.

Question 15

Aims of an Entrepreneur

Answer 15

Profit Maximisation: aim to make maximum profit, minimise costs and maximise revenue, sole traders (larger wages can be drawn from profit), Ltd & PLC dividends will be larger on shares, attracts investors.)
Profit Satisficing: aim just to make enough profit to keep business moving and- reward employees with higher wages, invest in environmental projects, serve the community.
Independence, flexibility, ethical reasons (environmental, animal rights, ethics), social purpose (reinvest for positive change.)

Question 16

Business Objectives

Answer 16

Survival: short term for new businesses, sustainable level of sales to reach break-even point.
Profit maximisation - Shrinkflation: products getting smaller and price staying the same.
Market share: % of a market that a business has in revenue or units sold. In a very competitive market, investors judge against competitors.
Cost efficiency is achieved by: minimum wages to unskilled workers, increase perceived value through branding, subcontracting where economically viable.
Employee welfare: external-medical insurance, housing, education for family. Internal-canteen, uniform. Satisfied workers=loyal, hardworking, motivated.
Costumer Satisfaction: monitor customer service, identify wants. Ensures repeat sales, brand loyalty.
Social objective: benefits environmentally or community.

Question 17

Partnerships

Answer 17

2-20 partners that share the risks, costs and responsibilities. Profits + gains shared, each partner responsible for paying tax on their share.
Example: John Lewis.
Pros: easier to raise capital, profits go to partners, no public information needed. Cons: unlimited liability, disagreements, control, sharing.

Question 18

Private Limited Company (Ltd)

Answer 18

Friends and family can buy shares, owners have full control of who buys shares, limited liability. Example: plumber, hairdresser, photographer, lawyer.
Pros: limited liability, raise extra capital, has own legal status. Cons: more complex and expensive, cannot sell shares.

Question 19

Franchise

Answer 19

Right given by business to another to sell good using its name.

Question 20

Franchisee

Answer 20

Business that agrees to sell under another’s name.

Question 21

Franchisor

Answer 21

Company that grants the rights.

Question 22

Niche Market + Advantages and Disadvantages

Answer 22

A smaller segment of a larger market, where customers have more specific needs and wants.
Advantages: charge premium price, easier to target customers, small scale production, can be flexible and follow trends, less competition.
Disadvantages: very risky, demand isn’t constant, higher unit costs so no economies of scale, smaller market size = fewer potential customers.

Question 23

Mass Markets + Advantages and Disadvantages

Answer 23

The largest part of the market, where there are many similar products offered by competitors, customers are less specific about their needs and wants.
Advantages: large scale production means economies of scale and lower average unit costs, mass marketing is straightforward as everyone is equally targeted, large volume of scales means high revenues.
Disadvantages: lots of competition, homogenous products need to be differentiated through marketing which can be expensive, high volume production may not be flexible enough to keep up with changes in demand.

Question 24

Homogenous

Answer 24

Adjective of the same kind; alike e.g similar products.

Question 25

Market Share Formula

Answer 25

scales of x / total scales in whole market x 100

Question 26

Dynamic markets

Answer 26

One that is subject to rapid or continuous changes. As tastes in fashion change rapidly, so products are made to satisfy these needs.

Question 27

Advantages and Disadvantages of Online Retailing

Answer 27

Advantages: shops are open round the clock so they don't miss critical times, orders can be taken automatically without need of staff, shops can reach international markets. Disadvantages: issues with sending goods back (may put customers off), owners need IT skills, problems with fraud, very competitive market.

Question 28

Product Orientation

Answer 28

A business is product oriented when it only looks at the predictor the production process when deciding what to make (inward looking). Appropriate when there is little competition in the market, the business can only make what suits its production capacity, when there is limited consumer knowledge e.g. dental fixtures, braces, apple products etc.

Question 29

Market Orientation

Answer 29

A business philosophy where the focus is on identifying customers needs or wants and meeting them, e.g. Amazon.

Question 30

Benefits to Business of Effective Market Research

Answer 30

Understand consumer behaviour, quantify potential consumer demand for a product, understand how much consumers will pay for a product, identify potential competitors.

Question 31

Primary Market Research

Answer 31

Information collected directly from people, e.g. survey to gauge customer satisfaction. Brand new data gathered by the researcher.

Question 32

Primary Research Methods

Answer 32

Questionnaires, observation, customer interviews, test marketing (with a sample), focus groups (a moderated group discussions on a product).

Question 33

Secondary Research

Answer 33

Publicly available data published by government bodies, e.g. the UK office for National Statistics.

Question 34

Secondary Research Methods

Answer 34

Government sources (Office of national statistics is very useful demographic information and data on the market or industry that the business is in. Information can be used to make decisions about expanding overseas), trade publications (Cater to a very specialist market, information on competitor activity such as promotions), market reports, internet sources, newspapers/magazines/TV/radios.

Question 35

Qualitative Research

Answer 35

Information gathered by; focus group discussions, interview with consumers on what they think, observations of buyer behaviour. Limitations are bias.

Question 36

Quantitative Research

Answer 36

Involves gathering data and measuring responses, data displayed in charts, graphs and percentages. Provides valid and useful data.

Question 37

Market Segments

Answer 37

Identifiable group of individuals or part of a market where consumers share one or more characteristics or needs.

Question 38

Segmentation by Location

Answer 38

A business may decide to sell its product in just one country, one region, or in an even smaller area (hot or cold countries).

Question 39

Segmentation by Lifestyle

Answer 39

Customers can be grouped according to the way they lead their lives and attitudes they share. For example, family situation.

Question 40

Segmentation by Income

Answer 40

Low income, middle income or high income.

Question 41

Segmentation by Age

Answer 41

Age groups; 0-10, 11-16, 17-19, 20-25, 26-35, 36-50, 51+.

Question 42

Segmentation by Gender

Answer 42

Female/male.

Question 43

Market Mapping

Answer 43

The process of finding the variables which differentiate brands in a market and then plotting them on a map to identify a gap in the market. It could also be used by a start up to identify which products to produce or which services to provide so they can be market orientated. It could also be used by traditional brand to reposition itself in the market e.g The North Face.

Question 44

Competitive Advantage

Answer 44

An advantage a business has over its competitors, allowing it to generate larger than average revenue for the industry, either in low cost leadership or price leadership.

Question 45

Reasons for Raising Finance

Answer 45

To pay debts, help a business over a slow trading period, to expand, to start up a business, to buy stock.

Question 46

Owners Capital and when is it Appropriate? Advantages and Disadvantages

Answer 46

Represents the net assets of the company if all the debts of the business were paid off, the owner may have used savings or a redundancy pay put to start up the business. Its appropriate for sole traders and partnerships would be the two business forms which would mostly use owner's capital to expand and grow. Advantages: no interest, easy access, no complex paperwork. Disadvantages: owners may not have the capital to put into the business

Question 47

Retained Profit and when is it Appropriate? Advantages and Disadvantages

Answer 47

After a year or more of trading a business may have some profits that they are able to reinvest into the business to help it grow. Its appropriate if a business has not been profitable then there will not be any retained profit to spend. Advantages: no interest or debt, easy access to finance, owners keep control. Disadvantages: limited funds, opportunity cost of not being able to use the retained profits somewhere else.

Question 48

Sale of Assets and when is Appropriate? Advantages and Disadvantages

Answer 48

A business can raise finance by selling items they already own e.g. machinery, land, premises, vehicles. Its appropriate when a business is growing, it may need to raise cash fast to be able to continue to trade. Advantages: no interest payments, improves efficiency and capacity utilisation. Disadvantages: indicates a business is in trouble, unappealing to investors, not suitable to start up a business.

Question 49

Competitive Advantage through price Leadership

Answer 49

Some businesses chose to use a very low-cost model and compete on price. Businesses can do this by focusing on a particular segment. By narrowing the product line, the company can allocate expensive product capacity to its most attractive items and market segments.

Question 50

Competitive Advantage through Added Value

Answer 50

Added value can be achieved through processes. For example Birds Eye takes cod and other fish and adds value to produce a range of oven-to-table fish-based products e.g. cook, gut, package.

Question 51

Competitive Advantage through Innovation

Answer 51

Innovation means developing an invention so its ready to sell. For example, in 1978 James Dyson created 5127 prototypes and took over 5 years to create the first bagless vacuum cleaner.

Question 52

Competitive Advantage through Reliability

Answer 52

It means that a product will keep doing what it was designed to do without letting the customer down. A reliable car is one that you can trust to start each day and will not cause you problems in terms of breakdowns, repairs and other issues.

Question 53

Competitive Advantage through Quality

Answer 53

High quality doesn't always mean luxury, high quality could mean the customer service attached to the product or company. For example, Apple, Tesla and Levi jeans.

Question 54

Competitive Advantage through Advertising

Answer 54

Advertising campaigns. For example, American football Super Bowl adverts.

Question 55

Competitive Advantage through Branding

Answer 55

Superdry is an exciting contemporary brand which focuses on high quality products. They are characterised by quality fabrics, authentic vintage washes, unique detailing, etc.

Question 56

Competitive Advantage through Convenience

Answer 56

Some companies seek to be the very best in the industry by offering convenience to the shopper. This means offering stores in places that are easy for customers to walk to. It can also mean convenient products such as ready meals.

Question 57

Competitive Advantage through Customer Service

Answer 57

Consumers want a business to get things right the first time and deal with their complaints faster and more efficiently. For example, Amazon has been voted best company for customer service.

Question 58

Product Differentiation

Answer 58

Where a product is different from the competition in someway. Through reputation (hair salon, restaurant.), through value for money (ASDA, Lidl, Primark.), through customer service or sales service (Marks and Spencers), through product features (cars, mobile phones.)

Question 59

Added Value

Answer 59

Added value is the amount by which the monetary value of a product or service increased at each stage of its production. A business can do this through design (develop new technology/design features to make their product unique) - differentiation advantage. Production, achieving quality and efficiency adds value. Quality will ensure a higher price can be charged. Efficiency helps cut cost of the input. Marketing, creating an image that makes the product more desirable.